Last week, Arizona Public Service surprised the solar industry with its sudden decision to invest directly in rooftop solar.
If its plan is approved by regulators, APS will install and manage 20 megawatts of PV systems on customer rooftops in Arizona using local labor, replacing a proposed 20-megawatt centralized solar power plant.
The proposal was lauded by installation companies operating in the state, some of which could see their business double in 2015 as a result of the initiative. But it was derided by the largest national solar service providers for shutting them out of the market. The issue, they say, is that APS can now rate-base distributed solar and get a guaranteed rate of return, giving it an unfair advantage over competitors.
Assuming the plan is allowed to go forward, it will give APS complete control over a large slice of the rooftop solar market in Arizona. So what does the utility think of distributed solar now that it's able to manage the market to match its own financial and operational interests?
In its latest filing, the company calls it "exciting" and lauded solar's "operational benefits."
"AZ Sun DG offers several benefits beyond helping APS achieve compliance with its renewable energy requirements. Deploying utility-owned residential DG provides an exciting chance to explore the operational advantages of installing rooftop solar with advanced inverters," wrote APS in its recent filing.
Indeed, there are clear benefits for APS. By managing the inverters connecting solar to the grid, it will be better able manage the flow of solar on the distribution grid. The company also said it plans to specifically target lower-income customers, thus helping spread the financial benefits.
But it's also helpful to remember that APS hasn't always been so supportive of distributed solar. Before talking so positively about the value of the technology under its own control, APS was quite open about its dislike of net-metered rooftop PV.
Here are a few quotes from previous APS filings worth noting.
From a July 2013 filing on net metering:
“Additional benefits claimed from rooftop solar, such as long-term fuel hedging, impacts on national and regional commodity prices, employment benefits from solar jobs and compliance costs for the renewable portfolio standard are either double-counting, spurious, unproven or all three.”
From an August 2013 response to regulators:
“APS does not believe that the ancillary benefits of rooftop solar as evaluated in the Crossborder study, which include commodity price mitigation, grid security and economic development, would provide any significant value (if any at all) in reducing utility costs or in mitigating the cost shift that results from net metering. The ability of rooftop solar systems in APS's service territory to reduce regional or national commodity prices for electricity and natural gas is too small to measure."
"Also, rooftop solar provides virtually no value in grid security because the vast majority of solar systems will not operate without power from the utility or during a grid outage. [...] Economic development is an important objective, but it does not directly impact utility costs and rates. Therefore, from APS's perspective, it is not appropriate to include any of these items in an evaluation of rooftop solar from a ratepayer perspective.”
From November 2013 comments to regulatory staff:
“No one credibly disputes that larger-scale solar facilities capture the same benefits of a rooftop system when interconnected to the distribution system. Both involve the same technology providing the same type of renewable resource to the same customers on the same system while satisfying the same Renewable Energy Standard."
"Because the two types of facilities provide the same value, why should APS customers pay more for energy produced by rooftop solar than for energy produced by utility-scale solar facilities and sold through purchased power agreements (PPAs)? In other words, why pay more for the same sun? The answer is you shouldn't; the price paid for solar energy through PPAs should be the ceiling for the price paid for solar from rooftop solar.”
In short, it seems as if APS doesn't think rooftop solar competition is fair unless it can control the incentive structure and control where it's built.
In fairness to the utility, net metering policy is a true long-term threat to revenue in states like Arizona with a such a strong solar market. It makes perfect sense that APS would want to find a different way to value distributed resources and make more money off the transaction. That's why the company proposed its own program to rival net metering and fully own the resource.
But it's worth noting how APS has softened the language it uses about distributed solar when developing its own plan to fully own the systems.