Arizona’s clean energy future could swing on governor’s race

Source: By Jason Plautz, E&E News • Posted: Tuesday, October 11, 2022

Katie Hobbs (D) and Kari Lake (R)

Katie Hobbs (D) is facing Kari Lake (R) in a race to be Arizona’s next governor. AP Photo/Ross D. Franklin, Pool, File (Hobbs); Brandon Bell/Getty Images (Lake)

For a state with bountiful solar resources, Arizona’s path to a clean energy economy remains rocky as voters to prepare to choose their next governor.

State regulators went back and forth on a possible mandate for 100 percent clean electricity before scrapping it earlier this year.

Arizona no longer has a dedicated state energy office, even as the current Republican governor has worked to encourage manufacturing of renewables and batteries. Only about 16 percent of the state’s power generation came from renewable sources in 2021, according to the U.S. Energy Information Administration. That’s despite EIA also saying the state has the nation’s second-greatest solar potential.

“It’s not a matter of will Arizona move forward with clean energy, but how,” said Caryn Potter, utility program manager for the Southwest Energy Efficiency Project. “The governor’s race will have big implications for whether that’s done in a way that’s cost-effective and distributes the benefits in a way that’s in the public’s interests.”

Yet energy and climate change have not been leading topics in the race. The election is scheduled for next month.

Democratic nominee Katie Hobbs, the secretary of state, in June released a “Resilient Arizona” plan that included a call for carbon-free energy by 2050, incentives for homeowners to invest in renewable energy, upgrading building codes and reinstating a state-level energy office. The plan would also focus new energy infrastructure in historically underfunded communities.

In a recent town hall hosted by the U.S. Hispanic Chamber of Commerce, Hobbs talked up her plan, saying it would built “a clean–a 21st century clean-energy economy so that we are addressing the effects of climate change that are leading to increased drought and wildfires in our state.”

Her Republican opponent, former television journalist Kari Lake, has not published an energy or climate plan — although she has highlighted opportunities to expand water access for Arizona amid a decadeslong drought. Lake gained prominence by campaigning on social issues and the false claim that former President Donald Trump won the 2020 election.

In a September town hall hosted by the Arizona Chamber of Commerce and Industry, Lake said her priorities would include energy reliability and avoiding brownouts like those that have taken place in California. While saying she’s “not opposed to some of the green energy,” Lake said she preferred “good old-fashioned clean energy, which is nuclear.” Arizona is home to Palo Verde, the nation’s largest nuclear power plant.

Lake suggested that Arizona could export energy by using small modular nuclear reactors.

“We can treat our energy as a commodity and sell it to California because with their asinine policies — they’re going to need all the power they can get, and I don’t think they’re prepared to bring that power to the state,” Lake said. “So, I want to become a powerhouse when it comes to power here in Arizona.”

Lake’s policy director, Sam Stone, told E&E News in a separate interview that Lake would oppose renewable mandates or any policies based on “technologies that are simply not ready to take on the responsibilities to provide reliable energy.”

The Southwest Energy Efficiency Project does not endorse candidates, although Potter said Hobbs had released more detailed information that would foster the clean energy industry.

The Republican National Committee struck back at Hobbs’ plan in a June statement that said the Democrat would raise energy costs.

The Hobbs campaign did not respond to requests for comment from E&E News.

RealClearPolitics rates the race as a toss-up, with an average of polls showing Lake with a narrow 1.1 percentage point lead as of Monday.

Maximizing opportunities

One of the first steps a new governor could take is a bureaucratic one: reestablishing an energy office in the statehouse.

In 2015, Arizona Gov. Doug Ducey closed the Governor’s Office of Energy Policy, firing the office’s head and some employees while also transferring certain workers to other government offices. That office had been in charge of distributing federal energy grants and incentives to residents. The administration explained the move at the time as a way to shrink the size of government.

Ducey’s spokesperson at the time, Daniel Scarpinato, told the Arizona Republic the move “cut down on the overhead of an office with a large staff with money that could have been going to grants going to staffing, and eliminated some of the duplication.” The state still has departments focused on environmental quality, water and mines and energy grants are handled through those offices.

Ducey’s office did not comment to E&E News on the impact of the office closure.

Shelby Stults, who leads Arizona legislative and regulatory work for the renewable energy group Advanced Energy Economy, said the lack of an energy office could put Arizona at risk of missing out on billions in federal funds authorized by this year’s Inflation Reduction Act and last year’s Infrastructure Investment and Jobs Act.

“One key area in reinstating that office is having staff that can work to maximize the receipt of these federal funding opportunities,” Stults said. That includes formula funding that goes to each state as well as competitive grants that Arizona would have to apply for.

Potter of the Southwest Energy Efficiency Project added that the structure of the federal bills depend on “boots on the ground in each state” to make sure that loans and grants reach consumers and businesses. Incentives for energy efficiency upgrades will especially depend on homeowners knowing what is available and how to access it.

“I have some concerns that if we don’t have a plan in place that money could sit idly by … or that Arizona could leave money on the table that other states could pick up,” Potter said.

Hobbs’ plan proposes a Water and Energy Innovation Initiative, which would work with state agencies, businesses, tribes and communities to advance a clean energy economy. Stone said Lake would not commit to creating an energy office, but he did not rule out a reorganization of energy officials.

The governor’s office has limited power over energy, but experts said it can set a broad tone to be followed by the Legislature and the independent Arizona Corporation Commission.

In her “Resilient Arizona” plan, Hobbs says she would work to pass a tax credit for energy efficiency upgrades and take steps to lower electricity bills, while also building towards a carbon-free energy system by 2050.

The plan calls for state-owned buildings to be made more energy efficient and working with utilities to “determine the best data-driven approach to accomplishing clean energy goals with the ratepayer in mind,” including solar and battery incentives.

Stone said that Lake, meanwhile, would work to prevent local measures that move away from natural gas or “rush” technology like solar energy.

While Stone said that Lake is not opposed to “opportunities to responsibly and reliably expand clean energy,” including federal funding, her campaign opposes using government mandates to push the technology. He added that Lake would explore opportunities to use water reservoirs for energy storage that could bolster solar energy and would explore hydrogen energy infrastructure.

Jason Lowry, director of sustainability initiatives for the business development group Local First Arizona, said local businesses are increasingly interested in renewable energy and sustainability. The next governor, he said, could help with education and access to clean energy for businesses.

“A lot of this is going to require turning away from sustainability as a niche thing to seeing it as quintessential to businesses surviving moving forward,” Lowry said.

Down-ballot races

Arizona’s most impactful clean energy race may not be at the top of the ballot, however.

Most of the state’s electricity policy comes from the five-member elected Arizona Corporation Commission (ACC), which regulates utilities. With two seats up for election in November — one being vacated by a Republican, the other by a Democrat running for reelection — the partisan balance could shift from a 3-2 Republican majority to Democratic control.

“Reelecting and adding Democrats to the ACC would be pretty transformative,” said Troy Rule, a law professor at Arizona State University who studies sustainability. “As it stands, the commission has not been in a position to do anything meaningful for renewable energy. That could change.”

The ACC acts independently from the governor, and it could take sweeping actions like setting clean energy standards for large utilities — a policy the body voted down earlier this year — and clearing the way for expanded renewable energy development.

The future of the state’s energy transition may also be determined, in part, by the state Legislature.

Republicans narrowly control both chambers in Arizona, which has allowed the party to work on legislation that would help to promote fossil fuels.

In 2020, the Legislature passed a bill blocking cities and towns from enacting codes banning natural gas or fossil fuels in buildings. Last year, the House passed a bill that would block the ACC from passing a zero-carbon requirement from utilities, although it was blocked by a Republican who crossed party lines in the Senate.

It may be unlikely that Arizona’s legislative chambers flip with the November election, but given the narrow margins, Democrats are hopeful that even a single pickup could help prevent other legislation that would block emission reduction mandates or other local climate action.

Arizona has emerged as a leader in clean energy manufacturing, attracting factories and offices for companies like solar power module giant First Solar, electric vehicle maker Nikola Corp. and battery manufacturers LG Energy and KORE Power. The Phoenix area has also attracted several large data centers, some of which run largely on renewable energy because of corporate mandates.

AEE’s Stults said the state, especially Maricopa County, has become a “cool little incubator” for the electric vehicle supply chain and has plenty of potential to become a renewable energy giant.

However, she said, it will take a government-wide change — not just a new governor — to make that happen, although that will start with leadership from the top.

“Arizona is a really great state, especially when thinking about rooftop and utility-scale solar,” Stults said. “We need someone who has the drive to push the state to its new economic potential and can help ignite that potential.”