Arizona utility regulators earlier March formally voted to repeal the state’s renewable energy standards. The Corporation Commission, though, had been taking steps for some time that signaled this was the direction it was headed.

The standards had been in effect since 2006. They required regulated utilities, like APS and Tucson Electric Power, to get at least 15% of their energy from renewable sources.

To get a sense of what the repeal could mean for Arizona ratepayers — especially as the price of energy becomes more of a concern for many of them — The Show reached out to Alexander Hill, an economics professor at ASU specializing in energy and environmental economics.

Full conversation

MARK BRODIE: And Alexander, from the 30,000 foot level, how big of a deal is it that the Corporation Commission voted to do away with the state’s renewable energy standards?

ALEXANDER HILL: Right, so I would say the 30,000 foot level answer is that it’s not a major deal. for Arizona, for the United States, a much larger deal in all of this. If you’re kind of thinking from the renewable perspective, we can think about other perspectives, you know, about consumers and prices and whatever, but in terms of renewable perspective, a much bigger deal is the fate of the investment tax credit for solar, in particular for Arizona, for wind, for for other states.

BRODIE: And that’s something on the federal level?

HILL: Yes, so that was something that has been around for a long time. It was the latest version was extended a few years ago in the Inflation Reduction Act. And then it was ended in what is the One Big, Beautiful Bill, the bill that was passed last year.

So that is that’s a huge deal because most of the costs with solar, with wind, right, it’s you don’t pay for the sun, you don’t pay for the wind. It’s all the capital costs. It’s what it costs to have the materials and install it and put it together. And so getting 30% off of that, that’s a huge deal.

BRODIE: So is the concern then that absent that assistance that people won’t be able to afford to install solar on their rooftops, for example, to begin with, never mind, you know, get the energy from it, they just can’t get the infrastructure on their homes?

HILL: Yeah, and I would highlight that increasingly, a lot of the solar that is installed is installed by utilities. It’s a much larger scale. So we tend to think of solar on the household level. And that has happened, and states like California has installed a lot of household solar. But increasingly, what it looked like we are installing and we were planning on installing for the future was much more called utility scale solar.

BRODIE: Is there an optics issue here in a place like Arizona, which is sunny so much, and the sense that like we should be sort of the solar capital of the world, and yet it seems like we’re kind of not?

HILL: Days of sunshine matter a lot, uh, when it comes to solar. So the more of those that you have, the better. But I think the main thing for people to understand is that, Solar energy is what we call intermittent, meaning it is, right, the sun is not shining all day and our batteries are not powerful enough to hold it throughout the evening. And so a lot of the importance of electricity sources like solar or natural gas or nuclear or whatever is when can you use them?

And what has increasingly happened, particularly in the Western electricity markets, mainly due to California, but not only California, is that there’s a lot of solar available in the middle of the day. And so there’s a lot of electricity therefore available in the middle of the day. And so in some sense, you know, okay, you could be the solar capital of the world, but that really is only to the extent that you need the electricity in the middle of the day.

BRODIE: So one of the arguments that some of the corporation commissioners made when taking this vote was that, they’re not necessarily opposed to solar, but, the industry should be able to sort of stand on its own. It shouldn’t need government subsidies for people to invest in it. If it’s that popular, the market, you know, and that great, the market should sort of support it on its own.

I’m curious, A, what you make of that argument, and B, why it is maybe that the solar industry still maybe needs some of these subsidies.

HILL: Sure. So yeah, the first one in particular is a really crucial point. And what I would add is that when you’re thinking about electricity markets, remember, these are 20, 30, 50 year investments. So the things that people are going to care about over the next several decades is the price of electricity, but also how reliable is it? And then, of course, the price does not capture the impacts on people’s health, and that this is a well-known thing.

People mostly are thinking about climate change, and that’s an important aspect, but there’s also local pollutants, so these are not captured in the price. Therefore, they’re not captured in decision makers that are primarily focused on price.

So government then has a role in trying to adjust for that. So I think that the argument that, well, it should stand on its own in the marketplace is discounting the fact that for society, some electricity sources are more valuable than others. Electricity sources that are clean that don’t pollute, electric sources that are available regularly. These are more valuable than prices might indicate, and ones that aren’t available as much. ones that are do damages that aren’t reflected in the price, those ones are not going to be as favorable.

BRODIE: So your argument then, it sounds like, and please correct me if I’m wrong, is that even though something like solar might be a little more expensive price wise, when you take into account all of the other factors, health, environment and others, actually, it seems like it’s worth it, even if it is a little bit more expensive on the price side of it?

HILL: It could be because now, of course, solar also comes with a negative, which is that it tends to be most available when electricity is least valuable. And what I mean by least valuable is if you look at wholesale electricity market prices, they tend to be lowest in the middle of the day when solar is highest. So that’s a way that prices can reflect some of that value.

So solar has a lot of value in terms of clean burning, but it also doesn’t have as much value in terms of the availability of when you really need it, which is in Arizona, as we all know, you come home from the office at 5 p.m., you’re cranking up the air conditioner, you’re running stoves, you’re turning on the TV, the lights are going on. That’s when we need all the electricity, you know, 5 to 9 p.m. there. And unfortunately, that’s when the solar is coming down. That’s, you know, the sun is setting lower, lower in the sky. You’re not going to get that solar energy.

BRODIE: Well, all of that seems to necessitate or call for more research and development into battery storage, which you referenced earlier, is there but maybe not quite as robust or as effective as maybe it should be.

HILL: This is huge. And I will add that battery storage is growing rapidly. The market has been saying, hey, we love solar. We love batteries. We need more of this. And the more of that that we do, the more that battery technology will improve. There’s a lot of learning by doing. When you increase demand, you increase companies’ incentives to research and produce lower batteries. So we’re not there yet.

Batteries are still very expensive. But if you look over the next decade, what does that probably look like? Probably looks like a lot more renewable resources and a lot more batteries.

BRODIE: Well, so if there are more batteries and maybe the batteries are better at taking the sun during the day when it’s not quite as needed and helps you in the evening when you come home from work and crank up the AC and cook dinner and everything, does that bring the general cost of solar overall down? Maybe it does, it is able to stand on its own and maybe doesn’t need government assistance.

HILL: So what I would say is that it doesn’t bring the cost down, but it increases the value. Because now what you’re doing is you are valuing solar originally without batteries at that low midday price. But now when you’re capturing the solar energy, you are then releasing it at very high prices.

And so the cost of solar has not necessarily changed. It still costs whatever it costs to install it and to construct panels and to do all, you know, hook it up and all that stuff. But what the value of that electricity has gone way up and so that would make solar a better market option.