S.B. 1066: Are We Shutting Down Solar?

By Natalie Heun. 

Solar energy is booming in Arizona. The sunny Grand Canyon State consistently ranks among the highest in the country for most solar energy potential and is on track to install over 10,000 megawatts by 2028.

The continued growth of solar energy is important in mitigating the effects of climate change. The United States’ continued reliance on fossil fuels for energy production has made the fossil-fuel-based electric power sector the second-largest source of greenhouse gas emissions in the country, amounting to a whopping 25% of our total emissions. Switching from fossil fuels to clean renewables like solar can help greatly reduce these numbers at a time when we need it most. Therefore, supporting solar development in one of the sunniest states in the country makes good sense.

However, a new bill progressing through the state legislature could put Arizona’s solar energy growth in jeopardy. Senate Bill 1066 would require certain solar panel owners to pay into a fund that would provide a small amount of royalties to Arizonans. Solar panel owners who must participate include those who are not owned by a public service operator regulated by the Arizona Corporation Commission (ACC) or by an Arizona public power entity, nor are subject to a purchase power agreement with an ACC-regulated public service operator or Arizona public power entity. Residential solar panel owners are excluded from this requirement. Although some Arizona residents may be interested in receiving this payout, this bill would likely be disastrous for the state’s solar energy industry if it is passed, as discussed below.

Inspiration from Alaska

Supporters of the bill, including State Senator Sonny Borelli, drew inspiration from Alaska, where residents receive an annual royalty check derived from the state’s oil revenues. This program, called the Permanent Fund Dividend (PFD), started in 1976 and is still going strong today. 

However, in recent years, issues with the PFD have become more readily apparent. The PFD now competes for funding with important services like health care, public education, and public safety. It has also caused a host of issues in the state legislature, where lawmakers disagree about how much to dedicate to the fund each year. Competition among the PFD and crucial public services diminishes quality of life for many Alaskans. The creation of a fund like this in Arizona could present similar challenges, which is concerning for a state that is currently ranked number forty-five in public education and number forty in public safety.

The Bill’s Potential Effects on the Solar Industry

Additionally, implementing this fund in Arizona would significantly impact the state’s solar energy industry. Once put into place, developers selling energy out-of-state would be required to pay 12.5% of every dollar made from the sale of kilowatt-hours. Requiring that solar developers pay into this fund would deter these developers from building future projects in Arizona, especially when no other state has such a requirement. With solar energy available nationwide, developers looking to maximize their profits are unlikely to want to take on this financial burden. This would be a shame for the state that is second in the nation for total solar energy potential.

Looking at U.S. energy policy, a fund like this may make more sense in Alaska, where the energy source being taxed is oil—a major fossil fuel. As we move into a cleaner energy future, taxing these polluting energy sources is an effective way to limit our fossil fuel production. However, the opposite is true of solar energy, which is a far cleaner renewable energy source. Rather than tax, we want to incentivize this production in order to promote solar energy growth. Senate Bill 1066, therefore, would move Arizona in the wrong direction in the push toward renewables. 

Looking Forward: Will the Bill Become Law?

Although Senate Bill 1066 has passed out of the Natural Resources, Energy, and Water Committee and the Senate Rules Committee, there is still a good chance that it will never become more than a bill. Once the bill passes through the Arizona Senate, it will have to get through the Arizona House of Representatives before going to Governor Katie Hobbs. Although there is a good chance the bill will pass in the House of Representatives, in Governor Hobbs’s office it may meet its end.

Governor Hobbs has been a significant supporter of renewable energy development in Arizona and has vetoed bills before that would have a negative impact on renewable energy. For example, this past summer, Governor Hobbs vetoed a bill that would have imposed stringent requirements on wind and solar development in the state, stating that the requirements would have a “chilling effect” on renewable energy. With all of the challenges Senate Bill 1066 presents, Governor Hobbs is likely to express a similar sentiment if this bill ends up on her desk. Until then, only time will tell what the future holds for Arizona solar.