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As Agua Caliente comes online, Arizona utilities continue to battle solar power

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This past Tuesday, the U.S. Department of Energy (DOE) announced that the Agua Caliente solar project was online, constituting the world’s largest photovoltaic (PV) power plant. Sited in Yuma County, Arizona, Agua Caliente is capable of generating 290 megawatts (MW) of energy – enough to power up to 225,000 homes during peak demand.

One benefit of Agua Caliente ought to be clear: 324,000 tons of annual CO2 emissions avoided – the equivalent of taking 70,000 cars off the road. In light of April 2014 data from the Mauna Loa Observatory in Hawaii demonstrating a monthly atmospheric CO2 concentration greater than 400 parts per million for the first time in human history, the need for two, three, many Agua Calientes is evident.

Agua Caliente represents a tremendous success at the intersection of public policies fostering renewable energy development. While state renewable energy portfolio standards create the need for projects capable of meeting renewable energy generation requirements, DOE has stepped in with loan guarantees to help fund projects. In the case of Agua Caliente, DOE’s Loan Programs Office (LPO) provided a $967 million loan guarantee for the plant – with co-owners NRG Energy and MidAmerican Renewables contributing private equity.*

(*The design, construction, maintenance, and operation of the plant was/is performed by First Solar.)

As noted by DOE’s Peter Davidson, LPO’s investment in 5 initial PV projects has helped to spur private investment – in the form of an additional ten announced PV projects, all larger than 100 MW of utility-scale solar capacity, and all without DOE aid. According to Davidson, U.S. solar capacity has increased by 418 percent since 2010. And as solar capacity and infrastructure expand, the costs associated with solar development have plummeted.

And yet, in spite of (or perhaps because of) solar’s increasing uptake, Arizona Public Service (APS) – the largest electric utility in Arizona – continues to associate itself with anti-solar initiatives.

As reported by Ryan Randazzo in the Arizona Republic, the Arizona Department of Revenue (ADR) has determined that homeowners leasing rooftop solar systems are now liable for additional property taxes on their leased solar panels.* Previously, leased rooftop solar installations were treated as exempt from property taxes – under an exception granted to individuals and businesses that own their own solar equipment. In support of undoing longstanding tax policy, the ADR characterized leased solar systems as more akin to “merchant power plants” than residential-owned solar panels – making such leased panels therefore subject to taxation under existing state tax law.

(*More precisely, the solar-installer businesses owning the leased equipment are liable for the tax – which will then be transferred to the end consumer in one form or another.)

Notwithstanding ADR’s new determination, recent “tax correction” legislation passed in the Arizona legislature did not include provisions which would have codified ADR’s ruling. Nonetheless, legislation aimed at explicitly reversing the new solar tax did not advance to a vote. At the moment, the final decision is up to Arizona Governor Jan Brewer, who retains discretion to reverse ADR’s new determination.

For its part, APS is actively lobbying in favor of imposing taxes on leased solar panels. This despite the fact that the tax would be regressive in nature. In contrast to residential-owned solar panels, most leased rooftop panel customers are middle-class customers unable to afford expensive solar arrays, and schools and non-profit groups unable to utilize federal tax credits to purchase solar panels.

Elsewhere, the American Legislative Exchange Council (ALEC) – an industry-backed legislative advocacy group which APS is a member of – has been engaged in a multi-state effort attacking renewable energy portfolio standards. Evan Halper, writing in the Los Angeles Times, quoted ALEC representatives claiming that “green energy mandates are bad policy” – with no elaboration to support this contention.

As the reader may recall from earlier entries, APS has recently urged the Arizona Corporation Commission to amend provisions of Arizona’s renewable standards – which changes would likely reduce the marketability of distributed solar energy.* Consider also efforts by APS/ALEC last fall, which sought to turn back Arizona’s “net metering”** policy and charge solar customers an additional $50 - $100 per month for using the grid.

(*Solar advocates at the ACC hearing addressing Arizona’s renewable energy standards argued that modification of the state’s Renewable Energy Standards – combined with new net metering charges levied last October – would result in widespread confusion in the solar marketplace, threatening the economic viability of Arizona’s burgeoning solar industry.)

(**As previously defined: “Net metering is a mechanism allowing homes and businesses with solar panels to send the excess energy they generate back into the grid and to be compensated for these contributions to the grid.”)

Taken altogether, it is readily apparent that APS and other monopoly utilities regard distributed generation solar as a threat to their business model – which threat the utilities wish to meet by imposing additional charges on solar that make it less attractive to their customers. Because utility-scale solar is still comparatively novel, it remains to be seen how APS will regard further development of this infrastructure in Arizona. Perhaps it is worth noting here that the electricity generated at Agua Caliente in Yuma County will be sold to California-based Pacific Gas and Electric – and not to APS or another Arizona utility.

As the recent and coming throng of utility-scale solar installations ought to indicate, solar is surging. In APS’s sun-drenched home state, solar represents a particularly important component of the energy future – providing an incredible business opportunity capable of building an environmentally sustainable, economically thriving community. Arizona must not get left behind, in vain, as this train leaves the station.

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