Arizona Public Service Co. is looking to raise an additional $143 million to boost the rollout of commercial solar power systems as demand outstrips the utility’s allocation of incentives.
In addition to asking permission from the Arizona Corporation Commission to raise additional funds for its commercial incentive program, the utility is asking that schools be made eligible for its residential incentives to draw some demand away from the commercial side.
The request has drawn both support and ire from the state’s solar power community. APS contends it must do something to sustain its popular commercial program.
“The participation on our residential side has been good, but just within the last couple of months we have been overwhelmed with requests on our nonresidential side,” said Barbara Lockwood, APS’ manager of renewable energy.
APS asked for more money in May to boost its incentive program, seeking to raise the amount it was allowed to recapture from ratepayers from $77 million to $220 million to cover residential and commercial requests.
Even with that proposed increase, APS officials said in filings with the ACC that school districts could be left out of funding for this year. The utility amended its request at the end of July asking that schools be considered residential rather than commercial properties.
The utility says it has received $72 million for 57 projects that have been approved or installed. An additional $55 million in requests have been received, and $63 million worth of projects are in development, according to information from ACC staff. Further requests totaling $30 million are expected by the end of the year.
Arizona’s renewable energy standards require utilities to provide incentives for residential and commercial systems at an equal rate. Those incentives are part of a plan to make distributed solar energy — systems installed on business and home roofs — account for 30 percent of the overall renewable energy required by the ACC.
APS has told the commission it expects between $20 million and $25 million to be left in the pool of residential incentives by the end of the year.
“We are encouraged by how (residential system installation) has grown, but it’s going to be a little while before we meet those standards,” Lockwood said.
Some in the solar industry like the move to reclassify schools as residential properties. SolarCity Corp., which is working with Scottsdale Unified School District to help it sell power from solar systems installed on high school roofs, filed a motion for that proposal.
“We fully support APS in this request and think this would be a home run for taxpayers,” said Jordan Rose, whose firm, Rose Law Group PC, is representing SolarCity in a case before the commission on power purchase agreements involving schools. “The APS request is critically important to allow schools to save money on power.”
Others in the solar industry oppose the move, saying it could cut homeowners’ access to funds.
“We’re afraid there’s not going to be money left for residential systems,” said Tom Alston, the Arizona lead for the Solar Alliance, an amalgamation of solar businesses.
Alston said utilities typically see a spike in demand when users are concerned about incentives expiring, as was the case when Salt River Project cut back its incentives on solar systems and received a flood of applications trying to beat the deadline.
A run on APS could occur if homeowners make the typical year-end dash to qualify for federal tax breaks. The alliance argues the state’s renewable energy standards have not been in place for long, and a permanent reclassification would require more data, Alston said.
The alliance said it would support APS using about $10 million slated for residential systems for one-time school incentives, provided no homeowners are cut off from funding this year.
ACC staffers proposed a compromise to temporarily allow allocation of residential money for schools, starting with $10 million that could be approved by commissioners next week.More money could be made available to schools in October and December, depending on how much of the residential pool remains.
The staff also favors allowing APS to recover $220 million from ratepayers, providing the utility begins scaling back its commercial solar incentive program to slow demand.
That solution could work for APS, which is trying to accommodate school districts looking at solar systems and trying to maximize tax breaks and stimulus funds from the American Recovery and Reinvestment Act, Lockwood said.
“It certainly looks like they’ve come up with something to get it started,” she said.
APS might face similar problems with its residential rebates falling short in the next few years. Businesses typically have more access to up-front funds than homeowners, and federal tax credits benefiting homeowners are relatively new.
It could be at least a couple of years before APS meets the state standard, which requires that 50 percent of the solar capacity installed on rooftops come from residential systems, Lockwood said.
“We’re encouraged by how it’s grown, but we believe it’s going to be a little bit longer until we meet those standards,” she said.
