Arizona House Bill 2527 aims to safeguard reliable electric power in Arizona so that it is not subject to blackouts and brownouts.
HB 2527 is straightforward. The bill stipulates that the Arizona Corporation Commission may not authorize the retirement of an electric generation facility unless there is a new generation facility with equal or greater power generation that is presently available on the grid. Further, it impresses a priority on dispatchable sources of energy while projecting to increase dispatchable electricity by at least 5 percent between 2025 and 2030. This ensures that energy will be ready at a moment’s notice for all ratepayers regardless of wind, clouds, or time of day. Ultimately, all parts of this bill focus on ensuring the reliability and abundance of energy for Arizonans, emphasizing affordability and reliability for all.
Arizona faces looming power shortages that threaten to disrupt quality of life and endanger human health and welfare. Electricity demand is growing, yet the availability of reliable, on-demand electricity capacity is not. Energy experts warn that rolling brownouts and blackouts are already an imminent threat, and the threat is only getting worse. Indeed, according to the Arizona Corporation Commission, Arizona registered its highest peak electricity demand ever recorded in August 2024.
According to a recent report by Grid Strategies, U.S. electricity demand is expected to grow by 15 percent in the next five years. This rapid growth is expected primarily due to the growth of data centers and the power demands of artificial intelligence. Arizona will need to add substantial new reliable electric capacity, and this must be accomplished quickly.
Against this backdrop, Arizona regulators and policymakers are recklessly approving the shutdown of numerous baseload power plants. The Navajo coal power plant closed in 2019, despite being perfectly operational. The Cholla coal power plants are slated to shut down this year, despite being perfectly operational. The Springerville coal plant is slated to shut down in 2031. The Colorado Generating Station coal plant is scheduled to shut down in 2032. None of these closures are operationally necessary—they are politically driven.
Climate activists claim new solar power projects can and will fill the demand gap from shutting down coal. They are dangerously mistaken. Even in sunny Arizona, solar power facilities provide power at 29.1 percent of solar PV capacity factors—less than 30 percent of their rated capacity according to the U.S. Energy Information Administration. This means that the vast majority of the time, baseload natural gas, nuclear, and coal power plants are required to keep the lights on, the air conditioners running, and critical infrastructure functioning.
Building massive redundancy in solar projects provides little help, as the same intermittency that keeps solar production under 30 percent of rated capacity will debilitate the newly built solar facilities at the same time as existing solar facilities. At night, and when clouds obscure the sun, no solar power would be produced no matter how many solar facilities exist.
Building new coal or natural gas plants is more affordable than building new solar. Shutting down perfectly operational and already paid-for coal power plants just to replace them with expensive new solar power projects is even more uneconomical.
Arizonans pay the highest electricity prices in the American Mountain West and Southwest regions. According to a report by the American Coalition for Clean Coal Energy, over the past 10 years, Arizona electricity costs have skyrocketed by a whopping 36 percent. This has added more than $500 per year to the average Arizona household’s electricity bills, let alone the higher costs of goods and services that reflect higher energy costs. Arizona’s rate-of-electricity price increase is far higher than the national average. This is driven largely by Arizona replacing existing operational baseload power with solar power.
According to the U.S. Energy Information Administration’s Arizona State Profile, coal power currently provides just 7 percent of Arizona’s electricity. It is affordable, reliable, and increasingly environmentally benign. For all the talk of desired diversity in energy sources, shutting down Arizona’s few remaining coal power plants is antithetical to energy diversity and an all-of-the-above energy policy.
Shutting down coal power is completely unnecessary. If, however, a political decision is made to shut down coal power, it should be replaced by natural gas or nuclear power. These baseload power sources are available on demand and mitigate the very real risk of imminent power shortages. Moreover, they are far more affordable than solar power.
In the peer-reviewed science journal Energy, economists examined the levelized full systemcost of electricity (Robert Idel, “Levelized Full System Costs of Electricity,” Energy, 259 (2022) 124905). The “full-system” component accounts for real-world added costs imposed by intermittency, extended transmission line requirements, and other factors that are often left out of generic so-called levelized electricity costs. The peer-reviewed study reports the following costs per megawatt-hours (mwh) of power generation from competing sources:
Solar $413
Wind $291
Nuclear $122
Biomass $117
Coal $90
Natural Gas $40
The above numbers were specific to Texas, and primarily western Texas. Solar irradiance in Arizona is moderately higher than in western Texas. Applying the full-system levelized formula to Arizona might reduce solar power costs to the mid-$300s in $/mwh, which is still approximately quadruple the cost of coal power and nearly 10 times the cost of natural gas power.
The full-system levelized cost numbers above explain why the world as a whole continues to increase the amount of coal power it generates and uses, even while the United States and Western democracies are dramatically reducing coal power. According to Statista, coal electricity production was at its highest rate ever in 2023 with 10,479.55 terawatt hours.
Utilizing coal power rather than solar power gives the rest of the world substantial competitive advantages over U.S. and Arizona businesses that must use prohibitively expensive solar power.
For the benefit of Arizonans, existing baseload power plants should not be shut down. If a political decision is made to shut them down anyway, new baseload and dispatchable power plants should replace them.
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Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.
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Samantha Fillmore is a State Government Relations Manager for The Heartland Institute.
