Arizona has long been seen as a potential leader in solar energy. But data show the state is lagging behind some other states, in terms of the rate of homeowners putting solar panels on their roofs.
Advocates are asking utility regulators to avoid policies that make it less economically advantageous for potential customers to go solar, but my next guest is concerned about the future.
Autumn Johnson is executive director of the Arizona Solar Energy Industries Association. She joined The Show to talk about it.
Conversation highlights
Full conversation
MARK BRODIE: What are you seeing in terms of the rates of residential solar use, either by buying panels or leasing them?
AUTUMN JOHNSON: So I get data from an organization called Ohm Analytics, and then they provide actual Arizona residential solar permits requested by month. And so that's how we can tell a general trend. … Per month, we're looking at about 1,500 applications, which is a decrease of 31% year over year. And that's as recently as May. And that is the lowest level of residential solar installations in Arizona since 2021.
BRODIE: Why is that, do you think?
JOHNSON: I think it's a combination of factors. So obviously a lot of folks are not able to just purchase solar outright. And so there is either a lease or some sort of financing involved. And you know, it's been a topic of significant conversation of late about interest rates.
And so when interest rates are north of 8%, obviously that is going to dissuade a number of people from installing solar if they would have to finance it because the overall cost to them over time is going to be significantly larger.
It is unfortunate because you're in a situation in which you have all of these great Inflation Reduction Act, IRA, tax benefits that apply to individual homeowners installing solar. But you still have these other larger sort of macro issues that impact solar. So the interest rates are one of them, you have issues with trade tariffs or another.
And then I think a really significant factor that I don't think we talk about enough is specific policies related to solar. So these are Arizona-specific numbers and things like interest rates apply nationally obviously. But in Arizona, we have kind of a confluence of policy decisions that make solar less and less attractive to ratepayers. You know, because of the specific decisions of our utilities and our lawmakers.
BRODIE: What are some of those solar-specific policies that, that concern you the most?
JOHNSON: Well, there are a few. So we're in a situation in which the state largely continues to decrease the export rate that you receive when you sell your extra solar power that you've produced on your home back to the grid.
So in the majority of the country, you're paid a retail rate or something called net metering for the extra power you pay back. In Arizona, we pay, they pay something called a resource comparison proxy or RCP. And it is a declining rate. That applies to TEP and APS. And so every year that you install solar, you're getting 10% less than your neighbor who installed solar the year before. And so now I think with APS, we're somewhere in the 6 or 7-ish cent range for the export rate.
And then they're doing that at a time when they're increasing the fixed fees that solar customers pay. So in February, the Corporation Commission just approved a new fixed fee called the grid access charge for all of APS’ solar customers. And that basically applied a 15% additional rate increase to all solar customers above and beyond what all other residential customers paid from that rate case.
BRODIE: So it seems like economics is playing the biggest role here in what we're seeing in terms of a decrease in the, in the rates of people who are choosing to incorporate solar into their homes.
JOHNSON: Yeah, I mean there's a number of reasons why someone might want to install solar, right? Some people are probably gonna install solar because they are concerned about kind of an energy independence resiliency benefit. And so if that's of interest to you, you're gonna pair that with storage, battery storage specifically.
If the environment is a motivating factor for you, you could install solar. But for most, most people, they install solar because they want to have some sort of certainty or control or reduction in their electric bills. And so if the economics, because there are increased fees or decreased export rate for the extra power, if those all are combined and it costs more to go solar than you save from your electric bill, it dissuades customers from doing so.
BRODIE: I'm curious how Arizona's decrease that you mentioned, how does that compare to other states that are also looking at solar, specifically other states that have a lot of sunny days like Arizona does?
JOHNSON: That's a good question. I don't have the same, I don't get the same data from Ohm Analytics regarding surrounding states because it really just focuses on Arizona policy. But there's been a lot of media obviously on changes to California's solar export rate policies.
It's called NEM 3.0, and I don't have the most recent data on that, but their market was said to be down 80%. Other states — I think it's about 35-ish states — still have net metering. And so that is an interesting comparison to see how those states are growing as far as solar goes versus states like Arizona, in which we have basically eliminated net metering, or we've modified it in a way to be much less economic for solar installations.
BRODIE: Well, it seems like there's a certain irony in the fact that Arizona, which has what, 300-plus days of sunshine every year, having a decreasing amount of people who are choosing or able to choose to use solar energy.
JOHNSON: It is. I often tell people that you wouldn't expect that being an advocate for solar energy in the sunniest state in the country would be such a difficult job, but it really is extremely challenging. The headwinds are numerous. We are about fifth nationally for solar capacity. We really should be like third, right?
I don't know if we're going to compete as much with Texas and California kind of given their size, population and just sort of economics, but generally we should be a leader, right? The sun doesn't cost us anything. We have over 300 sunny days a year, like you said. And so it makes sense to maximize a resource that we are plentiful with. And I think that there are ways to do it, that are a win-win for everyone.
But unfortunately, ideology a lot of times has become an impediment to what could be a very good economic opportunity for Arizona.
BRODIE: Well, so I wonder then given sort of the makeup of the Corporation Commission and the makeup of the state Legislature — at least as it's constituted right now — assuming that policies stay the way they are, would you anticipate that we're going to continue to see fewer people choosing solar?
JOHNSON: I think that we're in an interesting quandary. We are in a situation in which a growing amount of city councils and county supervisors as well as legislators are suspicious or outrightly hostile to utility-scale solar, at a time when the utilities want to build more utility-scale solar because it is least cost, it's market ready. And they can build it relatively quickly, and they're seeing increasing load growth.
You also have Corporation Commissioners sort of, I think deeply suspicious of their interest in building utility-scale solar. And so you have that combined with these headwinds we've already talked about with residential rooftop solar. And yes, I'm deeply concerned about the direction that our elected leaders are taking us and what really could be kind of a no-brainer, win-win in a really sunny state.
