The largest utility in Arizona is proposing to install solar panels on residential rooftops, marking the escalation of traditional utilities' foray into distributed generation.
Arizona Public Service Co. filed an application with the Arizona Corporation Commission on Monday to install rooftop systems for 3,000 customers and pay them $30 per month to "rent" the roof space for a 20-year period.
APS executives said the proposal, which they hope to get through the ACC by September, is the first large-scale bid from a traditionally regulated utility to enter the residential solar market.
"In terms of the scale and scope of this ... there's nothing close," said Marc Romito, manager of APS's renewable energy program. The installations would total about 20 megawatts and would count toward APS's target of 200 MW of solar installed by the end of 2015. They would be paid for through customer rates; APS puts the cost at $57 million to $70 million.
APS last year engaged in a bruising battle with solar rooftop leasing companies over the role of distributed generation, arguing that solar customers don't pay their fair share of infrastructure costs, which are incorporated into electricity rates. That fight resulted in a fee of 70 cents per kilowatt levied on rooftop systems (ClimateWire, Nov. 15, 2013).
The new proposal immediately reignited solar industry opposition, with national and state trade groups issuing strongly worded statements against it.
"After attacking rooftop solar companies in Arizona relentlessly for more than a year, this latest tactic by APS has a 'Trojan Horse' smell to it," said Solar Energy Industries Association spokesman Ken Johnson. "Our member companies welcome fair and equal competition, but this move would stack the deck in favor of a company which can rate-base solar with a guaranteed rate of return. How is that fair?"
Romito said APS isn't trying to edge other companies out of the market. "The intention here is by no means to be competitive with the leasing companies to compete for market space," Romito said. "This is an expansion of solar."
But it does intend to use Arizona-based companies to do its own installations. "I'd like to see this restricted to companies that are headquartered in the state of Arizona," Romito said.
That would exclude some of the companies that have been the most vocal opponents of APS's tactics, including SolarCity and SunRun, which are both based in California.
SunRun said the $30 monthly payment would draw customers away from solar leasing models, which have been offering savings of about $5 to $10 per month.
"It's a good example of how they're using the ability to rate-base solar to stomp out the private market," said Susan Glick, SunRun's senior manager of public policy.
A state-level solar trade group objected, as well. "The idea of our members who compete in the free market today having to all of a sudden compete with a regulated monopoly is frightening," said Corey Garrison, CEO of Southface Solar and treasurer of the Arizona Solar Energy Industries Association.
But APS has made inroads with a group of in-state installers who say the business models can coexist.
"I don't believe that 20 MW of power or 3,000 customers is going to destroy a market," said Joy Seitz, CEO of Scottsdale-based American Solar, who has been working with APS on its proposal as part of the Arizona Solar Deployment Alliance, a group of four solar companies that formed last year. "I am genuinely hopeful this is not a power play on APS's part."
Romito said the idea to do rooftop installations occurred sometime after APS submitted a proposal in April to build a 20 MW photovoltaic project that tracks the sun. The new distributed generation proposal is the "preferred option" of the two, he said.
The proposal envisions connecting all of the rooftop solar directly to the distribution grid. Romito said the plan would position some of the installations where they can help the grid the most.
"We'll take approximately 1,000 of these 3,000 homes and identify certain circuits on the grid where solar may be most useful," he said.
Romito conceded that rooftop installations in APS's territory dropped in the first months of 2014 compared to last year, when solar customers didn't have the monthly tariff, but said that the pace started picking up in May. APS is on track to reach about 40 MW of distributed solar installed in its territory this year, compared to 51 MW last year. It currently has 30,000 rooftop solar customers.
Nancy LaPlaca, a former policy adviser at the ACC who now works as a regulatory consultant, said she and others in the industry had been anticipating such a move since rooftop solar started gaining popularity in the state.
"It boggles the mind; they want to go from charging someone $50 to $100 to put solar on their house to all of a sudden wanting to pay someone $30," she said. "It shows you how threatened they are."
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