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Incentives/Policies for Renewables & Efficiency

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Renewable Energy Standard   

Last DSIRE Review: 09/05/2014
Program Overview:
State: Arizona
Incentive Type: Renewables Portfolio Standard
Eligible Renewable/Other Technologies: Solar Water Heat, Solar Space Heat, Solar Thermal Electric, Solar Thermal Process Heat, Photovoltaics, Landfill Gas, Wind, Biomass, Hydroelectric, Geothermal Electric, Geothermal Heat Pumps, CHP/Cogeneration, Solar Pool Heating (commercial only), Daylighting (non-residential only), Solar Space Cooling, Solar HVAC, Additional technologies upon approval*, CHP only counts when the source fuel is an eligible renewable energy resource , Anaerobic Digestion, Small Hydroelectric, Fuel Cells using Renewable Fuels, Geothermal Direct-Use
Applicable Sectors: Investor-Owned Utility, Rural Electric Cooperative, Retail Supplier
Standard:15% by 2025
Technology Minimum:Distributed Generation: 30% of annual requirement in 2012 and thereafter (4.5% of sales in 2025); half of this must be from residential installations and half from non-residential, non-utility installations
Credit Trading:Yes (no third-party tracking system in place)
Web Site:
Authority 1:
Date Enacted:
Date Effective:
AAC R14-2-1801 et seq.

In November 2006, the Arizona Corporation Commission (ACC) adopted final rules to expand the state's Renewable Energy Standard (RES) to 15% by 2025, with 30% of the renewable energy to be derived from distributed energy technologies. In June 2007, the state attorney general certified the rule as constitutional, allowing the new rules to go forward, and they took effect 60 days later. Investor-owned utilities and electric power cooperatives serving retail customers in Arizona, with the exception of distribution companies with more than half of their customers outside Arizona, are subject to the standard.

Utilities subject to the RES must obtain renewable energy credits (RECs**) from eligible renewable resources to meet 15% of their retail electric load by 2025 and thereafter. Of this percentage, 30% (i.e. 4.5% of total retail sales in 2025) must come from distributed renewable (DR) resources by 2012 and thereafter. One-half of the distributed renewable energy requirement must come from residential applications and the remaining one-half from nonresidential, non-utility applications. The compliance schedule is:

  • 2006: 1.25%
  • 2007: 1.50% (5% DR)
  • 2008: 1.75% (10% DR)
  • 2009: 2.00% (15% DR)
  • 2010: 2.50% (20% DR)
  • 2011: 3.00% (25% DR)
  • 2012: 3.50% (30% DR)
  • 2013: 4.00% (30% DR)
  • 2014: 4.50% (30% DR)
  • 2015: 5.00% (30% DR)
  • 2016: 6.00% (30% DR)
  • 2017: 7.00% (30% DR)
  • 2018: 8.00% (30% DR)
  • 2019: 9.00% (30% DR)
  • 2020: 10.00% (30% DR)
  • 2021: 11.00% (30% DR)
  • 2022: 12.00% (30% DR)
  • 2023: 13.00% (30% DR)
  • 2024: 14.00% (30% DR)
  • 2025: 15.00% (30% DR)

A utility may use bundled RECs acquired in any year to meet its annual requirement. With the exception of incremental generation from hydropower facilities or hydropower output used to firm intermittent renewables, renewable energy from facilities installed before January 1, 1997, is not eligible. Energy produced by eligible renewable-energy systems must be deliverable to the state.

Extra credit multipliers may be earned for early installation of certain technologies, in-state solar installation, and in-state manufactured content. The multipliers are additive, but cannot exceed 2.0. RECs derived from renewables installed after December 31, 2005, are not eligible for multipliers. If a utility makes an investment in a solar electric manufacturing plant located in state or provides incentives for a plant to locate in the state, the utility can acquire RECs for the main RPS tier equal to the capacity of the panels produced multiplied by 2,190 hours, which approximates a 25% capacity factor. These RECs cannot account for more than 20% of the annual requirement.

Utilities subject to the RES must submit compliance and implementation plans annually to the ACC. Utilities recover RES costs through a monthly surcharge. Each affected utility may adopt their own surcharge but it must be substantially similar to the sample tariff provided in the rules, and it must receive approval from the ACC. Affected utilities also have the option to file a rate case with the ACC in lieu of a tariff.

Prior to the 2006 rules, Arizona's original Environmental Portfolio Standard (EPS) required regulated utilities to generate 0.4% of their power from renewables in 2002, increasing to 1.1% in 2007-2012. Solar electric power was to make up 50% of total renewables in 2001, increasing to 60% in 2004-2012. The EPS was an update of repealed 1996 ACC rules for a solar portfolio standard, which set a goal of 0.2% from solar energy by 1999 and 1% by 2003.

*In June 2012 the ACC gave final approval of a request by the Mojave Electric Cooperative (MEC) to have a single waste-to-energy facility (i.e., municipal solid waste incinerator) designated as a "pilot program" and be considered an eligible renewable energy resource under the standard. For further details please see Docket E-01750A-10-0453 in the ACC's E-Docket Portal.

**For renewable energy systems that produce electricity, one REC equals one kilowatt-hour (kWh). For renewable energy systems that produce heat (solar water heating, solar industrial process heating and cooling, solar space cooling, biomass thermal systems, biogas thermal systems, and solar space heating systems), 3,415 British Thermal Units (BTUs) equals one REC. In Arizona, a REC is a bundled package of three elements: the kWh, the renewable attributes, and any environmental attributes. All three must be delivered to Arizona customers and utilities in order to meet the REST requirements. Unbundled "paper RECs" will NOT meet REST requirements.

  Ray Williamson
Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
Phone: (602) 542-0828
Fax: (602) 542-2129
Web Site:
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Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.

While the DSIRE staff strives to provide the best information possible, the DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. make no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on DSIRE Web pages.

Copyright 2014 - 2015 North Carolina State University, under NREL Subcontract No. XEU-0-99515-01. Permission granted only for personal or educational use, or for use by or on behalf of the U.S. government. North Carolina State University prohibits the unauthorized display, reproduction, sale, and/or distribution of all or portions of the content of the Database of State Incentives for Renewables and Efficiency (DSIRE) without prior, written consent.