From the Paris Climate Accords, to the Green New Deal (in the so-called “Inflation Reduction Act,”) the global “Net Zero” agenda has been steaming ahead at full speed. And it hasn’t been just in the form of government mandates. Across the world, electric utilities have been making their own Net Zero Commitments – whether it is in response to government regulations against fossil fuels, or subsidies from the government for unreliable power, explicit mandates, or from the influence of investors like Blackrock. No, it’s not just in Germany, and it isn’t just in California, either. The Net Zero agenda, unfortunately, is alive and well here in Arizona too.
We always knew it would be costly, and experience has proven that true. But now, in a newly released report published by the Arizona Free Enterprise Club and the AZ Liberty Network, the cost for Arizona’s largest utility to go “Net Zero” was found to be even more expensive than expected coming with a massive price tag of at least $42.7 billion by 2038.
History of the Green New Deal in Arizona
The “green” agenda is not new to Arizona. In 2006, then Chairman of the Corporation Commission Kris Mayes pushed through the first mandates in Arizona, requiring our utilities to get 15% of their energy generation from “renewables” by 2025. Those rules alone have already cost ratepayers $2.3 billion. In 2018, an out-of-state billionaire funded a proposition on the ballot that would have required utilities to obtain 50% renewable generation by 2035. That measure went down in flames, being rejected by a 2-1 vote.
Then in 2020, the Arizona Corporation Commission began pursuing another mandate – this time to require 100% renewable energy by 2050, also known as going “Net Zero” by 2050. The mandates almost passed without the Commission ever conducting an analysis to find out what it would cost ratepayers. Once an analysis was finally done, it was projected that the mandates would cost ratepayers $6 billion, leading to the proposal being rejected by the Commission.
But then, Arizona’s utilities, who opposed the 2018 initiative, announced publicly that they were voluntarily going “Net Zero” – mandate or no mandate. Or, for APS, Net Zero doesn’t even go far enough, and they have pledged to be 100% “carbon free” by 2050.
And these aren’t just public statements. The utilities have committed to going “Net Zero” in SEC filings to their shareholders, and they even compensate their top executives (page 68) based on how much “clean” energy they build in our state. Unsurprisingly, these commitments completely shape their resource plans.
Net Zero Resource Plans
Utilities are required to submit resource plans to the Commission every three years. These plans are supposed to project future demand in their territories and then evaluate several different portfolios of generation to meet that demand. This should be a technology agnostic process that selects the most affordable and reliable power generation for their ratepayers. Instead, it is guided every step of the way by their voluntary Net Zero goals.
The Commission is supposed to conduct their own independent analysis of these plans before approving them. Last year, after claiming they could not find someone to do an analysis, they voted to skip doing one altogether and charged ahead, approving the IRP without any idea as to the cost to ratepayers. Fortunately, we did find the expertise to do a cost and reliability analysis.
What the report found is shocking, yet not surprising. APS’ net zero commitments require a massive overbuilding of the grid, will eventually subvert the reliability of generation, and will cost ratepayers billions.
Overbuilding
With APS shutting down remaining reliable sources of power like the Four Corners coal plant by 2031, and building out almost exclusively wind, solar, and battery storage, the utilities plan to massively “overbuild” in order to meet future demand. This means nearly tripling the generation capacity currently on the grid to meet a 60% increase in demand over the next 15 years. Why? Because solar and wind are intermittent and unreliable, which means they must build far more than would be needed if they used reliable fossil fuel resources. Not only does building more cost more on its own, but it also increases shareholder profits as utilities are guaranteed a return on equity on every dollar they spend on new capital buildings. So, the more they spend, the more they profit, and the higher the costs are for ratepayers.
Sky High Rates
Given the amount of overbuilding, the cost of this Net Zero plan would be at least $42.7 billion by 2038, equating to an average $100 monthly electricity bill increase for Arizona families, and a $454 per month increase for businesses. Even worse, at this cost, the Net Zero resource plan presents serious reliability concerns.
California-Style Blackouts
Massively overbuilding “green” generation does not improve reliability. The report found that by 2038, APS could experience an up to 3,701 MW capacity shortfall in the middle of the summer late at night as Arizonans turn on their A/Cs to cool their homes. This shortfall represents 33% of the total demand in their territory, meaning hundreds of thousands of Arizona families and businesses would experience blackouts.
True Least Cost Portfolio Would Have Saved Billions
Despite the requirement to do so, the utilities did not evaluate a truly “technology agnostic” portfolio, but our report did. The findings are unsurprising. Instead of overbuilding by over relying on intermittent and unreliable sources, APS could have prioritized reliable, dispatchable power to meet future demand. By keeping Four Corners online and building new natural gas capacity, APS could reliably meet demand with no risk of blackouts by building just half the capacity APS would in their Net Zero plan at a cost of $20.8 billion, or a $21.9 billion savings for ratepayers.
Net Zero Costs Ratepayers, Rewards Shareholders
Because of this lower-cost plan, utility profits would be around $4 billion, instead of the more than $16 billion in profits the utility would make from ratepayers under their Net Zero plan. In other words, Net Zero is costly for ratepayers, but very profitable for shareholders.
Arizona Must Shut Down Net Zero
President Trump was right to declare an energy emergency on day one of his new administration. As utilities around the country continue to retire reliable power plants and replace them with unreliable wind and solar, not only are they driving rates through the roof, but they are also creating a dire reliability crisis that would plunge Arizona into energy poverty. The time to act is now. Arizona lawmakers and the Corporation Commission should draft off the Trump administration’s priority of unleashing American energy and protect ratepayers from these dangerous Net Zero Plans.
That’s why the Arizona Free Enterprise Club has spearheaded several pieces of legislation this year, including HB2527 which would prohibit utilities from retiring reliable sources of power unless they are replaced with equally reliable power, and HB2788, which would require the Commission to actually obtain a third-party analysis of the plans submitted by utilities before approving them in the future.
As this cost analysis shows, Net Zero means higher rates for Arizonans and California-style blackouts. If these plans aren’t shut down immediately, just as Germany experienced, there will be a point of no return. Arizona ratepayers will be left powerless and stuck with the bill.
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