Arizona's Imminent Disruptive Innovation in Solar Electricity

Arizona Eagletarian reader and House Appropriations chairman John Kavanagh (R-Fountain Hills) told a legislative committee on Friday that it may not be very long before the state government again faces the possibility of collecting less in taxes than it spends. Mary Jo Pitzl reports it thus:

Arizona’s state budget could mount a deficit of as much as a half-billion dollars within three years even if spending increases only modestly, the chairman of the House Appropriations Committee warned Friday.

Rep. John Kavanagh’s comments came as the Legislature’s Finance Advisory Committee met to update the state’s fiscal forecast.

The committee of public and private economists predicted the state would see a return to a deficit by June 2016, driven by a slowly recovering economy and the effect of business tax cuts that will reduce overall tax collections.

Kavanagh, R-Fountain Hills, said a more realistic snapshot would build in extra spending requests in the coming years, especially since the state has had a recent run of surpluses.

The first question I would ask Kavanagh, if I could, is just how much taxpayer money he and his GOP cohorts been spending on frivolous lawsuits. The most obviously frivolous being the one challenging the constitutionality of the Independent Redistricting Commission. Since that number is not likely to approach $500 million, he predictably would dismiss it as not being of a material amount.

However, if there were possibly other factors on the horizon to stimulate the Arizona economy to make up that hypothetical revenue shortfall, how seriously would he consider them?

Freelance Journalist Mark Hertsgaard, writing in The Nation magazine, describes what I believe could be a disruptive technological innovation that will make or break Arizona's monopoly electricity generating enterprises and provide immense growth in consumer sales in the near future.

"Solar is growing so fast, it is going to overtake everything," said Jon Wellinghoff, chair of the Federal Energy Regulatory Commission, in August. "It is going to be the dominant player. Everybody's roof is out there."

Deutsche Bank projects much the same for the global market—and says subsidies will soon be unnecessary. Within eighteen months, says the investment giant, solar will be able to compete in three-quarters of the world’s electricity markets without subsidies. The industry is climbing the learning curve, explains [Danny] Kennedy [executive VP with Sungevity], driving down costs the same way computer manufacturers did: “Like Moore’s law predicts, every doubling in [production] volume has led to an 18 percent reduction in price.” 

Given that this disruptive innovation will be unstoppable, despite the best efforts of coal industry interests (and they will not give up without a major disinformation campaign that will ultimately make them look incredibly stupid), what does this mean for the Arizona economy?

It means the Arizona Legislature will either find a way to capitalize on this trend for economic development in our state, or it (the Legislature and state government) will lose out. And there's not much that may embarrass elected officials more nowadays (other than their personal stumbling and other foibles) than passing up on legitimate economic development opportunities.

Case in point, in 2001 Arizona passed up on the opportunity to pioneer a known agricultural bonanza. Then Gov. Jane Dee Hull vetoed a bill to allow an Arizona university (the bill didn't specify which one) to conduct a study on the feasibility of growing Industrial Hemp.

Now, California, Colorado, North Dakota and Vermont are beating Arizona to the punch. The tsunami from disruptive innovation will enable the rebirth of a very promising Industrial Hemp industry. Will Arizona be able to get in early enough to get a competitive advantage? It certainly could have twelve years ago.

But we turn back to Arizona's most obvious competitive economic advantage -- solar electricity generating capacity. If only the doors are not kept closed by Big Money lobbyists for the monopoly utilities.

It's not altogether far-fetched to consider that the recent trial balloon -- put forth by the Arizona Corporation Commission about the possibility of reopening the door on deregulation -- was a chess move by the monopoly power companies, in particular APS, to shut the door before the knob could even be turned to open it.

After all, that's all those monopoly enterprises have to protect their economic interests. If you refuse to implement the innovations that will revolutionize your industry, all there is left is to appeal to those who can protect the monopoly. For APS, that's the Arizona Corporation Commission. For Salt River Project, that's the Arizona Legislature. In light of this year's passage of the Lobbyist Shakedown Bill (HB2573), rather than investing in technology advances, expect them to invest in incumbent state lawmakers committed to protecting the interests of those monopolies.

We have already seen brazen patronage of Sen. Robert Meza (D-LD30) and Rep. Catherine Miranda (D-LD27) in campaign spending believed to be tied to Arizona Public Service. Even if the campaign committee that funded a mailer on behalf of Meza and Miranda wasn't supported by APS, the two of them buddied up to the utility at a major Democratic Party fundraiser in May.

Perhaps as a result, both of them voted FOR HB2485, a Republican bill to exempt APS (specifically Palo Verde Nuclear Generating Station) from an environmental audit. HB2485 was signed by Gov. Brewer on April 29.

Now, just how imminent is this disruptive innovation that could bankrupt Arizona Public Service if it doesn't respond to the competitive threat?

Consider that among the ads running on this blog (as placed by Google, I do not choose the ads) is for a device called Power Whisperer Mobile Grid Backup System. They seem pretty easily affordable even now. Just how imminent does that make it?

In another ad, fossil fuel burning electricity generating enterprises hope to dissuade people from installing solar? Would they be paying for ads to do so if they did not believe the threat was imminent?

Whether APS or SRP like it (or not), technology very soon will -- cost-effectively and reliably -- allow Arizona residents to survive (and thrive) in the desert no longer dependent on those fossil fuel burning monopolies. I long to be able to crank down my home air conditioner to actually comfortable temperatures in the summer.

Over a century old, Kodak shriveled up because the organization could not come to grips with the fact that consumers would abandon film photography as quickly as they (we) actually have. That's in spite of the fact that Kodak actually developed some of the early digital imaging technology.

By the way, do you still have a landline phone? US West used to be the monopoly telephone company in Phoenix. They then became Qwest. Now, it's Century Link. How many people have abandoned the landline telephone?

APS has experience with solar energy. It has deployed a fair amount of it. But APS relies still on nuclear and natural gas for its primary fuels. SRP has experience with solar energy. I've already spelled out how it responded to announcement from Nevada Energy and Los Angeles Department of Water and Power that those two utilities would be dumping their interest in SRPs (coal burning) Navajo Generating Station.

Neither APS nor SRP appear (yet) to be preparing for the tsunami shift in the industry that Jon Wellinghof predicts will occur. APS and SRP will adapt or die. That's the way of the marketplace. Even when the companies have, in SRPs case, enjoyed well more than a century of government protections as a geographic monopoly.

If Kavanagh and his colleagues act in the 2014 session to pass legislation that will enable homeowners to put solar system costs into their mortgages, that will provide an immense spike in sales tax revenue, may boost home values and will certainly bring JOBS to our state -- without the legislature having to give huge tax incentives (like they did for the Arizona Cardinals and Phoenix International Raceway).

What are you waiting for John? I hope it's not the approval of APS or SRP.