Group Challenges Arizona Law Mandating Payments for Renewable Energy Supplies

Michael Giberson

Renewable energy mandates are often popular state polices. According to the US Department of Energy, 24 states and the District of Columbia have “renewable portfolio standards” (RPS) which requires that a minimum percentage of power consumed in the state come from renewable resources. Four other states have non-binding goals. (Wikipedia on RPS for more information.)

Many of the policies were passed by state legislatures, but in Arizona the state utility regulator, the Arizona Corporation Commission, devised and implemented an RPS using its regulatory authority.

Whether the ACC actually had sufficient authority to require RPS is now the subject of a lawsuit by the Phoenix-based Goldwater Institute. In the lawsuit, Miller v. Arizona Corporation Commission, the Institute argues that “the rules exceed the Commission’s limited constitutional authority, violate separation of powers, and impermissibly interfere with the relationship between APS and its customers.” (In the words of the press release.)

As an aside, the American Wind Energy Association describes RPS in the following manner:

The Renewables Portfolio Standard (RPS) is a flexible, market-driven policy that can ensure that the public benefits of wind, solar, biomass, and geothermal energy continue to be recognized as electricity markets become more competitive. The policy ensures that a minimum amount of renewable energy is included in the portfolio of electricity resources serving a state or country, and — by increasing the required amount over time — the RPS can put the electricity industry on a path toward increasing sustainability. Because it is a market standard, the RPS relies almost entirely on the private market for its implementation. Market implementation will result in competition, efficiency and innovation that will deliver renewable energy at the lowest possible cost.

I would have to agree that, as a regulatory policy, RPS is relatively market-driven. But like, say, a city policy that dictated that at least 15 percent of the homes in town be painted pale pink and “let’s the market decide” which houses and where to buy the paint, “market-driven policy” doesn’t automatically translate into “obviously-good idea.”

4 thoughts on “Group Challenges Arizona Law Mandating Payments for Renewable Energy Supplies

  1. Mike,
    There appears to be an inconsistency between the US DOE description of RPS and that of the AWEA. The DOE description appears to be commodity based, whereas the AWEA description appears to be capacity based. Let’s use wind as an example of renewable generation.
    An electric utility with a 10 GW conventional generation capacity would have to add 3.3 GW of wind capacity to achieve a 25% renewable portfolio on a capacity basis. (3.3/10+3.3=25%)
    The same electric utility (assume 50% capacity factor) would have to add 6.6 GW of wind capacity (25% capacity factor) to achieve a 25% renewable portfolio on a commodity basis. ((6.6*0.25)/(10*0.50+6.6*0.25=25%))
    This assumes that the utility’s demand equals or exceeds the wind energy production during the period when the wind is available.
    The situation would be less dramatic with solar which, while not dispatchable, is more predictable and more available during peak periods. It would be even less dramatic with hydro and geothermal, as long as the reliable component of the hydro commodity verses the “source of opportunity” component are clearly defined.

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