The U.S. Department of Energy’s Loan Programs Office (LPO) has issued a conditional commitment of up to $1.81 billion to Arizona Public Service Company (APS), Arizona’s largest electric utility. This substantial loan guarantee will empower APS to modernize its infrastructure, expand renewable energy generation, and enhance grid reliability through strategic investments in transmission projects, renewable power, and energy storage systems. This initiative aims to accommodate growing energy demands while reducing emissions and providing cost savings for APS’s 1.4 million customers.
Modernizing Arizona’s Energy Grid with APS
The proposed loan from the LPO, part of President Biden’s Investing in America agenda, will fund a multifaceted approach to energy infrastructure improvements. The initial project focuses on constructing the Agave Battery Energy Storage System (BESS) Phase 1. This 150-MW (600-MWh) battery storage facility, strategically situated adjacent to an existing solar power plant, will play a crucial role in grid stabilization, renewable energy integration, peak demand management, and surplus renewable energy storage.
Future projects under this loan encompass additional battery storage facilities, new renewable energy generation projects (including solar and wind power), and critical transmission infrastructure upgrades. Expanding transmission capacity is essential for enhancing grid flexibility, reducing overall costs, and ensuring reliability, particularly during extreme weather events, as highlighted by the Grid Deployment Office’s National Transmission Needs Study.
APS’s Commitment to Clean Energy and Customer Savings
This significant investment aligns with APS’s stated objective of achieving 100% clean and carbon-free electricity by 2050. Interim goals include a 65% clean energy resource mix by 2030, with 45% derived from renewables, and the complete phase-out of coal-fired generation by 2031. The LPO loan will directly support the replacement of retiring coal-fired power plants with cleaner energy sources, in accordance with APS’s 2023 Integrated Resource Plan and U.S. EPA regulations.
A key stipulation of the Energy Infrastructure Reinvestment (EIR) loan program requires recipient utilities to pass financial benefits on to their customers. The LPO financing is projected to mitigate upward pressure on electricity rates, resulting in an estimated $250 million in total savings for APS customers over the loan’s lifetime.
Investing in Communities and a Sustainable Future
The Arizona Public Service Company project underscores the Biden-Harris Administration’s commitment to the Justice40 Initiative, which prioritizes directing benefits from federal investments in climate and clean energy to disadvantaged communities. As part of the loan requirements, APS will develop and implement a comprehensive Community Benefits Plan to ensure meaningful engagement with local communities and labor groups, fostering job creation and improving overall well-being.
APS has demonstrated a proactive approach to community transition support through its planned exit from coal-fired generation. This includes substantial financial contributions to impacted Native American tribes and counties, along with commitments to electrification projects on tribal lands and job redeployment opportunities for affected APS employees. Further collaborations with Arizona State University and other utility companies highlight APS’ dedication to a just and equitable energy transition.
The LPO’s conditional commitment to Arizona Public Service Company signifies a major step towards a cleaner, more reliable, and affordable energy future for Arizona. While this commitment demonstrates the DOE’s intent, the finalization of the loan guarantee hinges on meeting specific technical, legal, environmental, and financial conditions.
