1. M
y December 2009 TREND report article wherein I called out the importance of China, the throttling
back of solar deployment in US and hopes for a resurgence of US global solar leadership proved too
optimistic. But now market growth has created new opportunities for local prosperity. With that
perspective, and echo of the 2009 statement “…all energy independence is local,” I provide the following thoughts
on solar trends.
Where are we now?
US solar development has been impressive
since 2009: generation from solar (PV &
thermal) was 9,708,000 MWh, up from
612,000 MWH (eia, Electric Power Monthly
(February 2014) (http://www.eia.gov/
electricity/monthly/update/ all unless
noted). Arizona followed the trend: since
2007, over 1.5 GW of solar energy producing
morethan2,250,000MWhhasbeendeployed.
That is the good news. As former Federal
Energy Regulatory Commission (“FERC”)
Wellinghoff put it: “Solar is growing so fast it is
going to overtake everything.” (http://www.
greentechmedia.com/articles/read/ferc-chair-wellinghoff-sees-a-solar-future-and-a-utility-of-the-future).
As impressive as 1.5+ GW solar is, that is only 2% of Arizona’s electricity generation. And the bad news is that
Arizona has been slowing deployment: US increases from 2013 to 2014 were 79% while Arizona’s were only 56%.
Part of the slowdown is related to electric power industry concerns that solar growth is a threat to their business. At
2% of sales, that is a bit of a stretch, but utilities plan for the long term. So the search is on for equitable solutions in
the face of technology development, lower costs, and climate change. This is a process primarily controlled by the
Arizona Corporation Commission (“ACC”) and is why the most visible battles are playing out there.
Arizona Corporation Commission
ACC “battles” between regulated utilities and the ecosystem of non-utility energy providers (ex: Solar City,
Sunpower) have filled the airwaves. The matters are complex with legitimate claims on all sides, but fundamentally,
the question is how to support utilities while including participation by the market-based non-utility providers
(NUP). NUP have made significant grid investments, especially in renewables, storage and other technologies.
Speed, greater flexibility and the ability to absorb higher risk, the NUP has been key to solar success: they have
Arizona Solar Energy: Prospering from Solar 2.0
Valerie Rauluk • published in the May 2014 issue
Davis-Monthan Air Force Base’s 16.4 Megawatt solar power
plant is the largest solar energy facility at any U.S. Department
of Defense installation and is expected to reduce the Air Force’s
utility costs by $500,000 annually for the next 25 years.

2. deployed more than 6 times the solar energy MWh for the US grid than utilities in 2013. NUP have achieved a
critical mass power in the marketplace and a seat at the table.
Electric power markets are regulated. Rules of doing business like how profits are earned and prices set are
determined by slow to change regulations and an equally slow regulatory process. The speed of technology and
climate change is racing forward and speeding up the process is needed. This adds to the work we need to do: re-
work utility rules as well as how they are developed and enforced. A big task, but benefitting from the clean tech
wave will be highly dependent on it.
The next phase of clean power development indicates a leadership role for utilities, now that solar risks have been
reduced. Additionally, utilities are the logical integrators of generation, storage, and intelligent controls, another
emerging trend in solar deployment. But that leadership will not be at the exclusion of NUP.
Thus, the main hurdle will be integrating the utilities and NUP. Although this is common practice and there are
many examples to guide us, the friction of integration may be with us for some time.
Technology Drivers
Onthetechnologyfront,solarcostreductionshavedeliveredpricingfrom$12/Win1998to$6/Win2011(NREL
http://www.nrel.gov/docs/fy13osti/56776.pdf), to values $0.75/W and below, recently. These reductions are
great for ratepayers as they benefit from the increased private capital for a greener public grid. Efforts continue
for cost reductions, and increased value from higher performance, functionality and waste capture utilizing digital
controls, concentration and cogeneration.
Business Models as Technologies
Business models drive rapid market change as well. A great example is the approach SunEdison/Solar City
originated offering solar for no (or little) money down exploding solar market growth. New business models are
emerging for both sectors. The utility model will need to expand customer choice, shift to a more customer versus
regulator orientation and redefine profitability as customers pursue self-generation and efficiency.
Financial Reorganization of Southern Arizona Utilities
Of note locally, UNS Energy Corporation, parent company of two of southern Arizona’s largest utilities, Tucson
Electric Power Company and UniSource Energy Services is in the process of being acquired by Canadian company
Fortis, Inc. It appears to be at least non-detrimental to rate-payers, but the ACC will make that final determination
later this year.
Corporate re-organizations are a regular part of financial development. But faced with major investments to green
electric power over the next 20 years and the importance of the utility financial health in keeping costs down, a
deeper look seems appropriate. Case in point is the 2007 leveraged buyout of a Texas utility, currently processing
a $45 billion bankruptcy. If Arizona utilities had followed similar paths, solar energy assets could not have been
financed and built. As called out in the 2009 report: “we need to make sure we get best value from our investment,”
especially those related to critical energy infrastructure.

3. Next Steps for Southern Arizona
Continuing what was called out in 2009 is a good start: increasing investment, partnering, going beyond mandates,
building local capacity and harvesting intellectual property. Add to this the urgency for rapid deployment driven
by technology and climate change and the re-creation of business models for the utilities.
An exciting, but difficult road is ahead. Perhaps in light of the urgency to convert fossil generation to renewables
called out recently by the IPCC, and the need to refurbish our economy, we can find a constructive path forward.
Valerie Rauluk is the founder and Chief Executive Officer of Venture Catalyst Inc.(“Vecat”), provider of services
and capital for technology development, particularly renewable energy. Vecat has been broadly active in the solar
energy space since 1997 and has facilitated over 20 megawatts of solar energy resources and the development of
several solar business models. She can be reached at vajra@vecat-inc.com.
Tucson Real Estate + New Development
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