Arizona's Smart Solar Policy

The Copper State is promoting a sustainable energy future.

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Solar panels stand in Nicaragua's first photovoltaic park, a joint project between the governments of Nicaragua and Japan, in La Trinidad, Nicaragua, Thursday, Feb. 21, 2013. Japan's government invested $11.4 million dollars in the solar park of over 5,000 solar panels with a capacity greater than one megawatt that can meet the demand of more than 1,000 homes with monthly consumption of approximately 150 kilowatt-hours.

Last week, the Arizona Corporations Commission beat back efforts by the state's leading utility company to strangle rooftop solar in its cradle.  The commission affirmed the state's net metering program, which allows homeowners who install rooftop solar systems to sell their excess power to those who need it. By mostly resisting pressure from the local utility, Arizona took the right stand. Its decision supports a sustainable energy future, saves money for consumers and endorses a sound, market-based solution.

It's easy to see why many utilities dread the rise of renewable energy. The future of electric distribution is changing dramatically, threatening utilities with obsolescence. Until now, electricity was distributed on a "one to many" basis. One big generating plant could serve thousands of households, stores and businesses. This one-to-many grid was relatively straightforward to design and to operate.

But the paradigm is shifting. We now need grids that support "many to many." Power will be generated and stored in many places: many solar roofs, many windmills, many batteries. The power grid must be able to switch electricity from many points of generation to many points of use, and it must store power to handle the fluctuations of wind and solar sources.

[See a collection of political cartoons on energy policy.]

Building the new grid – the smart grid – is expensive. Utilities have an incentive to drag their heels and delay the expenses as long as they can.  One way they can put off investing in smart grid is to stall the roll out of rooftop solar. The less solar energy they need to take in, they less they need to spend to modernize the grid. Thus, Arizona Public Service, the state's largest utility, benefits from discouraging solar hookups.

Net metering can save money for all concerned. Under net metering, homes and businesses that generate power can sell excess power to the utility, who can then sell it to other customers. This greatly reduces the customer's power bill each month. On average, Arizona residents who convert to solar will save more than $100 per month, which many would say is a reasonable and fair return on what they invest to install solar panels and connect up the system. The net metering payment also goes, in part, to support innovative, entrepreneurial start-ups that contract with households to install rooftop solar. These start-ups finance the entire capital cost themselves, so ratepayers can pocket savings without investing a nickel of their own capital.

In the long run, the utilities save money too. They don't have to burn as much coal, and they don't have to build as many new power plants.  But to reap the savings, they need to modernize their grid. Unfortunately, many utilities are still in the early stages of modernizing and they need to make more investments before they can earn a return from the distributed solar power now coming on line. 

[See a collection of political cartoons on gas prices.]

Utilities need and deserve to be paid a fair price for building and running the smart grid. But this cost needs to be shared across all the utility's customers, not shouldered by the early adopters alone.

We've been to this movie before. Disruptive technologies often require major investment in infrastructure before they can pay off. Consider the Internet, the airport system and the interstate highways. None of these were paid for early adopters of these technologies. If the U.S. had insisted on funding these bits of crucial infrastructure solely by charging the early adopters, it would have taken decades longer for the innovations to bear fruit.

The smart grid and the rapid deployment of alternative energy are key technologies that support both a sustainable economy and national security. We can't afford to delay their roll-out.

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