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Ariz. regulators approve 20 MW of storage in Tucson Electric Power's renewables plan

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


Ariz. regulators approve 20 MW of storage in Tucson Electric Power's renewables plan

TheArizona Corporation Commission on May 3 approved a $57 million by thatincludes the acquisition of two 10-MW lithium battery storage units to meet itsrenewable energy obligations.

However,the commission has deferredthe company's proposals to expandits utility-owned rooftop solar program and launch a proposed residentialcommunity solar program until they can be considered in TEP's general ratecase. Those twoprograms, according to TEP's initial proposal, would add another about $10million and $15 million in costs, respectively.

TheFortis Inc.subsidiary said theresponses to its energy storage solicitation far exceeded expectations, so theutility was able to obtain 20 MW of total storage capacity for less than thecompany's original cost estimate to acquire 10 MW. The second 10 MW battery projectwill be paired with a 2-MW solar facility.

Theprojects will provide frequency response at pre-determined set points, voltageand volt-ampere reactive support, ramp rate control, according to thecommission staff's report and proposed order.

Respondingto questions from Commissioner Bob Stump about whether solar and storage mightcause widespread grid defections, Tucson Electric Power Senior Director ofEnergy Supply Carmine Tilghman said solar energy storage is only a small partof the utility's aim. He said TEP needs about 30 MW of capacity available atall times for frequency response and is optimistic battery storage will filltwo-thirds of that need.

Tilghmansaid this storage application will be the largest in the nation for anybalancing area that is not in a power market such as the or .

Sincethe storage must be available 99% of all hours, and there are technicalchallenges to recharging batteries while discharging them at the same time, thesmall solar link will play a minor role, he said.

"[I]tis not specifically designed to determine the effectiveness of solar andstorage. We look from a system-wide perspective at all resources and how theywill be integrated together and the bigger overall benefit we can get fromthese facilities," Tilghman said.

On amotion from Stump, the commissioners approved the storage and other componentsof the Renewable Energy Standard Tariff Implementation plan on a 4 to 0 votewith Commissioner Andy Tobin abstaining due to a conflict of interest.

TEPwill contract with outside companies for the two storage facilities and for 10years of service from those facilities with an annual fee for both of $1.52million, or $15.2 million over the agreement period.

"TEPhas indicated in discussions with staff that pursuit of storage projects suchas these is necessitated by the increasing deployment of renewable energyfacilities on its grid and the concomitant grid support needs," thecommission's order said.

Thecommission will allow TEP to recover costs through the utility's power and fueladjustment. The third-party storage agreements include performance requirements.

Rest of REST plan outlined

Intotal of $47.8 million of REST costs for 2016 will be recovered through theapproved customer surcharge, while a balance of about $9 million for theprogram year will be paid for from unspent money collected earlier with thesurcharge.

Mostof the expenditures to be paid for in the REST surcharge will be for continuedcost recovery for existing power purchase agreements at existing renewableenergy projects. About $7.3 million will be continued payments ofperformance-based incentives for rooftop solar customers signed up in earlieryears.

However,going forward TEP said it will no longer request recovery of costs related tonew renewable energy investments through the REST surcharge, but will recoverthose costs through traditional methods, such as general rate proceedings.

Tomeet the state's renewable energy standard, TEP must obtain 6% of its 2016annual retail sales from renewable resources and 30% of that energy must comefrom distributed generation resources. Further, TEP must meet half of thisannual distributed generation requirement from residential applications.

TEPsaid it will satisfy its 2016 utility-scale requirement with 326 MW ofrenewable resources of which 236 MW is solar photovoltaic capacity. A total of266 MW will come from power purchase agreements currently in effect or within-service dates in 2016 while the remaining 60 MW will come from TEP-ownedfacilities.