The U.S. Department of Energy Loans Programs Office (LPO) made a conditional commitment for loan guarantees of up to $1.81 billion for Arizona Public Service (APS).
APS is an electric utility serving over 1.4 million customers in the Phoenix, Arizona area. It submitted its loan application to LPO in November 2023.
The loan guarantee is expected to support APS’ investment into new or upgraded transmission projects, renewable energy generation and grid-scale energy storage systems.
DOE said the APS proposed plan is expected to save customers approximately $250 million in total savings over the life of the loan guarantee. All electric utilities receiving an Energy Infrastructure Reinvestment (EIR) loan must provide assurance to DOE that financial benefits received from the financing will be passed on to the customers of that utility. The EIR was created as part of the Inflation Reduction Act of 2022, the nation’s largest-ever climate and energy spending package.
The funds come as part of the Biden Administration’s Investing in America agenda, which seeks to establish job opportunities. The projects associated with the APS loan are expected to create 960 construction jobs and 20 long-term operations jobs.
The first investment expected to be supported by the APS loan guarantee is the construction of the Agave Battery Energy Storage System, a 150 MW, 600 MWh battery located near an existing solar facility. Additional loan-supported projects are expected to include more grid-scale batteries, solar, and transmission.
APS Integrated Resource Plan and EPA regulations require the retirement of coal-fired power plants. The projects that the loans will support are expected to replace the generation provided by coal assets that are planned to be retired by 2031. APS has publicly stated goals of delivering 100% carbon-free electricity by 2050, with interim goals of 45% renewable energy by 2030.
Along with the planned exit from coal, APS provided community-transition support, including direct financial support of $2.25 million to the Hopi Tribe, $10 million to the Navajo Nation, and $1.6 million to Navajo County. APS has also committed to working with the Hopi Tribe and the Navajo Nation to contribute up to $2.5 million toward electrification projects on Tribal lands.
APS has also developed a partnership with Arizona State University to provide seed funding for the Indigenous Leadership Academy at the University. APS has partnered with utilities Salt River Project and Tucson Electric Power Company on the Utility Grant Funding Program, providing financial assistance to communities affected by the exit from and decommissioning of coal-fired generation facilities.
Despite investments in solar and energy storage at the grid-scale, APS has put up some roadblocks to residential, rooftop solar adoption. This includes cuts to compensation rates for exporting solar to the grid, and a new fixed monthly charge exclusively for solar customers.
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