The onslaught of TV ads would have you believe Prop. 127 means disaster for Arizona in the form of astronomically higher costs of electricity.
Donβt believe the hype.
Iβve done my best to talk with utility representatives, the opponents and supporters of the proposition and other experts. Iβve gone over the studies, Iβve considered the politics, and I donβt think passing Prop. 127 would mean economic or electric disaster for Arizona.
But it probably would cost us more, Iβve concluded, even though advocates of the initiative are saying it would not. They say it would actually save us money and add jobs. My thought: probably not.
Before I tell you why I think that, we should all remember why weβre talking about a mandate of 50 percent renewables on Arizona utilities by 2030. Itβs the brainchild of Tom Steyer, the California billionaire who is funding the pro-127 campaign almost entirely himself. Heβs pursued similar initiatives elsewhere, and in some places, like Colorado and Michigan, the utilities have embraced aggressive change.
While Steyer has his own personal interests β a run for the presidency as a Democrat, maybe, and an investment in solar energy β the most basic motivation for the initiative is to reduce the burning of fossil fuels that contributes to global warming.
We canβt do much to affect this global phenomenon in Arizona, but we can do our part while others do theirs. Imagine Tucson or Phoenix being significantly hotter than they already are, and you can see why we have a self-interest in doing our part.
But itβs natural that people think more of their own pocketbooks. And this yearβs studies of the potential effects of the Clean Energy Initiative started off with an apocalyptic-sounding analysis of the economic impact by the Seidman Research Institute at ASU.
The March 19 report said the effect on Arizonaβs gross state product β the value of all goods and services produced in Arizona β would be $1.58 billion by 2030. That may sound like a lot, but the gross state product was $320 billion in 2017, and $227 billion 12 years earlier, in 2005. If we were to grow at the same pace over the next 12 years, and the Seidman projection comes true, the negative effect of Prop. 127 would be tiny β shaving 1 percentage point or so off total economic growth.
In August, Seidman released a more alarming analysis. In a two-page memo, Seidman projected that Arizona Public Service customer bills would increase by $1,936 per year by 2030 if Prop. 127 passes.
Arizona Public Service and the political groups it has funded to oppose Prop. 127 have jumped on the analysis to claim disastrous results if Prop. 127 passes, but Seidmanβs research was paid for by APS and based on information provided by APS. The second Seidman report simply does not pass the smell test.
When you call Seidman to inquire about these analyses, they donβt put you through to the author. They put you through to a recording, of a man with an English accent explaining that, yes, they got all their information from APS, but their model is validated and βAll of our research is independent, objective and apolitical.β
Dylan Sullivan, who works for the pro-127 campaign and has produced its studies on the initiativeβs potential impacts, put it this way when I spoke with him in Tucson last week: βI feel like APS is laundering its cost estimate through Seidman. APS hasnβt shared any of the inputs.β
The nuclear question
Perhaps the most touchy and controversial input, or assumption, contained in the Seidman reports is that the Palo Verde Nuclear Generating Station will close. This would have the dire economic effect of eliminating thousands of good-paying jobs and a major source of property-tax revenue, as well as extinguishing a supplier of cheap, reliable and emissions-free energy.
APS has a compelling argument for why this might happen. Nuclear plants have to operate at full tilt, not turned down and up like a burner on a stove. Solar energy, on the other hand is variable, flooding onto the grid in the middle of the day and disappearing quickly as evening descends.
That means that in the middle of sunny days, excess power may be produced, leaving no place for the nuclear plant to send its electrons as the utilities prioritize using solar energy to meet the Prop. 127 mandate. This would happen The plant canβt ratchet up and down, so it could end up closing as new renewables become available and compete with the plant to find a market.
βToo much energy production is expected regularly in the future under Prop. 127, not just during short periods,β said Jeff Burke, APSβ resource planning director, in an email. βDuring the middle of the day for more than six months of the year, customers arenβt using their air conditioning in a significant way.β
He noted that California utilities paid Arizona utilities to accept excess power generated under a renewable mandate on 150 days in 2017.
A separate report by the Residential Utility Consumer Office listed another threat to Palo Verde: With the mandated introduction of increasingly cheap renewables, the nuclear plant would become more quickly uncompetitive in price. This may sound like a good thing, but the Palo Verde plantβs closure, if it happened soon, would lead in the short term to burning more coal or gas to replace the nuclear energy.
But the supporters of Prop. 127 argue that the alleged threats are exaggerated. For one, they say, the threat of excess production is relevant only in parts of spring and fall, on days when the sun produces a lot of solar power but there isnβt much use of air conditioning to soak up that power. When that does happen, as D.J. Quinlan, the consultant for the pro-127 campaign said, you can turn off the solar.
βThere are a ton of things you would do before you would consider shutting down a nuclear plant,β Quinlan said.
Cheaper energy outlook
Jim Lazar, a Washington-based economist who consults on utility resource planning, told me utilities regularly βcurtailβ renewables as needed. He sent me a table from Maui Electric Co. that shows this year the utility has produced 115 gigawatts of wind power but curtailed 10 gigawatts, or about 9 percent of the total. It increases the cost a little bit, but not enough to make a big difference, Lazar said.
Lazar is sympathetic with the studies produced by Sullivan and the Natural Resources Defense Council for the pro-127 campaign. He told me that far from causing electric costs to rise, they may well fall if Prop. 127 goes into effect.
βThe cost of renewables has come down so much, that I donβt really think there should be a concern about utility rates rising faster than they have,β he said. βItβs not going to require a great deal of storage. If thereβs a great deal of solar and wind, you need a little storage to get you through the day.β
Indeed, thatβs what Sullivan and Quinlan argued to me last week and in three studies the NRDC has produced supporting the proposition: The initiative will actually save consumers money and create thousands of jobs. Their argument rests on the idea that the initiative will require the installation of a lot of cheap renewables, mostly solar plants, without requiring a lot of new battery storage, which is relatively expensive now.
TEPβs projections
That did not seem realistic to two Tucson Electric Power officials I told about it. Company spokesman Joe Salkowski and resource planner Mike Sheehan explained that they put the initiative through their own modeling and found that it would require about $2 billion in additional capital spending for solar plants, battery storage and other projects.
One of the most intriguing projects would use solar power to pump water uphill in the day, store it behind a dam, then release it and produce hydro power at night. The dam then becomes a form of storing solar power. A sister company of TEP owns the land and rights for such a project in the Chino Valley north of Prescott.
The actual cost of storage is, of course, unclear, but Sheehan said their model projects a 40 percent decrease in the price of four-hour lithium-ion batteries over the next five years, and the question is whether the batteries can become cheaper than a peaker plant, a gas plant used for times of peak demand, in the near future.
βIf you can get eight hours out of a battery, itβs a game changer,β Sheehan said.
But capital costs arenβt the only additional costs. TEP expects it will have to pay to convince sufficient customers to put rooftop solar on their homes, which is required to be 10 percent of the utilitiesβ energy production by 2030 under the initiative. There could also be some costs of retiring old plants, such as the coal plant near Springerville.
When you add all that up, TEP projects a $400-plus increase per typical residential customer per year by 2030 β about $33 dollars more per month for electricity.
The Residential Utility Consumer Office projects a smaller increase for TEP customers, in part because it assumes only one unit of the Springerville plant will close. The result: $256 more per residence per year, or about $21 per month.
For APS customers, RUCOβs study projects an increase resulting from Prop. 127 of $249 per year, or $21 per month β a small fraction of what the Seidman Institute predicted, even though RUCO also projects Palo Verde would close early under Prop. 127, in 2029.
The variables in all these forecasts are crazy-making: Will Palo Verde stay open? How cheap will solar power and storage become? How many fossil-fuel plants will close or be opened?
I think itβs reasonable to settle into a conclusion that the investments necessary to arrive at 50 percent renewables by 2030 will cost us ratepayers more money. But my best guess is that the likely outcome is nowhere near the $1,000-plus per year that APS affiliates have claimed.
Itβs more likely to be closer to the range that RUCO is projecting βsignificant, especially to the poor, but not overwhelming for other customers and the stateβs economy.
