trending Market Intelligence /marketintelligence/en/news-insights/trending/hgybnsyj-ucirpoufiagnw2 content esgSubNav
In This List

Distribution grid dominates APS' $3.5B investment plan

Blog

Insight Weekly: US stock performance; banks' M&A risk; COVID-19 vaccine makers' earnings

Video

S&P Capital IQ Pro | Powered by Expert Insights

Blog

Insight Weekly: LNG exports surge; investors unfazed by inflation; neobanks drive VC funding

451 Research Podcast

Next in Tech | Episode 41: IoT's Role in Energy and Utilities


Distribution grid dominates APS' $3.5B investment plan

Pinnacle West Capital Corp. subsidiary Arizona Public Service Co. plans to pump $1.6 billion into its distribution grid over the next three years, by far the largest portion of a projected $3.5 billion capital outlay. That number could grow, however.

While distribution system upgrades such as advanced grid management software, energy storage and 21 new substations are driving its approved expenditures, APS is considering additional initiatives such as microgrids that could further boost distribution system spending through 2020, Pinnacle West CFO James Hatfield said on a Feb. 23 fourth-quarter 2017 earnings call with analysts. Such investments would be "a little outside" the company's current capital spending plan, he said.

"Our investments are focused both on additional clean energy resources and the technology necessary to support these resources," Pinnacle West CEO Donald Brandt told analysts, highlighting APS' recently announced solar-fueled battery storage project with First Solar Inc. The 65-MW solar farm, backed by a 50-MW battery system, is not included in the investment plan, as APS will purchase the output rather than own the plant. Touted as one of the largest battery storage systems in the U.S., the project, scheduled to come online in 2021, "will ensure that sun helps power Arizona homes into the early evening when our customer demand for electricity peaks," the CEO said.

SNL Image

Overall, renewable energy accounts for the smallest share of APS' planned capital expenditures over the next three years, totaling just $55 million, or less than 2% of its planned investments through 2020. While those numbers do not reflect the utility's purchases from third parties, they nevertheless seem at odds with gathering momentum to boost utilities' state renewable energy procurement targets.

On Feb. 20, a group called Clean Energy for a Healthy Arizona filed an application with the Arizona secretary of state for a ballot initiative to ratchet up utilities' renewables mandate to at least 50% of their annual retail sales by 2030, from the current 15% by 2025. The initiative is backed by Tom Steyer, president of San Francisco-based NextGen Americas and the founder of hedge fund Farallon Capital Management LLC.

"The ballot initiative filed by California billionaire Tom Steyer is irresponsible and bad for customers," APS said in an emailed statement.

Other efforts to increase clean energy purchases in the state are also underway. In January, Arizona Corporation Commissioner Andy Tobin called for utilities to procure 80% zero-emission power by 2050, including both renewables and nuclear energy, while deploying 3,000 MW of storage by 2030, setting a "clean peak" target and investing in electric vehicle charging infrastructure.

APS called Tobin's proposal "a bold, challenging vision" while praising its recognition of the role of nuclear energy and "smart energy infrastructure."