Democrats seek to bolster solar energy development by winning Arizona utility board

NEW YORK CITY -- Arizona Democrats are vying to wrest control of the state utility board so they can expand the use of solar energy in the nation's sunniest state.

Democrats running for the Arizona Corporation Commission are promising to expand use of rooftop panels and large-scale solar power plants in the state, the nation’s No. 3 generator of energy from the sun. Republicans, who hold three of the panel’s five seats, say they are concerned that could raise power rates.

At issue is a 2006 commission order that utilities get 15 percent of their power by 2025 from renewable sources such as solar and wind. Arizona Public Service Co., the state’s biggest utility, and Tucson Electric Power Co., are on a path to reach the goal ahead of schedule, erasing their incentive for further investments in solar, said Amanda Ormond, principal of an energy consulting firm in Tempe, Arizona, and former director of the state energy office.

“To me, the market is at a critical junction now and for the next couple of years because there is not a lot of demand,” Ormond said in an interview. “Those manufacturing facilities will only survive if there is demand.”

The Arizona race evokes partisan battles in Washington over government subsidies to green-energy companies, a cornerstone of President Barack Obama’s effort to promote economic growth and jobs. Mitt Romney has derided Obama for providing billions of dollars to solar and wind company, saying the president is in an “imaginary world” where renewable energy fuels the economy.

Support Waning

Support for renewable energy is waning nationwide, Ormond said, as a glut of natural gas lowers fuel prices. Plentiful sunshine has made the state attractive for operators such as First Solar Inc. of Tempe, which is building the world’s largest photovoltaic plant in Arizona.

“In this election cycle it’s become a blue or red issue somewhat, and that’s troubling to some of us who look long into the energy future,” Ormond said

Renewable energy in 2011 accounted for 16,790 Arizona jobs, or less than 1 percent of the state workforce, and pumped $2.1 billion into the state economy, according to a February study from Elliott D. Pollack & Co., a Scottsdale-based economic and real-estate consultant. About 268 companies build solar panels, install units and support the industry in Arizona.

‘Status Quo’

California and Colorado have higher renewable-energy goals, to be met by 2020. In California, 33 percent of the power must come from renewables while Colorado set the target at 30 percent.

Republicans “don’t have any interest in anything other than maintaining the status quo,” Marcia Busching of Phoenix, a lawyer and Democrat candidate, said in an interview. “I see Arizona having the opportunity to create a lot of jobs, to be a leader in renewable energy, to be a state where capital and investment want to come.”

Expanding the use of solar energy is backed by 94 percent of Arizona Public Service’s customers, according to a 2011 study by the Morrison Institute of Public Policy at Arizona State University. Most of those polled would be willing to pay higher rates.

The numbers have failed to persuade Republicans who oppose a higher target, according to Kris Mayes, a Republican who is director of the law and sustainability program at Arizona State.

‘Partisan Issue’

“Renewable energy has become a partisan issue,” Mayes, a commission member from 2003 to 2010 who helped push the target through an all-Republican board, said in an interview. “That polarization between the parties did not exist 10 years ago.”

“It’s a policy decision whether the state wants to subsidize an industry that today does not make a whole lot of financial sense,” Rick Merritt, president of the Pollock firm, said in an interview. “It doesn’t work unless there are incentives attached to the industry.”

In the second quarter, 173 megawatts of solar power were installed in Arizona, second to California’s 217 megawatts, according to the Solar Energy Industries Association in Washington. One megawatt is enough to power about 800 typical U.S. homes.

“The state has gotten to a certain level,” Carrie Hitt, vice president of state affairs for the solar association, said in an interview. “There’s a lot of activity there, a lot of investment, there’s jobs and there’s solar being generated. Now it’s what happens next, and this commission will decide that.”

Agua Caliente

First Solar, the world’s largest maker of thin-film panels, is scheduled to complete its Agua Caliente photovoltaic plant in 2014, company spokesman Ted Meyer said in an e-mail. In 2010, Jiangsu, China-based Suntech Power Holdings Co., opened a solar panel plant in Goodyear, Arizona, making it the first China-based clean-technology company to create manufacturing jobs in the U.S.

First Solar expanded manufacturing faster than demand rose, producing an oversupply of panels that contributed to a 50 percent decline in prices last year. First Solar scaled back plans to start manufacturing in Arizona, Vietnam and France and fired 30 percent of its workforce.

Commission Republican Bob Stump and Democrats Sandra Kennedy and Paul Newman are seeking re-election on Nov. 6. Also running are Busching, Republicans Susan Bitter Smith and former state Senate president Bob Burns, one candidate from the Libertarian Party and two Green Party candidates. Chairman Gary Pierce and Brenda Burns, both Republicans, aren’t up for re-election.

Waste Incinerator

The candidates sparred during an Oct. 1 debate on Arizona PBS station KAET-TV over whether to increase the renewable energy target, and a recent commission decision involving a waste incinerator.

In a ruling challenged by a public-interest group, the commission’s three Republicans agreed in July that Mohave Electric Cooperative Inc. can use energy from a waste burner to help meet the 15 percent goal.

“Solar, with all its benefits, does not provide the power at a rate that is sufficient, especially at night,” Burns said during the debate. “What do we do when the sun no longer shines?”

Democrats said the Commission was backpedaling with the incinerator ruling.

“We can’t move Arizona forward by allowing a trash incinerator as renewable energy,” Kennedy said. Voters have a “clear choice between the solar team and the trash team.”

Meeting Goals

Tuscon Electric, with about 400,000 customers, will be halfway to the 15 percent goal by the end of next year, spokesman Joe Barrios said in an interview. Arizona Public Service, with 1.1 million customers, will have 10 percent renewable power by 2015, spokeswoman Jenna Shaver said in an e-mail.

Democrats back a higher renewables target, citing the state’s abundant sunshine. On average, Arizona receives more solar radiation energy than any other U.S. state, according to the National Renewable Energy Laboratory.

Raising the target to 25 percent would create jobs and position Arizona as a leader on renewable energy, Barry Broome, president of the Greater Phoenix Economic Council, said in an interview. “The corporation commission can impact the economy over the next two to three years as much as the Arizona legislature can.”

Republican Burns said he’s concerned that moving the target will raise electricity rates for homes and businesses as utilities pass along the costs.

“I believe that would create a ripple effect that would be unsustainable,” he said during the broadcast debate.

Regulated utilities in the state are allowed to charge homeowners about $2 to $4 a month to promote renewable energy, according to Michael Neary, executive director of the Arizona Solar Energy Industry Association. Small businesses in Tuscon Electric’s area pay up to $130 a month. The charge must be approved by the commission.

Arizona is one of only 13 states that elect utility regulators. Stump said the commission is the “most important government body you’ve never heard of.”

“Not a lot of people really know what the corporation commission does,” Neary said in an interview. “That’s gradually changing.”

Copyright 2012 Bloomberg

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