Arizona Eliminating Solar Energy Incentives


In 2012 Arizona was second, only behind California, in per capita installations of solar energy in the United States with 710 megawatts of capacity for photovoltaic electricity generation, compared with 275 mW of capacity in 2011.

This progress is a result of both utility investment in solar plants and modest incentives that subsidize the transition from fossil fuels-based energy generation to alternative sources to meet Arizona’s commitment to its Renewable Energy Standard (RES).

As solar installation costs subside nationally, installations increased 76% in 2012, 11% of all global solar systems, according to a Solar Energy Industries Association (SEIA) report. In Arizona three major utility-scale projects are scheduled to come on line in 2014.

These are the 290 mW Agua Caliente unit of NGR Solar near Yuma, Sempra Generation’s 150 mW Mesquite Solar facility at Arlington in Maricopa County, and Abengoa Solar’s Solana 280 mW Generating Station near Gila Bend.

NGR Solar and Sempra Generation have contracts to sell the energy they produce to California’s Pacific Gas and Electric (PG&E). The Solana Station’s energy will be acquired by the Arizona Public Service Company (APS), the private utility based in Phoenix.

The Arizona Corporation Commission (ACC), which is the elected State entity having responsibility for regulating public utilities, approved the current RES in 2007. Since then, Arizona authorizes electricity utilities to reimburse up to 50 % of the cost of the first 30 megawatts of capacity for residential installations and 40% for commercial installations.  Additionally, a net metering system provides credits to electric bills for solar energy generated by individual residential and commercial systems.

All of that is now changing.  The current ACC, with three new members elected in 2012, is progressively raising rates and eliminating incentives for solar energy in Arizona.  In doing so, the ACC is bowing to political pressure from the fossil fuels and nuclear power industries promoting deregulation and so-called market-based pricing.

In January 2013 the ACC eliminated statewide all cash incentives for businesses that install renewable energy systems such as photovoltaic solar panels and windmills, and reduced the incentives for residential systems from 10 cents to 3 cents per DC watt of capacity.  They justified this move on the basis of declining installation costs for renewable energy.

On July 12, 2013, the APS, which, together with the Salt River Project (SLP), provide electricity to most of central Arizona, requested new monthly fees of $50 to $100 for residential solar energy users.  APS claims these fees are needed to compensate for individual solar customers’ use of the grid since their substantially lower electric bills contribute less toward the utilities’ grid maintenance and improvement costs.

Under the net metering formula, solar users sell the surplus energy their photovoltaic panels produce during daylight hours to the utilities for use in neighboring homes or businesses that do not generate their own electricity. The solar users then use their credits to buy back electricity from the grid during hours of darkness, most of which are not peak electricity usage hours.

Net metering actually saves the utilities the costs associated with long distance transmission of electricity over the grid, as well as electricity lost during long-distance transmission. APS’s calculations do not include the benefits to the utility from solar generated electricity and net metering.

The cost of the direct incentives to renewable energy customers is covered by the utilities themselves from surcharges included in all Arizona electric bills. Almost all producers of solar-generated electricity are connected to the national grid, since individual private battery storage facilities are not cost effective.

This situation until now has benefited the utilities since they do not need to transport electricity long distances over their grid.  But it has raised red flags with the fossil fuel and nuclear energy behemoths that see their share of the market diminishing as increased numbers of electricity consumers are converting to solar sources, especially now that installation costs are declining.

According to responses to our inquiries, the average cost of a complete on-the-grid photovoltaic solar system for southern Arizona residential electricity customers is between $20,000 and $40,000, and, therefore, not accessible to low income residents.

Similar systems can be leased for approximately $11,000, payable in monthly installments with no money down;  lessees cede their up-front incentives to the leasing company.  Such arrangements can reduce electric bills by well over $100 per month, according to usage.

According to TEP, residential customers who install photovoltaic solar energy systems before October 15, 2013, are still eligible for up-front single-payment incentives of 10 cents per watt of DC capacity not exceeding 50 % of the total cost, up to 30 mw of DC capacity for systems that have a minimum 20 year warranty, since this amount was previously budgeted. Eligible customers must sign a credit purchase agreement assigning TEP the corresponding renewable energy credits (REC) for 20 years.

RECs allow an electricity utility to meet their requirements under their state’s renewable energy standards.  In Arizona the standard is that 15% of all electric energy generated by regulated utilities be generated from renewable sources by 2025, a relatively low one. California’s goal is 33% by 2020.

A Science Applications International Corporation (SAIC) cost-benefit analysis conducted last year for APS shows the benefits to the utility from solar energy exceed the costs over a 20-year period.  Projected benefits were 21.5 to 23.7 cents per kilowatt hour (KwH); costs were calculated at 13.9 to 15.5 cents per KwH as shown in below.

Chart 1. Benefits and Costs of Solar DG on the APS System.

Benefits 20-year level cents per kWh (2014 $)

6.4 to 7.5

Generation capacity

6.7 to 7.6

Ancillary services and capacity reserves



2.1 to 2.3





Avoided renewables


Total Benefits

21.5 to 23.7


20-year level cents per kWh (2014 $)

Lost retail rate revenues


DG incentives

0 to 1.6

Integration costs


Total Costs

13.9 to 15.5

Source: Crossborder Energy Study of Costs and Benefits of DG Solar in Arizona.

This analysis includes all directly generated solar energy, including the utilities’ units, not just that derived from individual residential or commercial photovoltaic panels, but it serves as an overall indicator overall since individual systems costs and benefits, which reduce transmission costs, should not exceed those for long-distance transmission from solar and wind plants.

Moreover, it only considers those benefits perceived directly by APS and does not factor in the externalities that benefit the public at large from reduced carbon emissions and the effects of climate change.

The benefits to the electric utilities themselves are principally from tax breaks and other subsidies stacked on the side of non-renewable energy.  According to Rhone Resch, President and CEO of the Solar Energy Industrial Association in Washington, DC, al energy technologies receive some form of federal government support, oil and gas since 1916, coal since the 1930s, nuclear since the 1950s, and solar, with the 30% federal tax credit, since 2006 (quoted by Ryan Rendazzo in the Arizona Republic, July 31, 2013).

A 2009 study by the Environmental Law Institute of US federal energy subsidies shows the breakdown presented below.

Chart 2. Federal Subsidies to Fossil Fuel Providers, 2000-2008.

Energy Provider Type Kind of Subsidy Subsidies’ Value  (US$)
oil and gas Foreign tax credit

15.3 billion

oil and gas Non-conventional Fuels tax credit

14.1 billion

oil and gas Exploration and Development expensing

7.1 billion

oil and gas Depletion allowance

5.4 billion

oil Enhanced oil recovery tax credit

1.6 billion

oil, gas, and coal Other tax credits and exclusions

19.5 billion

Total Fossil Fuels Tax breaks

54.2 billion

Total Fossil fuels Grants and Payments for Reserves

18.3 billion

Total Subsidies

72.5 billion


By contrast, federal subsidies to renewable energy for the same period total only $23.9 billion, of which more than 50% benefit corn-based ethanol production.   Nuclear energy subsidies were not included in the ELI study.  But, clearly, fossil fuels have a 3 to 1 advantage in federal subsidies for the study period, and both the US Congress and the federal administration stacked the decks in favor of the fossil fuels industries, in spite of political rhetoric regarding climate change and support for renewable energy sources.

Meanwhile, a new 400 mW coal-fired plant at Springerville is under construction to provide Tucson Electric Power (TEP) with electricity, just as the Los Angeles Department of Water and Power and the Nevada Energy utilities in Las Vegas are opting out of their contracts with SLP for energy from the coal-fired Navajo plant near Page.

So, the modest incentives to home owners and small businesses to install photovoltaic solar panels and wind mills is extremely modest by comparison to those granted the fossil fuels and nuclear energy providers by the federal government.  Similarly, the 30 % federal tax credit that these homeowners and small businesses receive pales in comparison with the huge subsidies that benefit the fossil fuels and nuclear energy sectors.

The ACC is reviewing the APS request for rate increases and new solar customer fees and should issue its decision at its November meeting. Leading up to that date, lobbying and other forms of pressure from the opponents of alternative energy are increasingly evident. If the new fees are approved for APS, TEP and the other electric utilities in Arizona will not be far behind in demanding similar rate structures. TEP serves 400,000 families and businesses in southern Arizona.

According to the US Energy Information Agency, Arizona’s energy consumption by end use sector is presented in Chart 1 below.

Chart 3. Arizona’s Energy Consumption by End Use Sector

Sector                           Percentage

Residential                   27.6

Commercial                 24.1

Industrial                     15.5

Transportation          32.8

Total                            100.0

Source: Energy Information Administration State Energy Data System:

According to the U. S. Energy Information Administration (EIA), 40.4% of the energy generated in Arizona was from coal, 28.9 % nuclear –from the Palo Verde plant–  21.5% from natural gas, and 15.4% from renewable sources.  The electricity generated in Arizona exceeds in state demand; the balance is sold principally to southern California cities and Las Vegas.

In 2011, 40.4% of the energy generated in Arizona was from coal. Coal burning power plants are a major source of air pollution and greenhouse gas emissions.  The percent of energy produced from natural gas in Arizona is decreasing, from 33.9% in 2007 down to 21.5% in 2011. Natural gas-fired power stations burn cleaner and produce lower greenhouse gas emissions than coal-fired generators, but natural gas is a non-renewable energy source.

Arizona’s Palo Verde Nuclear Power plant is the highest capacity nuclear plant in the United States.  In 2011 it produced 28.9% of Arizona’s electric energy. By comparison, renewable energy production in Arizona in 2011 increased by 3% over the 2010 level to 9.0% of the total for the year. Arizona ranked 23rd in 2010 among U.S. states in carbon dioxide emissions, at 95.9 million metric tons. This ranking reflects the state’s relatively low industrial base and high dependence on automobile transportation. ( 1999-2011 Net Generation by State by Type of Producer by Energy Source. EIA-906, EIA-920, EIA-923).

On January 15, 2013, Arizona Governor Jan Brewer signed Executive Order No. 2013-03, which created a 40 member Task Force to produce a Draft Master Energy Plan for the state by September 2013, followed by public hearings and submission to the Governor by December 2013.  These hearings will be important venues for citizens to make their priorities known on this issue if they know about them and participate.

Citizens also need to become well informed on Arizona’s energy policies and regulations with good information on the positions and cozy alliances of the next group of candidates for the Corporation Commission, for which elections will be held in 2014.  If they fail to do so, the fossil fuel and nuclear energy advocates will be able to control the regulatory policies, and renewable energy will become a forgotten dream in Arizona.

8 thoughts on “Arizona Eliminating Solar Energy Incentives”

  1. Electron Barons
    My Local electric utility is actively discouraging potential “Home Solar” customers like myself by imposing stiff/hidden requirements (High Insurance, Non-refundable Engineering Review Fee, long waits for approval , etc) and reneging on their PV generated power buyback program (the credit for solar generated KWs, used to be 11 c/KWh, dropped to 7 c/KWh by the time I was ready to sign in 2012 and will be 5 c/KWh in 2014). In 2012 I came a stone throw from installing “10 KWh Shingle PVs” on my unit but realized prior to signing that I am on the take for any damages to the grid if utility affiliated experts determine the installed PVs were the reason for a local grid malfunction and demanded 5 times the current Home insurance to cover such risks. They also refused to refund the $250 “Engineering Review Fee” after the deal fell through.
    I will continue charging my “Chevy Volt” and “Electric Motor Assist Bikes” from the grid and meanwhile look for alternatives to completely remove the local Utility from my “Recurring Cost” list.
    Next phase of Human evolution will be staged around Electron Energy independence.

  2. I have given input to the hearings before the Arizona Corporation Commission mentioned above as set forth below:

    Pursuant to the debate and hearings on net metering/solar, I have a vested interest.

    First – I have entered a contract for a 20 year lease for 7.25 KW of solar panels on my roof to begin as soon as they are installed on my roof. The leasing company has also contracted with a third party company to seal up our HVAC ductwork using a proven technology to improve our conditioned air to near 100% efficiency. Further, the leasing company has contracted with an additional third party company to install a KVAR unit at the electrical service entrance on our home to offset/provide the KVARs (reactive power) required for the inductive motor load in our home (washer, dryer, refrigerator, air conditioner compressor, fan on the forced air furnace/air conditioner unit, ceiling fans, etc.). As you know, KVARs are required as part of the power equation and do not do any work, whereas KWs as part of the power equation do the work. Both are required and both turn the power meter. Both heat up the utility supplier’s transmission and distribution lines creating electrical losses.

    Having these efficiency devices as part of the installation and lease of the solar equipment and in total with the solar panels on our roof offset the energy requirement for the utility. In our case TEP is the electric utility and I am sure is an intervener in docket number E-01345A-12-0290.

    Electrically speaking, TEP is interconnected with APS, SRP and other electric utilities, including WAPA, DOE, etc., either through transmission tie points, generation station substation tie points, and even miscellaneous coal fired, oil fired, and natural gas fired plants providing transmission and load support for the interconnected systems. These include industrial cogeneration, utility owned large scale wind and solar generation. Why not include distributed residential solar in the interconnected mix. That provides for an offset for additional heavy transmission systems additions throughout our region in the southwestern united states.

    I am a retired electrical engineer having extensive utility power systems experience managing and directing municipal electrical systems including serving on and chairing several major regional power generation and transmission entities such and the Intermountain Power Agency (IPA) who owns and built the Intermountain Power Project (IPP) with its large scale coal fired generation plant near Delta Utah – 4 unit trains for hauling coal from south central Utah – rail car service facility in Springville, Utah and 500 kVDC transmission system to southern California and 345 kVAC transmission system in Utah; Utah Associated Municipal Power Systems, Intermountain Consumer Power Agency, Nebraska Municipal Power Pool, wind power project in Nebraska; all of the above while managing and directing the municipal electric utility of Murray City, Utah and then the Utilities Department of Gillette, Wyoming (including the largest municipal electric system in Wyoming) . I retired from Gillette after 18 years and after raising 8 children. After retiring my wife and I moved to Tucson, Arizona where we’ve lived since 2005.

    I have testified before the Public Service Commission in Utah on numerous occasions, and also before the same in Wyoming on issues pertaining on electrical generation, transmission, and rates. Further, I have testified on natural gas transmission and rates. I have provided testimony before legislative committees in both states and before congressional committees.

    I do not take this hearing lightly and have witnessed the positive and negative support advertising on television, cable, and the internet. I can provide my resumé and supporting details on my background upon request. My wife and I have contracted to lease for 20 years the above mentioned solar equipment and, therefore, have a vested interest in the outcome.

    Thank you for taking the time to read this as you deliberate given testimonies and determine an outcome.


    • I am shocked at the gentleman’s article whereby he has had a career as an electrical engineer.I purchased my own solar system. My ex-wife went and leased a 7.00 KW solar system; she wanted to beat me and get a solar system before I got mine so she could boast about it.What innocent fools people are. Although she pays only a small nominal amount to TEP now that she has her own solar system, because she went and leased hers, the leasing company gets the huge tax break, and she gets none. With her leasing charge at over $140.00 per month, she pays $600.00 dollars more now for her electric than her previous costs before leasing her solar system.Buy your solar system…don’t be a sucker and lease it. Why in the world would someone want to lease a solar system….at $600.00 more a year than before the system was installed? d-a-a-a-a-h-h-h?!?

  3. The winter print version of the Occupied Tucson Citizen ran an update to this article which suggests there could a lot more of this to come:

    ALEC Behind Attack on Solar Energy in Arizona

    Though alternative energy activists and businesses managed to defeat Arizona
    Public Service’s (APS) plan to impose a crushing grid access fee for
    homeowners who install solar panels, they were unable to prevent the
    introduction of a lower grid access fee.

    Instead of the $50 to $100 a month fee proposed by APS, the Arizona
    Corporation Commission approved a $5 fee which, however, is a foot in
    the door for increased fees later on. Further, with the decision Arizona
    became the first state to impose such a fee, setting an important precedent.
    In a report on December 4, the Guardian newspaper (“ALEC calls for
    penalties on ‘freerider’ homeowners in assault on clean energy”) made
    it clear that Arizona was simply the opening salvo of a national campaign.

    To quote the Guardian: “An alliance of corporations and
    conservative activists is mobilizing to penalize homeowners who install
    their own solar panels – casting them as “freeriders” – in a sweeping new
    offensive against renewable energy, the Guardian has learned. Over the
    coming year, the American Legislative Exchange Council (ALEC) will
    promote legislation with goals ranging from penalizing individual
    homeowners and weakening state clean energy regulations, to blocking
    the Environmental Protection Agency, which is Barack Obama’s
    main channel for climate action.”

    See our October 26 article, “Arizona
    Eliminating Solar Energy Incentives”
    for a detailed critique of the APS

  4. first some corrections: Solar panels last over 30 years.
    You can’t call the lost of retail revenues a cost of solar. That’s just competition in the market.
    integration costs are negative. Distributed solar save on grid upgrades, because it reduces peak loads.
    The fossil and nuclear companies get many more hidden gov benefits and protections. and they have to a century. War for instance.

    We voted for the Reagan corporate Obama and the Democratic Leaderships Council Reagan democrats, instead of the Green party and the Progressive Cucucas folks. Obama is pro fracking and nuclear and anti solar with tariffs.

    We are suckers.

  5. 2 years ago, after watching rates for pv solar systems go down sufficiently in cost, I hired a phoenix company to install a 4.08 KW system with a sunny boy inverter on my home.With the explosion of new oil wells in the dakotas, bringing fossil fuels such as auto & truck gasoline down to record low prices for consumers, it pushes us back in time 30-40 years whereby people no longer have the desire to go green and conserve water, fuel, etc. and have no urge to use windpower as well. I. for one, am not going to be driven by this glut of new oil. I
    pray that others will follow.My next project will be to install a low profile windmill on my home.

  6. A minor success story – and it almost didn’t get reported.

    “The project made its way into national news in October 2016, when site manager Matt Mounie heard a dog barking in the abandoned plant. Upon investigation, he found a dog treading water at the bottom of a 30-foot hole. Mounie contacted local authorities who staged a rescue. After treatment and a search, the dog was reunited with his owners.”

    ~ more at ~


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