The Energy Transition in Retreat: Arizona Moves to Repeal Its Renewable Mandate
When sober minds reconsider the costs and benefits of the so-called energy transition
“Only a fool learns from his own mistakes. The wise man learns from the mistakes of others.” — Otto von Bismarck
The failures of the “energy transition” are increasingly hard to ignore. It’s not just that the transition is failing to pick up steam; it’s failing in general.
In the regions of the world that have most embraced wind and solar, such as Germany and the United States, in places like California, Texas, and others, it has had disastrous effects on the reliability of the electric grid and put upward pressure on costs.
Luckily for Arizona residents, state regulators have seen the trainwreck unfolding elsewhere and wisely decided to avoid making the same mistakes by moving to repeal the state’s mandate for unreliable wind and solar resources.
Arizona Moves to Repeal Its Renewable Mandate
In a little-reported move, members of the Arizona Corporation Commission (ACC) voted on February 6th, 2024, to initiate a proceeding eliminating the state’s renewable energy mandates, which require regulated utilities like Arizona Public Service (APS) and Tucson Electric Power (TEP) to generate 15 percent of their electricity from renewable sources by 2025.
This measure was approved along a 4-1 party-line vote—ACC Commissioners are elected in Arizona— with Republicans voting to revoke the mandates and the lone Democrat voting to keep them. If the mandates are repealed, Arizona will join West Virginia and Montana in completely repealing its Renewable Portfolio Standard (RPS), according to a database maintained by the National Conference of State Legislators.
Cost Consternation
Arizona’s mandates for wind, solar, and energy efficiency have come under fire from Republican members of the ACC who argue the regulations have cost the state $3.5 billion since they were first implemented in 2006 and no longer provide system benefits, according to Utility Dive.
Commissioner Kevin Thompson, a Republican who voted to repeal the mandates, criticized what he called outdated mandates that involve “incentives and giveaways left and right,” reported a local Arizona news station.
“I welcome utility programs that actually reduce energy consumption and meet avoided costs but not under the threat of commission mandates that can be easily hijacked by financially interested stakeholders.”
According to the Arizona Star, ACC Commissioner Nick Myers noted that he believes “it is time for the Commission to reconsider these rules and mandates that appear to unnecessarily drive up costs.” He continued, saying that “Utilities should select the most cost-effective energy mix to provide reliable and affordable service, without being constrained by government-imposed mandates that make it more expensive for their customers.”
As Isaac noted in his testimony to Ohio and Pennsylvania lawmakers, there is an energy hierarchy of needs where reliability must come first, affordability must come second, and reducing carbon dioxide emissions must come third. It is encouraging that ACC members seem to understand this important order of operations, because when carbon reductions take precedence, either affordability or reliability, or both, start to deteriorate.
Solar Interests Seethe
Unsurprisingly, solar and wind special interest groups were unhappy about the decision.
Autumn Johnson of the Arizona Solar Energy Industries Association said she was unaware of any state repealing its existing renewable portfolio standards entirely, which she credited for boosting the solar energy economy, which employs more than 8,000 Arizonans.
“I worry that being the only state in the country to repeal what is already an extremely modest RPS sends the wrong signal to the industry. It says, ‘Take your business, your jobs, and your dollars elsewhere,’” Johnson said.
Arguments like these are common but as my friend and American Experiment colleague
(check out his Substack!) often notes, the purpose of the energy industry is to create energy, not create jobs.According to the U.S. Energy and Jobs Report for Arizona, the electric power generation sector employed 23,898 workers in The Grand Canyon State in 2022. Using the employment data in the report and generation data from the U.S. Energy Information Administration (EIA), we can see that solar currently generates less electricity per job than hydroelectric power, natural gas, nuclear, coal, and wind.
This may shift over time because solar jobs are largely temporary jobs in the installation sector, but as it currently stands, the energy return on each person employed is the lowest for oil-peaking plants, solar, and wind generation.
Check out the Energy Bad Boys on the Power Gab Podcast
Mitch and Isaac join Amy Oliver Cooke and Jake Fogleman of the Independence Institute in Colorado to talk about the true cost of renewables.
Green-Plating without a Mandate
The ACC’s decision to repeal the current renewable energy mandates is an important step toward ensuring Arizona has reliable and affordable electricity.
However, regulators will need to exercise eternal vigilance because the largest utilities in Arizona, APS, and TEP, have voluntarily pledged to go carbon-free by 2050, which will accomplish the same end results as having a mandate.
As we have noted previously in our piece Electricity Prices Are Soaring: It’s Time to Hold the “Energy Transition” Accountable, recent filings by APS indicate that its rush to wind and solar is driving up electricity rates:
In this Application, Arizona Public Service Company (APS or Company) seeks a net increase in base rates of $460 million, or 13.6%, to become effective on December 1, 2023. The requested increase is necessary for APS to continue making the investments required to maintain a reliable, resilient, and clean energy grid for its customers today and into the future.
APS explained the company’s situation in more detail:
APS’s last rate case concluded on November 9, 2021, and was based on a test year that ended on June 30, 2019. A variety of factors have changed since the conclusion of APS’s last rate case, including significant investment in plant and infrastructure, revenue and expenses, the cost of capital, customer growth, compounded inflationary pressures, and disruptions to the global supply chain.
Among the items listed for the investments made by the company include infrastructure for EV-charging stations and three new renewable projects.
TEP is also getting in on the action. In its 2023 Integrated Resource Plan, TEP notes that it will retire its remaining coal plants and replace this lost capacity with solar and storage despite the fact that electricity demand is expected to grow in the region:
TEP projects that its peak energy demand will increase from 2,382 megawatts (MW) in 2024 to 2,800 MW in 2038, or 1.23 percent annually. The company also plans to retire its last 892 MW of coal-fired generation during this period with the retirement of Units 1 and 2 at TEP’s Springerville Generating Station (in 2027 and 2032) and Units 4 and 5 at Arizona Public Service’s (APS) Four Corners Generating Station in 2031.
To meet anticipated load growth and capacity lost to future coal plant retirements, TEP plans to secure over 3,970 MW of new resources, including 2,640 MW of new generating capacity and 1,330 MW of new energy storage over the next 15 years.
While 90 percent of the new resource capacity will be sourced from renewable and energy storage projects, TEP anticipates a need to develop 400 MW of new natural gas-fired generation by 2028 in order to maintain reliable and affordable service for our customers.
In essence, TEP is proposing to close down 892 megawatts (MW) of coal capacity by 2032 and replace it with 4,370 MW of solar, battery storage, wind capacity, and natural gas capacity constituting a nearly 5:1 capacity replacement ratio due to its voluntary renewable energy pursuits.
Ultimately, this strategy will leave the grid increasingly reliant upon solar, battery storage, and wind to meet peak demand and its planning reserve margin, which is the same strategy employed by California to unenviable results.
Conclusion
The ACC's decision to begin proceedings repealing Arizona's mandates for wind and solar is a commendable first step toward protecting ratepayers from rising prices and preserving grid reliability, and lawmakers around the country should follow suit.
However, the gesture risks becoming purely symbolic if the ACC still allows utilities to retire reliable assets and build five times as much solar, storage, wind, and natural gas capacity to replace them.
Coupling laws to repeal wind and solar mandates with our Only Pay for What You Get legislation, however, could provide the one-two punch needed to balance the playing field, protect ratepayers from soaring prices, and create better alignment between utilities' incentives and the customers they serve.
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“Utilities should select the most cost-effective energy mix to provide reliable and affordable service, without being constrained by government-imposed mandates that make it more expensive for their customers.”
Cost effective. It's an argument that can cut two ways.
In his classic "Lectures on Physics", Richard Feynman had this to say about a topic different from wind/solar, but which applies none the less.
"If you start a [classical] argument in a certain place and don't go far enough, you can get any answer you want."
The argument in question here is the marginal costs of an infinitesimal addition of wind/solar generation, without regard to the system costs that finite additions of wind/solar impose on the grid as a whole -- inefficient use of fuels ramping thermal plants, maintaining a spinning reserve, additional transmission costs, over building of wind/solar plants, and the as yet not clearly understood amount of battery storage. We can forget about pumped hydro because the resources for necessary amounts of pumped hydro simply do not exist.
That stacked resource diagram from TEP is in all IRPs and drives me utterly crazy. Is the amount of wind/solar displayed a nameplate rating or some seasonal average or what? The storage component has different units than the other categories, so time duration has snuck into this graph without so much as a peep from the utility or PSC (ACC in this case). The graph is fundamentally misleading because the utilities really don't have much clue about storage needs in a weather dependent system.
As an electrical engineer, I think the most maddening part of renewable energy additions is advertising their nameplate ratings as what the system will actually see. A 1MW solar farm will not actually have a capacity factor of 100% over its lifetime and does not have the ability to ramp up or down. And when the sun goes down, that 1MW becomes 0MW, every single day without fail.
Adding wind into it is more maddening because wind is so unpredictable and when weather reaches the extremes wind usually disappears or is ineffective. So a wind farm with a 5MW nameplate will never reach that 100% capacity factor ever.
As for natural gas and nuclear, they can easily operate on the upper end of their capacity factor at virtually any time. This is referred to as “baseload” generation, which has to be spoon-fed to the public to understand.
Thank you for all you do and keep up the good fight.