REPORT: Replacing Arizona’s Coal Fleet with Solar Power Would Save Customers Billions of Dollars

PHOENIX, AZ--  An independent analysis released today finds that Arizona’s electric utilities can save more than $3 billion by replacing all remaining coal-burning power plants with new renewable energy resources. The Arizona Coal Plant Valuation Study, conducted by energy consulting firm Strategen, analyzes the cost of replacing the 11 existing coal units that provide power to Arizona customers with renewable energy, like solar and wind, as well as market purchases. These savings exceed $10 billion when also accounting for the societal costs of greenhouse gas emissions and the financial tools available to help transition away from coal. All units evaluated are slated for retirement after 2035, with the analysis assuming an earlier retirement of 2023.  

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“An updated analysis of Arizona’s aging coal fleet proves what so many of us already know: coal is far more expensive than clean, renewable energy,” said Sandy Bahr, Chapter Director of Sierra Club’s Grand Canyon (Arizona) Chapter. “Arizona’s utilities need to realize the huge potential of the sun to power our lives while reducing the negative impact that burning fossil fuels has on our climate, health, and wallets. It is time for state leaders to seriously commit to a timely transition away from fossil fuels towards renewable energy.”

Using publicly available data and applying conservative assumptions, Strategen found the following:

• Solar resources are cheaper than coal power from all 11 coal units owned by Arizona utilities.

• $3.5 billion: the potential savings if all 11 coal units are replaced with solar plus battery storage.

• $2.8 billion: the potential savings if all 11 coal units are replaced with market purchases.

• Wind resources are lower cost than the coal power at six of the 11 units, with $263 million in potential savings if those six coal units are replaced with wind. 

“The Arizona Coal Valuation Study provides a comprehensive analysis of the extremely high cost of continuing to burn coal to power Arizona’s communities, particularly now that technologies like solar power and battery storage are so much more affordable. In a state where hot summer days can place a significant burden on electricity customers’ bills,  it’s clear that a change from business as usual could actually help alleviate that burden in Arizona,” said Edward Burgess, Senior Director of Consulting at Strategen Consulting. “In addition,the study provides cost estimates of how much money ratepayers would save if Arizona took advantage of financial tools similar to those in other states to ease the transition away from coal to renewables.” 

Strategen calculated the social cost of carbon (SCC) of the 11 units, applying a value of $15.99 per short ton of coal in 2025, which is the price specified in the Arizona Public Service (APS) 2017 Integrated Resource Plan, and found significant savings when switching to renewable sources: 

• $10.2 billion: the potential savings when accounting for SCC if all 11 coal units are replaced with solar plus battery storage. 

• $7.3 billion: the potential savings when accounting for SCC if all 11 coal units are replaced with wind. 

Strategen calculated ratepayer benefits that might be achieved through the securitization of the remaining debt at one unit at Tucson Electric Power’s (TEP) Springerville plant over a period of 20 years starting in 2023 and found the following:  

• $23 million: the potential savings for TEP customers when compared to business-as usual scenario.

• $326 million: net savings for TEP customers when replacing the unit with equivalent solar plus storage. 

Of the coal units analyzed, the Four Corners coal-fired power plant is the largest serving the state, after Navajo Generating Station, which is slated for closure in 2019. Four Corners has a must-buy coal supply agreement with the Navajo Transitional Energy Company through 2031. Despite the contract, retiring the coal plant and replacing the power with solar and battery storage is still less expensive than the continued operation of Four Corners. 

Similarly, unit 2 of Coronado Generating Station is more expensive than solar and battery storage even without adding required pollution controls to adhere to clean air protections. The costliness of running unit 2 at Coronado would only increase with the addition of pollution controls, further burdening ratepayers. 

“This is great news, because not only will solar and wind energy save money, but they will save lives,” said Eve Shapiro MD, MPH, Board President of Physicians for Social Responsibility Arizona. “Burning fossil fuels increases our risk of lung and heart disease, so switching to alternative energy sources will create a healthier Arizona.”