Arizona’s Renewable Energy Standard and Tariff (REST)—also known as a Renewable Portfolio Standard (RPS)—is intended to increase use of renewable resources in the state by establishing the minimum amount of renewable energy that the state’s electricity providers must sell in a given year. This legally-established renewable energy procurement goal gradually increases over time to meet the overall target of 15% renewable power by 2025.
The state profile below explores the design of this policy, highlighting the factors that influence the success of Arizona’s RPS goals and the tradeoffs inherent to it. Once you’re comfortable with the information on this page, you can evaluate the policy’s expected viability with the RPS Feasibility Calculator. You can also use the calculator to change the policy requirements, trajectory, cost cap, and more, to see how altering Arizona’s policy design affects its success.
- 15% of the state’s retail electric sales from must be from renewable sources by 2025
- Carve-out for distributed generation
- No legally defined cost cap
Carve-outs can create economic opportunities in the state by introducing new or promising technologies into the market. However, these standards limit the utilities’ ability to substitute between renewable energy sources, potentially increasing the cost of the policy. Arizona’s REST requires that 30% of the renewable obligation in each year be fulfilled through distributed generation. This amounts to 4.5% of total annual retail electric sales in 2025.
Compare the goal established in the RPS to what is being achieved.
The following chart compares the variety of sources currently used to generate Arizona’s electricity. The color of each bar is indicative of the carbon intensity of each source.
Cost Cap Details
Unlike some states, Arizona does not have an explicit ‘cost cap’ or limit on the potential increase in electricity costs as a result of this policy. Rather, the Arizona Corporation Commission (ACC) is responsible for managing these costs by approving utility-proposed ‘tariffs’. Each utility can recover any additional costs imposed by the REST by filing a ‘tariff’, or rate adjustment, with the Arizona Corporation Commission (ACC). By statute, the ACC must deem the tariff to be ‘reasonable and prudent’. The ACC’s decision on what is a ‘reasonable and prudent’ premium on renewable energy acts as an implicit cost cap on Arizona’s REST. In other words, utilities will not spend more money on renewable energy attributes than they are allowed to recover. It is also of note that the ACC may waive compliance with the RPS program for good cause. Using the RPS Feasibility Calculator you can act as the ACC, determining what level of costs will lead to a viable RPS.
Historic retail prices (¢ / kWh)
The above chart presents historical data from the Energy Information Administration (EIA) on the price at which residential customers can purchase electricity. Typically, states set explicit cost caps relative to the retail price (as opposed to the lower wholesale price).
The Arizona Corporation Commission increased the state’s REST in 2007. These rules require that investor-owned utilities and electric power cooperatives serving retail customers purchase 15% of their power (or purchase RECs equivalent to that amount) from renewable sources by 2025. The program is administered by the Arizona Corporation Commission. In June 2012, a waste-to-energy (municipal solid waste incinerator) pilot was approved as an eligible source.
RPS Technical Details
|Eligible 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, Fuel Cells using Renewable Fuels, Geothermal Direct-Use|
|Geographic Eligibility||Only renewable energy delivered to Arizona counts toward the standard. There is also a credit multiplier to incentivize in-state generation.|
|Percent of Total Load||58.6%|
|Technology Requirements||For 2012 and after, 30% of the annual requirement must be met through distributed energy resources (4.5% of sales in 2025); half of the distributed energy or customer–owned requirement must be met by systems among residential customers and the other half from business customers.|
|Sectors||Investor-Owned Utility, Rural Electric Cooperative, Retail Supplier|
|Penalty||By statute, state regulators may impose unspecified penalties for non-compliance.|
Tools and other links
- Database of State Incentives for Renewables & Efficiency (DSIRE) RPS data page—Datasets available for download in .xlsx format
- National Renewable Energy Laboratory (NREL) Energy Analysis Portal—Resources on renewable energy policies, and interactive web tools
- Energy Information Administration (EIA) U.S. Energy Mapping System—An interactive energy resource map with a myriad of data layers to explore
- DSIRE State RPS Page—Visit for detailed information on RPS and complete legislation
- U.S. Department of Energy Office of Energy Efficiency and Renewable Energy (EERE)—State Profile—Access your state’s EERE page, and find information on renewable resources maps, energy statistics, and news