Arizona Public Service Company (APS), the largest electric utility in the state, has secured a conditional commitment [1] for a loan guarantee of up to $1.81 billion from the U.S. Department of Energy’s Loan Programs Office (LPO). This loan will fund investments in new or upgraded transmission projects, renewable power generation, and grid-integrated energy storage systems.
APS intends to use the loan to invest in various infrastructure technologies to meet the growing demand, reduce emissions, and save customers money on their electricity bills. The first project supported by the loan will be the construction of the Agave Battery Energy Storage System (BESS) Phase 1, a 150-megawatt (MW)/600 megawatt-hour (MWh) BESS in Maricopa County. This project aims to ensure stable and reliable grid operations while integrating renewable energy and storing excess renewable generation.
APS has set ambitious goals to deliver 100% clean and carbon-free electricity by 2050. The utility has interim targets of achieving 45% of its energy mix from renewables by 2030 and phasing out coal-fired generation by 2031.
As part of its plan to exit coal-fired generation, APS has committed to providing community transition support. This includes direct financial support of $2.25 million to the Hopi Tribe, $10 million to the Navajo Nation, and $1.6 million to Navajo County Communities. APS has also pledged to collaborate with the Hopi Tribe and Navajo Nation on electrification projects, contributing up to $2.5 million. Additionally, APS will provide $2.5 million annually to the Navajo Nation for transmission line development, starting when APS exits the Four Corners plant (or by 2032, whichever is earlier) and ending in 2038, totaling $17.5 million over seven years. APS will offer job redeployment within its organization to all employees at coal-fired power plants prior to exiting coal generation.
Future projects funded by the loan may include additional BESS facilities, new renewable energy generation projects (such as solar PV and wind), and transmission projects. APS aims to deliver 100% clean and carbon-free electricity by 2050, with interim goals of 45% renewable energy by 2030 and ceasing coal-fired generation by 2031.
The loan is expected to mitigate the upward pressure on electricity rates for APS customers by reducing the cost of debt through LPO financing, resulting in approximately $250 million in total savings over the loan’s lifetime. APS has also committed to providing community transition support, including financial assistance to the Hopi Tribe, Navajo Nation, and Navajo County Communities.
In October 2024, APS was approved for $70 million in combined awards from the DOE’s Grid Resilience and Innovation Partnerships (GRIP) program. These funds will be used to upgrade system devices, monitoring systems, and wood utility poles to improve wildfire resilience. The funds will also support the implementation of microgrids in vulnerable areas to enhance energy reliability and resilience for 289,000 APS customers. Approximately 69% of the project will be carried out in rural, Tribal, or disadvantaged communities. APS estimates that these efforts will prevent nearly one million customer interruptions and save $113 million in emergency repair costs.
Sources:
[1] Arizona’s largest utility lands $1.81B loan for renewable generation, transmission projects https://www.renewableenergyworld.com/energy-storage/battery/arizonas-largest-utility-lands-1-81b-loan-for-renewable-generation-transmission-projects/
