The Arizona Corporation Commission (ACC) voted to reject a request from the state’s investor-owned utilities to set two-year contract terms for renewable energy projects under the federal Public Utility Regulatory Policies Act (PURPA). Instead, commissioners voted unanimously to set contract terms at 18 years, providing renewable energy developers the financial certainty they need to develop new clean energy projects in the state.
PURPA was passed by Congress in 1978 to promote the independent development of renewable energy and cogeneration technologies as alternatives to fossil fuel-based energy production. By 2017, PURPA projects accounted for almost half (2000 of 4500 MW) of all solar energy production in the country.
Even in a state like Arizona, where solar and battery storage can cost billions of dollars less than coal power, short PURPA contract terms — like the two-year term proposed by utilities — make financing far too risky for capital-intensive projects with lifetimes of 30 years. According to industry and Sierra Club experts, long-term contracts are therefore necessary to give renewable energy developers a reasonable opportunity to secure financing for these projects.
Compared to other utilities in the region, Arizona utilities do not have a strong track record of integrating renewable resources into their long-term plans. As of 2017, both Arizona Public Service and Tucson Electric Power only generated 7% of their power from renewable energy. Citing the need to harness the benefits of renewable energy in sunny Arizona, Commissioners Kennedy and Marquez Peterson introduced a joint amendment intended to position Arizona as a leader in renewable energy development. The December 11 decision from the ACC is consistent with policies adopted in other western states, including Wyoming with contract terms at 20 years and Utah and Oregon at 15.
“Today, the ACC opened the door for the development of new renewable energy infrastructure here in Arizona,” said Sandy Bahr, chapter director of the Sierra Club’s Grand Canyon Chapter. “The frustrating reality is that our utilities keep clinging to dirty, over-priced fossil fuels despite all the potential for low cost solar here in the state, but this decision makes it harder for them to keep delaying our clean energy future.”