There have been many advancements in the energy industry over the past decade, yet major opportunities remain for implementing reasonable, balanced long-term energy policies. Unless one is directly engaged in an industry on a daily basis, it is difficult to comprehend the day-to-day complexities in developing and implementing an effective policy regime. Although the loudest voices may be the ones heard, they do not necessarily reflect the positions that are the best for industry development.
The ability of any industry to flourish is only as strong as the policies set to support it. Such policies impact the amount of regulation, the amount of investment needed for continued industry development and the ability of the industry to advance. If uncertainty is raised by these policies, there are detrimental impacts to industry development. This delicate balance between the government’s interest in protecting the consumer and the industry’s goals of developing in a predictable playing field must be carefully achieved. Without transparency and fair discussion, public participation in this process declines due to a lack of confidence that a fair result can be realized. This process is further impacted with additional factors of changing market conditions, evolving disruptive technologies and lack of a federal energy policy. The confusion and complexities created by these factors can overpower any rational discourse that would otherwise lead to a solution-oriented process.
Finding common ground to resolve these issues is not a simple task. Since 2011, the Arizona Energy Consortium (AEC) has focused on working with industry stakeholders to create an attractive business environment that promotes development, while still protecting our valuable resources for a sustainable future. The AEC actively promotes collaboration in the industry for growth and retention of energy companies. We continue our efforts to develop and implement energy policies that work in the real world, and benefit both the providers and users of energy in our changing energy economy.
What policy trends are shaping the energy industry?
The many exciting advancements in disruptive technologies over the past decade make it difficult to predict the future of energy in the long-term. However, the energy sector will continue its transformation from a fossil-fueled economy, and predominant advancements will continue to be decarbonization of energy resources and reduced water use. Advancements in battery storage technologies, both for utility-scale and residential use, will continue to support further deployment of renewable energy resources.
The speed with which these changes will be accomplished, and the opportunities that will be gained or lost, will be determined by the amount of certainty in policymaking for long-term growth. There are many examples where the lack of a clear and stable policy and regulatory environment resulted in further difficulties for capital investment to flow into developing sectors. Other than poor management, it’s one of the main reasons that start-up businesses fail. The continued adoption and expansion of a decarbonized energy sector cannot fully occur until investment capital finds certainty in the industry, and securing capital remains an issue for much of the industry.
The transformation from decades of investment in fossil-fueled infrastructure to a decarbonized energy economy takes significant planning and coordination to succeed. Many jurisdictions have been focusing on encouraging robust development for new technologies by reducing industry and policy barriers. As with any transformative progression, regulators and utilities must be mindful to avoid unintended consequences of changes in policy. The aggressive mandates in some jurisdictions that are inevitably impacting the energy markets of their surrounding states are having consequences that the originators of those mandates may not have anticipated. For instance, California’s strong solar energy generation mandates have resulted in less deployment of solar energy generation in Arizona. Since Arizona can take advantage of excess solar power from its neighboring state at much lower costs (including negative pricing) than building its own solar generation, this regional cooperation has benefited the Arizona consumers while allowing California to offload power it could not otherwise utilize.
What’s the future of the energy sector?
As the U.S. fleet of coal-generation resources ages, it is important to fully understand the costs to deploy newer decarbonized energy technologies. Utilities who must replace larger capacity and more efficient fossil-fueled generation with smaller, more expensive decarbonized energy generation resources face many challenges that will take some time to overcome. In addition, the grid must continue to be modernized to support the changing load profiles and more advanced technologies. All of these costs will ultimately be borne by the customer.
There are many proposed policy changes facing Arizona that could have significant impact on regional transmission and generation. To find success in Arizona, the industry must shift its mindset from viewing decarbonized generation resources as a means to satisfy a renewable energy mandate to an opportunity to stimulate and enhance the economy and diversify the state’s energy mix. Since industry development is attracted by consistent policy and access to capital, Arizona and its regional neighbors must adopt energy policies conducive to both. An additional benefit to this continued diversification of the energy mix is greater security for the state’s economy that can more easily adjust to a reduction in the carbon-based power resources. It is important to realize that this diversification cannot happen overnight and must be carefully planned to avoid undesirable consequences.
While there is some collaboration driving the transformation of the energy sector, the amount of regional cooperation will be critical to a robust industry that takes advantage of what each jurisdiction can contribute. It will be important for all stakeholders to work together to ensure that as fossil-fueled facilities are decommissioned they can be repurposed, and displaced workers can be trained to work in the new energy economy. Through its efforts such as the Southwest Energy Conference, the AEC continues to work with key stakeholders to provide an open discourse about how to best achieve these goals regardless of one’s position on climate change. The AEC actively promotes collaboration for growth and retention of all industries that impact the energy sector, whether they are producers or users of power.
One critical technology for the transition to a decarbonized energy economy is battery storage. With technology advancements and reduction of costs for utilities, this technology will have significant long-term impacts on centralized generation peak shaving and stabilization of intermittent renewable energy resources. The AEC believes that with more collaboration among industry stakeholders to find opportunities to better utilize resources, the transformations in the energy sector will continue to flourish to the benefit of the customer.
The AEC is looking forward to helping shape the course of the energy sector over the next decade as technologies continue to improve and the energy sector is transformed. We will continue to act as a resource and a forum for industry to share solutions to power Arizona’s future.
Michelle De Blasi is a prominent environmental attorney and director at Fennemore Craig. She is also executive director of the Arizona Energy Consortium.
