Policy Documents

The Economic Impact of Arizona's Renewable Energy Standard and Tariff

David G. Tuerck, Ph.D., Paul Bachman, MSIE, Michael Head, MSEP –
April 3, 2013

Study: Arizona’s renewable mandate should give cause for concern for new commission

(Boston, MA) In January, as he launched his term as Arizona Corporation Commission’s (ACC) new chairman, Bob Stump discussed renewable energy policy by announcing he would “refuse to bet on, or cheerlead for, any one form of technology,” and that he would “pursue a path in which adequate, reliable service is ensured and rates are just and reasonable.” A new study, which analyzes Arizona’s Renewable Energy Standard and Tariff (REST), offers several reasons for the ACC to revisit whether the state’s mandate to produce electricity from alternative sources aligns with Mr. Stump’s intentions.

The report, prepared by economists at the Beacon Hill Institute at Suffolk University (BHI) in Boston, found that Arizonans will likely pay $1.38 billion more for power in from 2013 to 2025 because of the state's REST, and it could cost them as much as $2.2 billion more. Arizona’s REST requires utilities to generate 15 percent of electricity from renewable sources by 2025.

“Arizona’s mandate for utilities to purchase higher-cost renewable power for their customers is extremely burdensome – one of the most expensive of the states we’ve studied so far,” said Paul Bachman, director of research for the Beacon Hill Institute and a co-author of the report. “The higher electricity prices will act like a regressive tax, since everyone needs reliable and consistent power, and thus will fall disproportionately on the poor.”

The Beacon Hill Institute analysis produced low, medium, and high estimates of economic impacts from Arizona’s REST, based upon U.S. Energy Information Administration numbers. Other findings from the BHI report:

•    Arizona’s electricity prices will rise by 6 percent by 2025, within a range of 3.7 percent and 9.7 percent;

•    The REST will lower employment by 2,500 jobs, within a range of 1,500 jobs and 4,100 jobs;

•    Real disposable income will be reduced by $334 million, within a range of $202 million and $543 million; and

•    Investment in the state will be $38 million less in 2025, within a range of $23 million and $61 million.

“The additional costs will filter throughout the economy, and businesses’ financial resources will be devoted to higher power bills rather than adding new workers,” Bachman added. “With greater energy costs — whether transportation fuels or electricity — there are always ripple effects. Arizona’s are particularly high.”