For decades, Phoenix has attracted a steady influx of residents who like the affordable real estate and dry desert air, and aren’t deterred by the occasional bout of triple-digit heat. More recently, the region has also drawn a spate of data centers: Arizona hosts 2 gigawatts of active data centers, according to independent analyst Michael Thomas.
That’s just a taste of what might be coming. Thomas noted in a January post that Arizona Public Service has 30 GW of proposed data centers in its queue for grid connection, several times more than the utility’s peak demand record of 8.5 GW. That gargantuan mismatch is reason enough to doubt that much of the proposed buildout will ever materialize. Still, the utility has already mobilized to construct a 2-GW gas plant to keep pace with this new demand.
The propulsive growth in consumption creates new urgency for clean energy in terms of both planet-warming emissions and affordability. The state’s progress on cleaning up its electricity supply could slow or reverse if renewables stall out just as utilities fast-track constructing fossil fuel plants. And an assertive clean-energy expansion could help keep prices lower in a period of tight supply. That’s especially true as the turbines used in gas plants get more expensive amid yearslong supply chain backlogs. Furthermore, since Arizona lacks its own gas supplies, consuming more of the fuel requires building more pipelines and shipping more dollars out of state.
Election-year pressures for Arizona regulators
At this pivotal moment for Arizona’s energy outlook, details included in the Arizona Corporation Commission’s decision cast doubt on whether customers will save much money from the end of the mandate.
The regulators focused their criticism on costs imposed on customers over the years by the surcharges utilities levied to fulfill the renewables mandate. The implication was that eliminating the mandate would therefore lower people’s bills going forward.
But that rhetoric doesn’t match the facts in the official proceeding, said Autumn Johnson, who argued against the repeal as the leader of the state affiliate of the Solar Energy Industries Association.
The commission’s economic impact statement does say that utilities “may see some marginal savings” from forgoing the administrative work involved in complying with the requirements. However, it notes, one utility indicated that “most renewable-related costs will continue due to long-term contractual and programmatic obligations, which may limit overall savings.”
The rule changes don’t eliminate American contract law. Utilities will still have to pay for contracts they signed years ago, and those costs will continue to be recovered as surcharges, a commission spokesperson confirmed. Utilities had already fulfilled the requirement, so it wasn’t likely to force their hand in signing new deals. Even if it did, solar and battery proposals today compete extremely well on the cost of power , an extra nudge to pick the cheapest source of new kilowatt-hours should not unduly raise costs on consumers.
“What does it say to the country, what does it say to the industry, if even this tiny, anemic RPS [renewables portfolio standard] that’s honestly embarrassing, even that we have a problem with?” Johnson said. “This is just to signal that you don’t like renewables, which I think is really not smart from an economic development standpoint.”
As for why sitting regulators might want to signal such a thing, two of the regulators quoted in the press release are running for reelection in November, with a primary on July 21. Kevin Thompson and Nick Myers are facing primary challenges from state legislators Ralph Heap and David Marshall, who are campaigning to “stop the Green New Deal” and “oppose harmful rate hikes.” This vote gives the incumbents something to talk about to show they are working on affordability while pruning what they see as government overreach.
It’s also possible that the repeal, if enacted, won’t materially damage the pace of the clean energy buildout, since the mandate wasn’t driving that buildout anymore. Excising the old policy enables renewables developers to make a clearer case that they’re winning on the merits, not because of state favoritism.
Still, Arizona’s retreat on its renewables policy coincides with other forces acting against the clean energy industry. Local jurisdictions in the state are passing ordinances that could stymie solar and battery development through restrictive permitting, Johnson said. The Trump administration is phasing out tax incentives for wind and solar installations and holding up permitting for projects on public lands. Arizona’s rooftop solar market has contracted since the state lowered the rate of compensation for customers who send power from their panels back to the grid, and imposed what Johnson called “punitive fees” on those households.
In sum, Johnson hopes the recent clean-energy success story continues in Arizona, but stressed that this outcome is not guaranteed.
“You can’t maintain a third ranking for storage and fourth or fifth ranking for solar if you continue to do things that are antagonistic to those industries,” Johnson said.
Now, the fate of the renewables policy hangs on the wrangling between the attorney general and the commissioners, as election-year politics spices up the usually mild world of utility regulation.