Arizona would wager on electric competition, hedge its bet with a solar portfolio.Looking for a new way to promote renewable energy? Think of it as a hedge against rising prices for fossil fuel.
That's the latest idea from the staff of the utilities division at the Arizona Corporation Commission (ACC), which has proposed requiring utilities, generators, and other electric suppliers to procure, generate, or sell (as the case may be) a certain minimum increment of solar energy resources as a condition of participating in the state's anticipated competitive electricity market.
The Portfolio Standard. However, any supplier that participates must rely on solar resources located in Arizona to make up at least one-half of 1 percent of the total retail electric energy it sells competitively. Moreover, the solar resources must be new: i.e., installed on or after January 1, 1997. Thus, suppliers could not simply assign existing solar generation to competitive sales to meet the half-percent test (what the ACC terms the "solar portfolio standard").
The staff report assumes that photovoltaics would cost $6,000/Kw (installed capital cost) in 1996, but would decrease in cost at a real rate of 7 percent per year through 2004. Thus, the staff suggests that its half-percent capacity threshold will balance twin interests in promoting solar power and controlling high costs:
"If solar power costs about 30¢ per Kwh today, and conventional generation costs 3¢ per Kwh, [then] a one-half-percent blend of solar energy with conventional energy would cost 3.135¢/Kwh. ... We believe that it is justified by the value of solar resources as a hedge against fossil fuel price increases."
New Construction. Tucson Electric (TEP), Arizona Public Service (APS), Salt River Project (SRP), Citizens Utilities (CU), and Arizona Electric Power Co-op (AEPCO) have filed resource plans to construct 377 megawatts (Mw) of new generating capacity by 2003, and add another 225 Mw by 2004.
Based on these assumptions, the ACC predicts that its solar portfolio standard, including participation from the publicly owned Salt River Project, would lead to 128 Mw of new solar capacity additions by 2004, separate and apart from the renewable resource goals for the year 2000.
Likely Technologies. The report sees four technologies for its solar plan, but favors photovoltaics and dish/Stirling technologies and identifies the major manufactures for each one:
s Photovoltaics: Siemens, Amoco/Enron, United Solar Systems Corp. (with Canon of Japan as part owner)
s Solar Dish: Cummins Power Generation, Science Applications International Corp. (SAIC). If field tests prove successful, the two companies could offer commercially available systems in 1997 or 1998, says the ACC report. It notes testing work conducted by McDonnell-Douglas, and research and development underway by Detroit Diesel. t
Source: Staff Discussion of the Proposed Rule on Electric Industry Restructuring, Docket No. U-0000-94-165, Oct. 4, 1996.
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