Renewing Arizona’s Economy

Investing in a clean, renewable energy supply for Arizona would generate thousands of new high-paying jobs, boost Arizona’s economy, conserve scarce water supplies and improve public health.

Adopting a renewable energy standard to increase electricity generation from clean and renewable sources by at least 1 percent per year (reaching 10 percent of total electricity consumption by 2015 and 20 percent by 2020) would have a variety of benefits compared to business as usual. Between 2005 and 2020, investing in renewable
energy would:

• Create jobs, increasing net employment by an annual average of 380 jobs per year, for a total of 6,100 person-years by 2020;

• Increase wages by a net annual average of $66 million, with a total net present value of $570 million;

• Increase the gross state product (GSP) by a net annual average of $200 million, with a net present value of $1.6 billion;

• Help rural areas, directly generating over $600 million in property taxes to fund education and other local government services;

• Save water, conserving a total of 23 billion gallons, enough to supply the residential needs of Phoenix for three-quarters of a year; and

• Reduce pollution; in the year 2020 annually avoiding emissions of:

o More than 11,000 tons of smogforming nitrogen oxide (the equivalent of taking over 500,000 cars off the road);
o More than 9,000 tons of soot-forming sulfur dioxide (13 percent of 2000 emissions from electricity generation); and
o 8 million tons of global-warming inducing carbon dioxide (the equivalent of taking 1.5 million cars off the road).

Overall, renewable energy is an excellent investment that will provide strong returns for Arizona. At the cost of a few dollars a month, Arizona electricity consumers would lock in stable energy pricesfor 20 to 30 years (the life of a renewable energy installation), hedge against the risk of fossil fuel price increases, reduce demand and price for natural gas, and reduce the need for transmission infrastructure and increase reliability by shifting to distributed energy systems.

Investments in renewable energy, dollar for dollar, produce a greater net benefit for Arizona’s economy than traditional technologies. According the Arizona Department of Commerce, more than half of all expenditures for energy now leave the state and are not reinvested in local economies. In 2000, Arizona exported $2.5 billion to purchase electricity and gas, plus nearly $3 billion for petroleum. In contrast, fuel for wind, solar and geothermal energy is free, and fuel for biomass energy can be grown at home.

As a result, renewable energy keeps more money in the local economy, where it can have a greater impact. Arizona is well positioned to power its economy with renewable energy. In terms of raw potential, renewable resources could produce almost double the amount of electricity the state currently uses.

These resources include:

• Solar Energy. Arizona has more concentrated solar energy potential than any other state in the U.S., upwards of 100 million megawatthours annually (over 150 percent of
Arizona’s current annual demand).

• Wind Energy. Windy areas north and east of Flagstaff and east of Phoenix could generate 5 million megawatt hours of electricity every year (about 9 percent of Arizona’s annual demand).

• Geothermal Energy. Tapping into the Earth’s heat in the southern part of the state could provide another5 million megawatt hours of electricity each year.

• Clean Biomass Energy. Using crop wastes and landfill gas to generate electricity could generate 1 million megawatt hours of electricity annually.

The Arizona Corporation Commission (a board of elected officials who regulate Arizona’s electric utilities) should build on the steps it has already taken to promote clean, renewable energy. In 2001, the commission adopted a rule to require the state’s utilities to produce 1.1 percent of their energy from renewable sources by 2007. In 2004, the commission initiated a public dialogue to evaluate the possibility of increasing the required percentage of clean energy.

In January 2005, staff advisors for the commission released a report recommending extending the renewable energy standard to 5 percent by the year 2015 and 15 percent by the year 2025, with 20 percent coming from solar sources and one-quarter from distributed energy sources. This path would produce benefits for the state. However, it does not fully take advantage of all of the opportunities to improve Arizona’s economy, help rural areas, conserve water, improve public health, and protect the state from the economic impact of reliance on fossil fuels.

To capture more fully the benefits of renewable energy, Arizona officials should:

Adopt an Accelerated Renewable Energy Standard

The Arizona Corporation Commission should implement a program to increase our use of renewable energy sources—including wind, solar, geothermal, and clean biomass power—by at least 1 percent each year, resulting in 10 percent renewable energy by 2015 and 20 percent by 2020.

Ensure That Municipal Electric Utilities and Electric Districts Invest in Renewable Energy

Municipal electric utilities (including the Salt River Project) and electric districts are outside the jurisdiction of the Arizona Corporation Commission. Arizona’s leaders should ensure that these entities participate in renewable energy deployment as well, since their participation will enhance benefits to the state.