What is the value of solar in Arizona?

New policy discussion concerns home and business owners
Published: Nov. 20, 2023 at 7:54 PM MST
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TUCSON, Ariz. (13 News) - The sun may create “free” energy - and Arizona gets plenty of it - but harnessing the sun’s power comes with a cost. Right now, for many in Arizona, that cost is a concern. What’s worrying the solar industry, owners, and environmentalists is Arizona’s net metering, or how much solar owners can earn back for extra energy production.

How much you spend to install solar panels depends on many factors. The Inflation Reduction Act means higher tax credits if you buy American-made systems, which are becoming more common in Southern Arizona. The federal solar investment tax credit is the biggest incentive. You can deduct 30% of the system’s total cost. In Arizona, there’s an average federal credit of about $4,300. Also, the state gives you up to a thousand dollars as a on-time income tax credit. There are other incentives, too.

“It’s a low-cost resource; it helps our environment, especially here in Arizona with how valuable water is now, but also how important it’s going to be in the future, “ said Louis Woofenden, co-owner of Tucson’s Net Zero Solar. “I want to live in a place with lots of solar, lots of batteries, lots of electric vehicles, so we’re living more in harmony with the desert.”

Woofenden says solar install costs in Arizona are in line with most of the country. But new discussions over what’s fair for utilities pay to put that extra solar power on the grid - have brought a feeling of instability.

“If a lot of people are generating power when electricity is cheap and then using it when it’s expensive, they’ve changed that,” said Justin Martino, managing editor at Consumer Affairs, has been covering solar for more than a decade. He says in places with lots of sunshine, we need bigger, more expensive systems.

“What you see in a state like Arizona is, you get a lot more sunlight, it’s a lot hotter. It all adds up,” said Martino.

Still, more people are going solar specifically to save money. And Martino says, that’s not changing.

“We do think i’s worth it. You do see an estimated net savings over 25 years of close to $24,000 dollars,” said Martino. “Even though it’s a big investment up front, how does that work out ten 20, 25 year span?”

Martino says, to get the best bang for your buck, make sure to partner with an established company that asks a lot of questions to find the right fit. That includes figuring in that yearly-diminishing Arizona buyback amount, which is changing the equation for homeowners, and making it harder to estimate future savings.

Almost two hundred thousand homes in Arizona have solar panels - with about 300 solar providers who install them. All of them are worried about a recent move by the Arizona Corporation Commission.

Solar customers and companies feel their future’s on the line because the commission voted to review buyback rates for rooftop solar energy. That’s the amount of credit solar homeowners get on their power bill for excess energy they send to the grid. If the policy set in 2017 is changed, owners and environmentalists say it could stifle solar in Arizona.

In August, the ACC dropped solar export rates by the maximum ten percent allowed by that 2017 agreement, which is slated to last until 2027. October first, TEP’s rate for solar dropped to 6.33 cents paid out per kilowatt hour, down from 7.03 cents last year.For comparison, the average retail electricity rate is 16 cents.

Solar panel owners currently get a ten-year rate lock-in. But that could all change.

Woofenden grew up in a home powered by sun and wind, and loves bringing solar to Arizonans. He also volunteers with budding UA engineers, but isn’t sure what to tell them about his industry’s future.

”We’re not planning to grow, just because we don’t have any kind of certainty about what’s going to happen,” Woofenden said.

Woofenden’s concern being, if solar becomes less affordable, fewer people would make the switch. And Woofenden fears jobs could go to other states.

“It’s sort of a race between innovation of solar and storage and these negative policy choices,” Woofenden said.

If the value of what solar owners don’t use plummets, so could their investment.

“They are sending power back to the grid that’s being sold to their neighbors, often for three times what they’re getting paid for it. it’s only going a hundred feet to their neighbors. But utilities do have to build and maintain a grid.”

The issue “heated up” last month at an Arizona Corporation Commission open meeting.

Commissioner Nick Myers motioned to explore whether some of the 2017 provisions need updating, concerned that the solar purchase rate could be *overvalued.

“At this point, I am interested in exploring possible changes to the RCP (purchase rate) ten-year lock-in period and annual ten-year reduction cap, only as it pertains to future rooftop solar customers. Even though I believe it’s unfair to customers to be compensated beyond what their energy is worth, any changes we make should be prospective only,” said Myers.

The meeting was packed, with a line of speakers.

“There are people in this room worried about losing their jobs, losing their businesses, or having their life savings wasted,” said Autumn Johnson with the Arizona Solar Energy Association. “This is not a political game to them. This is their real lives and your decisions have consequences.”

Myers said he sees no harm in a discussion about what’s next.

“I’m definitely not prejudging the outcome of that conversation,” said Myers. “I do not want to prejudge. I want to hear what the data is..”

Neither Myers nor the other two commissioners who voted to explore a change responded to requests for comment. But, at a procedural conference this month, lawyers for TEP, the solar industry, and environmental groups all said they’re confused because they already agree on the status quo.

“It’s sort of weird - the last time we went through this process, it was pretty clear there were two diametrically opposed sides, people could understand where they were coming from but I don’t know what change this is or what they want out of it,” said Court Rich, co-founder at Rose Law Firm, representing Arizona Solar Energy Industries.

At press time, the judge had posted no update on the next step after the procedural hearing.

Meanwhile, Woofenden says people are trying to start projects now to be grandfathered in if rates change.

For now, the future of one of Arizona’s greatest resources - is up in the air.