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Arizona’s Energy Future Arizona’s G&T Cooperatives Kris Mayes, Chairman Arizona Corporation Commission June 10, 2009

Arizona’s Energy Future Arizona’s G&T Cooperatives Kris Mayes, Chairman Arizona Corporation Commission June 10, 2009. Utility of the Future. “Greener and Leaner” Within five years, the percentage of utilities that will be generating at least 10% of power from renewables will double.

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Arizona’s Energy Future Arizona’s G&T Cooperatives Kris Mayes, Chairman Arizona Corporation Commission June 10, 2009

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  1. Arizona’s Energy Future Arizona’s G&T Cooperatives Kris Mayes, Chairman Arizona Corporation Commission June 10, 2009

  2. Utility of the Future • “Greener and Leaner” • Within five years, the percentage of utilities that will be generating at least 10% of power from renewables will double. • Utility demand management initiatives and customer distributed generation are expected to make tremendous inroads within 10 years. • IBM survey of 1,000 business and public sector leaders found that the most dramatic looming change will be a greater level of customer involvement. Digital-age customers will demand a more collaborative relationship with their utilities.

  3. Utility of the Future • How is the need for greater customer involvement going to be met? • Utility coordination of Renewable and Energy Efficiency efforts • Increased implementation of Smart Grid technologies

  4. Electric Cooperatives and Renewables • Sulphur Springs Valley Electric Cooperative • Provides incentives of $4.00 per installed watt, or up to 50 percent of the total installed cost of the system, whichever is less. • Trico Electric Cooperative • Photovoltaic (PV) and small wind: Customers receive $4 per installed watt up to half the cost of the system. • Solar water heating: 75 cents per kilowatt hour saved in the first year (determined based on a nameplate rating).

  5. Electric Cooperatives and Energy Efficiency • Navopache Electric Cooperative • Offers Time-of-use rates to members willing to change their lifestyle by using much of their electricity during off-peak times. Members receive a discounted rate during off-peak hours to encourage them to use their electricity then. • Sulphur Springs Valley Electric Cooperative • Offers a residential rebate program for homes that switch to a 14 SEER or higher electric or dual fuel heat pump. • Dixie-Escalante Rural Electric Cooperative • This cooperative offers rebates for efficient electric heat pumps, electric water heaters, or dual fuel heating and cooling to replace less efficient equipment or in new home construction. Service rebates are also available.

  6. Energy Challenges Facing Arizona Growth In 2007, Domestic Net Migration totaled 90,402 or 7,500 monthly Between 2000 and 2039, Arizona’s population will more than double. By 2030 Arizona’s population will exceed 10.7 million people – becoming the 10th largest in the country. Between 2000 and 2007, Arizona’s consumption of electrical power grew at about three times the rate of the United States as a whole. APS has estimated that 2025 peak demand will be 60 percent higher than current levels. Focus on Renewables, DSM, and Energy Efficiency to shave the peak Rising Energy Costs Rate filings premised on volatile natural gas prices and growth. Nationally, energy expenditures account for $1 Trillion, or 8.4% of GDP. Infrastructure Needs Natural Gas Infrastructure: Arizona desperately needs a natural gas storage facility to keep volatile natural gas prices down.

  7. Meeting Arizona’s Challenges with Renewables As Arizona’s population grows each year, so does peak electrical usage. This peak can be met by building new transmission lines and power plants as well as by the use of renewable energy, energy efficiency and demand response. In order to meet the ambitious RES goals, as well as increasing energy efficiency programs (such as DSM, and Demand Response), it will be necessary for Arizona to create a clean energy economy. The RES alone has created a $115 million/year market in Arizona.

  8. Why Renewables? • Fossil fuel prices have been historically volatile and their costs have trended up over the long term. • Renewable generation costs are primarily in plant and not in fuel. • Renewables provide a hedge against fossil fuel volatility and their long term costs have trended down. • Carbon Legislation • APS has estimated that the current Presidential proposal could raise rates between 11% - 41%. • Minimizing reliance on fossil fuels reduces our dependence on foreign sources and enhances energy security.

  9. Summary of Waxman-Markey • Require electric utilities to meet 20% of their electricity demand through renewable energy sources and energy efficiency by 2020. • Invest in new clean energy technologies and energy efficiency, including energy efficiency and renewable energy ($90 billion in new investments by 2025), carbon capture and sequestration ($60 billion), electric and other advanced technology vehicles ($20 billion), and basic scientific research and development ($20 billion). • Mandate new energy-saving standards for buildings, appliances, and industry. • Reduce carbon emissions from major U.S. sources by 17% by 2020 and over 80% by 2050 compared to 2005 levels. Complementary measures in the legislation, such as investments in preventing tropical deforestation, will achieve significant additional reductions in carbon emissions.

  10. Representative Solar Costs

  11. Projected Natural Gas Prices

  12. Support for Renewable Energy • In February 2007, Public Opinion Strategies conducted a statewide poll on renewable energy. • The poll found that 87% of the electorate prefers to address Arizona’s current energy situation by “increasing energy efficiency and using more clean energy sources like wind and solar power” rather than by “importing more electricity from coal power in other states” (8%). • Overwhelming majorities of voters across the state and of every demographic and partisan group side with a clean energy approach to address the state’s energy needs, including 83% of Republicans, 89% of Independents and 91% of Democrats.

  13. The RES: The Power of Clean Energy The RES rules require regulated utilities to generate 15% of their energy from renewable resources by 2025. The RES allows utilities to use solar, wind, biomass, biogas, geothermal and other similar technologies to generate “clean” energy to power Arizona’s future.  The rules package outlines what technologies qualify and allow for new and emerging technologies to be added as they become feasible. In addition to utility-owned projects such as Tucson Electric Power’s large solar installation in Springerville, Arizona, the Commission also required a growing percentage of the total resource portfolio to come from distributed generation – residential or non-utility owned installations.  The distributed energy requirement starts at 5 percent of the total portfolio in 2007 and grows to 30 percent of the total renewable mix after 2011.

  14. Renewable Portfolio Standards www.dsireusa.org / April 2009 WA: 15% by 2020* ME: 30% by 2000 New RE: 10% by 2017 VT: (1) RE meets any increase in retail sales by 2012; (2) 20% RE & CHP by 2017 MN: 25% by 2025 (Xcel: 30% by 2020) MT: 15% by 2015 • NH: 23.8% by 2025 ND: 10% by 2015 MI: 10% + 1,100 MW by 2015* • MA: 15% by 2020+1% annual increase(Class I Renewables) OR: 25% by 2025(large utilities) 5% - 10% by 2025 (smaller utilities) SD: 10% by 2015 WI: Varies by utility; 10% by 2015 goal • NY: 24% by 2013 RI: 16% by 2020 CT: 23% by 2020 • NV: 20% by 2015* IA: 105 MW • OH: 25% by 2025† UT: 20% by 2025* • PA: 18% by 2020† IL: 25% by 2025 VA: 15% by 2025* • CO: 20% by 2020(IOUs) 10% by 2020 (co-ops & large munis)* • NJ: 22.5% by 2021 CA: 20% by 2010 • MD: 20% by 2022 • MO: 15% by 2021 • AZ: 15% by 2025 • DE: 20% by 2019* • NC: 12.5% by 2021(IOUs) 10% by 2018 (co-ops & munis) • DC: 20% by 2020 • NM: 20% by 2020(IOUs) • 10% by 2020 (co-ops) TX: 5,880 MW by 2015 28 states & DChave an RPS 5 states have goals HI: 20% by 2020 State renewable portfolio standard Minimum solar or customer-sited requirement * State renewable portfolio goal Extra credit for solar or customer-sited renewables † Solar water heating eligible Includes separate tier of non-renewable alternative resources

  15. Potential Configuration for Transmission to Serve All Available Renewable Resources

  16. Western Renewable Energy Zones

  17. Renewable Interconnection Requests

  18. RES Funds APS - $78.4 Million TEP - $29.7 Million SSVEC - $3.4 Million DSM and Energy Efficiency APS - $25.5 Million TEP - $6.4 Million SRP - $200 Million over the next six years 2009 Renewable and Energy Efficiency Funds Available

  19. Net Metering • On October 16, 2008, the Commission approved Net Metering Rules which were recently approved by the Attorney General. • Under the rules, if a consumer produces more electricity each month than he uses, he receives a credit for the electricity the next month, and then at the end of the year, the utility must true up with the customer and pay him for the electricity that he produced but didn’t use. • The most unique feature of Arizona’s net metering plan is that it has no statewide MW cap, and limits an individual who wants to net meter a home or building to 125 percent of the connected load of that building. Solar energy advocates see this feature as groundbreaking.

  20. Net Metering Enhancements • Virtual net metering • Allows electricity produced by a single solar installation to be credited to the benefit of multiple tenants in the building without requiring the system to be physically connected to each tenant's meter • Commission could consider this policy in the coming two years.

  21. Incentives and Potential for a Clean Energy Economy Arizona will need incentives to attract new high-tech companies Tax credits? Public/Private partnerships? Partnerships with ASU, U of A, NAU? Outreach by elected officials and the business community to Wall Street and venture capital markets. Clean Energy is good for jobs and economic development, especially in rural Arizona. According to the Arizona Solar Roadmap, the accelerated development of solar energy can result in 3,000 jobs by 2020. The Western Governors Association has estimated that 1,000 MW of central station renewable energy (such as large-scale wind, or CSP), can result in 2,120-3,400 construction jobs, and 100-250 permanent plant jobs. Given Arizona’s 10,000 MW commercial potential, this could translate to 21,200-34,000 construction jobs and 1,000 to 2,500 permanent plant jobs. A SWEEP study found that increasing energy efficiency 20% by 2020 can result in 12,000 Arizona jobs. A recent study done by APS, SRP and TEP found that Arizona has approximately 1,000 MW of wind potential, and 4,300 MW of solar thermal electric potential. Arizona needs to capitalize on these large-scale projects in addition to the distributed energy, required by the RES.

  22. Sulphur Springs Valley Electric Cooperative The solar schools program will provide every school in SSVEC’s service territory, with a solar shade structure

  23. Arizona Public Service Prescott Airport Solar Plant 3.5 MW

  24. Frito Lay Project, Phoenix 201 kW Slide Courtesy of American Solar Electric

  25. APS Aragonne Mesa Wind Project, 90 MW, Santa Rosa, NM Slide Courtesy of APS

  26. Pennington Street Garage, Tucson 60 kW Solar PV System Installed in September, 2005 Manufacturer: Kyocera Estimated Annual Production: 108,000 kWh Slide Courtesy of American Solar Electric

  27. Skystream Wind Turbine, Flagstaff, AZ 1.8 kW Slide Courtesy of Southwest Wind Power

  28. Energy Efficiency • Cooperatives are taking the initiative • Great River Energy (Minnesota) - Plans to first aggressively pursue conservation and efficiency to reduce future resource needs. • National Rural Electric Cooperative Association – “Technology advances, aggressive consumer education, mandated standards for new buildings, upgraded electricity delivery systems and upfront spending to lower electricity usage for moderate and lower income groups must be pursued now in order for efficiency to significantly impact demand reduction in the future.” • The cheapest form of “energy” that exists • Recent APS case found cost to be 1.02 cents per kWH. • The Energy Information Administration calculated Arizona’s average retail price of electricity across all sectors to be 8.34 cents per kWH. • Increasing incentives for Energy-Efficiency creates substantial new construction investment and employment retrofitting buildings. • One study estimated that energy efficiency created twice as many jobs as natural gas generation, creating 21.5 jobs for every $1 million invested vs. 11.5 jobs. (New Energy for America, Apollo Jobs Report 2004). • According to the Center for Energy, Resources and Economic Sustainability at the University of California, Berkeley, California’s energy-efficiency policies created nearly 1.5 million jobs from 1977 to 2007, while eliminating fewer than 25,000.

  29. Energy Efficiency • ACC has currently approved annual budgets for APS, TEP and Southwest Gas of approximately $37M. • There are currently 40 approved energy efficiency programs at Arizona’s gas and electric utilities • APS (10 Programs) TEP (9 Programs) • UNSE (6 Programs) UNSG (4 Programs) • SWG (7 Programs) SSVEC (4 Programs) • Some Existing Programs include: • Low-Income Weatherization (All) • HVAC (APS, TEP, UNSE) • New Construction (APS, TEP) • Compact Fluorescent Lamps (APS, TEP) • Building Operator Training (APS)

  30. Energy Efficiency Docket • The Commission has initiated an energy efficiency workshop to examine current utility energy efficiency programs and develop ways to increase Arizona’s efforts and results. • Part of the discussion includes creating a long term energy efficiency target, perhaps 20% by 2020.

  31. Arizona’s Energy Efficiency Programs • There are currently 40 approved energy efficiency programs at Arizona’s gas and electric utilities; Most of these programs have experienced major ramp-ups in the last decade • APS (10 programs) • TEP (9 programs) • UNSE (6 programs) • UNSG (4 programs • SWG (7 programs) • SSVEC (4 programs)

  32. Goals Set by other States • Utah: Increasing energy efficiency by 20% by 2015; • New York: Reducing electrical usage by 15% by 2015; • Virginia : 10% electrical savings by 2022, calculating from 2006 sales; • Illinois: Increasing from 0.2% of energy delivered in 2008 to 2.0% annually for 2015 and subsequent years; • Minnesota: at least 1.0% per year; • Washington: 10.6% of projected needs by 2025; and • North Carolina: 12.5% energy savings through renewable energy and energy efficiency by 2021 and thereafter; 25% can come from energy efficiency

  33. Smart Grid • Electric power’s future is ‘smart grid’ • Described smart grid as “…where utilities get instant feedback on a transformer outage, shift easily to integrate wind and solar energy with electricity from coal-burning power plants, and go into homes and businesses to automatically adjust power use based on preset agreements.” • Cooperatives nationwide are involved in smart grid technology. • South Plains Electric Cooperative – “…meters cut down on operating costs and help cooperatives effectively manage outages. For example, a smart meter can tell us when the power is out instead of relying on you to call the outage in, and they can help reroute power around problems. Down the road they might be able to help you manage energy use, showing you what power costs at different times of the day to help you make smart energy choices when using appliances.” • Seventy percent of the nation’s cooperatives have installed some form of a smart meter, and another 11 percent will join them in the next year.

  34. Conclusion Arizona Corporation Commission documents and orders can be found by visiting www.azcc.gov Information on Arizona’s Renewable Energy Standard can be found by visiting www.azcc.gov/divisions/util/electric/environmental.htm Chairman Kris Mayes: 602-542-4143, kmayes@azcc.gov

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