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Arizona Public Service Enters the Rooftop Solar Business: Good for Installers or a Trojan Horse?

Stephen Lacey's picture
Greentech Media

Stephen Lacey is a Senior Editor at Greentech Media, where he focuses primarily on energy efficiency. He has extensive experience reporting on the business and politics of cleantech. He was...

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  • Aug 5, 2014

arizona rooftop solar

Arizona Public Service has had a rocky relationship with the solar industry.

The utility has been criticized for funding a smear campaign against solar firms operating in Arizona, harangued by installers for pushing fees on net metering customers, and blasted for supporting property taxes on all solar projects in the state. 

But after all the bickering and finger-pointing between APS and solar companies, the utility is doing something that few expected: getting into the rooftop solar business itself.

This week, APS filed a proposal with regulators asking for permission to develop 20 megawatts of solar PV systems on 3,000 rooftops through the end of 2015. The systems would be installed on the utility side of the meter and all electricity would be fed into the grid. Customers renting their rooftops would get a $30 credit each month on their bill for twenty years. 

APS says the program, which will cost between $55 million and $75 million, gives the utility more flexibility by controlling the inverter and offering a wider variety of consumers a chance to put solar on their homes.

“Many customers are interested in rooftop solar, but either cannot afford to buy a system outright, or have insufficient credit to lease a system. AZ Sun DG provides a means for at least some of these customers to ‘go solar,'” wrote the utility in its proposal. “Moreover, deploying utility-owned residential DG provides an exciting chance to explore the operational advantages of installing rooftop solar with advanced inverters.”

If the plan is approved, the utility would use local installers for all the work through a competitive bidding process. The 20 megawatts up for grabs over the next fifteen months would be far lower than the 73 megawatts of residential systems installed in Arizona last year. But it still offers a much bigger market than most states in the country.

So a major utility seen by the solar community as antagonistic is now entering the rooftop solar business. That’s a positive sign, right?

Not in the eyes of many advocates and national solar companies that have been working on solar policy in Arizona over the last couple of years.

“The irony here is that APS has spent two years complaining about how terrible solar is [and] how it’s a massive problem for the grid. But now they’re saying it’s fine, as long as they can control it entirely,” said Will Craven, a spokesperson for the Alliance for Solar Choice (TASC), an advocacy group that represents solar service companies such as SolarCity, Sunrun and Sungevity.

The major concern for TASC is that APS will be able to rate-base the investment and make a guaranteed rate of return. Solar companies don’t have that luxury.

The Solar Energy Industries Association (SEIA) echoed that sentiment, calling APS’ proposal a “Trojan horse.”

“This latest tactic by APS has a ‘Trojan horse’ smell to it. 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?” said SEIA spokesman Ken Johnson in a statement. 

Not everyone is lining up to criticize APS. A handful of local installers about to get a big boost through the program are pleased with the sudden announcement.

“We’re excited that such a large utility sees solar as an asset and is putting a strong focus on Arizona companies,” said Joy Seitz, CEO of American Solar, a company based in Scottsdale.

American Solar installed about 3.5 megawatts in 2013, and Seitz said the company could potentially double that in 2015 by working with APS.

Will a regulated monopoly choosing a small number of companies be able to provide a competitive service? Cory Honeyman, a solar analyst with GTM Research, says it likely can.

“APS has expressed a preference to work with in-state installers, which puts SolarCity and other national players at a disadvantage as potential partners with APS in this program. But by offering a $30 monthly credit to solar customers, the AZ Sun’s value proposition is a competitive offering compared to monthly lease terms offered by leading installers active in AZ,” said Honeyman.

For its part, APS says it wants to be more creative and meet ongoing consumer demand for solar. Daniel Froetscher, a VP of transmission and distribution at the utility, told the Arizona Republic that it was all about proving the company has an entrepreneurial spirit.

“This is an effort to reassure our customers that this is not the staid, old, stodgy utility company,” he said.

In mid-July, APS held a meeting with SunEdison founder Jigar Shah — a solar advocate who has publicly quarreled with the utility — to discuss the future of the solar industry. And over the last five weeks, the utility has been signaling to installers in the state that it is ready to get deeper into rooftop solar. 

Still, there are a lot of upset companies that now feel shut out of a large piece of Arizona’s solar market.

“Monopolies are intended to be rare things in American society, and monopoly rights are not extended where functioning markets already exist. If APS wants to compete on a level playing field then they need to do so through an unregulated subsidiary,” said TASC’s Craven.

But Honeyman said he expects more similar moves from utilities over the next year. With the solar market expected to grow 60 percent this year, power providers aren’t going to sit on the sidelines.

“GTM Research expects this announcement will be the first of several over the coming year in which utilities pilot programs to actively capitalize on the residential market’s boom, rather than focusing on the future of net metering and the value of distributed solar,” he said.

Utilities like APS want to develop programs that are “fair” to them and their customers. But in the process, will they create a limited market that locks out competition?

Photo Credit: Arizona and Rooftop Solar/shutterstock

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Thank Stephen for the Post!
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Bas Gresnigt's picture
Bas Gresnigt on Aug 5, 2014

Smart move to avoid loss of profit & control to the customers.

Similar proposals didn’t get customers in Germany. But there, the major utilities created a huge gap with their customers by pursuing the nuclear option despite the major opposition.

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