Phoenix-based Pinnacle West has a long-range commitment to add more alternative fuels to its utility mix, but natural gas should remain a risk management tool, the management team said during the second quarter earnings call.
CEO Jeff Guldner said the integrated resource plan (IRP) for utility Arizona Public Service Co. (APS) filed in June called for 2,500 MW of power supply from 2020-2024 via a mix of renewables, demand response, energy efficiency and storage.
Between now and 2035, the APS territory is expected to see steady growth even as 1,400 MW of coal capacity is retired and 1,600 MW of gas-fired generation purchase agreements expire. Overall, APS by 2035 still would need another 6,000 MW of capacity, Guldner said.
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With the state’s growing power capacity needs, “we’re going to have to be building out wind, solar and battery projects,” he said. Separately, APS plans to pursue a rate mechanism to pay for the expansions.
COO Daniel Froetscher said APS had projects on the table that were paused when an incident last year at the McMicken battery storage site in Surprise, AZ, injured first responders. After pausing the projects to await inspections, they now are back in play.
“Absent any rate recovery mechanism, we still have reliability and service obligations that we plan to meet through a combination of wind, solar and batteries,” Froetscher said.
There are no gas-fired projects in the new capacity plans, however, APS spokesperson Alan Bunnell said. In the near term, gas generation would help to maintain reliable service at reasonable prices.
“Natural gas is an essential bridge to maintain reliable, affordable service for customers and further develop clean energy resources,” he said. For example, gas is needed to facilitate retiring coal-fired facilities, provide system support for capacity needs, and to smooth out intermittency of renewable power sources.
“Technology advances will determine how quickly we can phase out or retrofit gas resources while keeping our commitment to affordable, reliable service,” Bunnell said.
About 50% of the APS portfolio now is weighted to alternative fuels, which include a large solar fleet and the Palo Verde Nuclear Generating Station. Coal-fired generation is targeted to be eliminated by 2031 when 65% of the utility portfolio is slated to be from renewable resources.
Pinnacle West reported net income of $193.6 million ($1.71/share) in 2Q2020, compared with year-ago profits of $144.1 million ($1.28).
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