Chairwoman Griffin and Members of the Committee, my name is James Taylor and I am President of The Heartland Institute. The Heartland Institute is a non-profit, non-partisan public policy organization with a mission of discovering freedom-oriented solutions to policy challenges. Thank you for the opportunity to testify regarding HB2527.

HB2527 is a bill that is crucial to safeguarding reliable electric power so that it is not subject to blackouts and brownouts.

Arizona faces looming power shortages that threaten to disrupt quality of life and endanger human health and welfare. Electricity demand is growing, yet the availability of reliable, on-demand electricity capacity is not. Energy experts warn that rolling brownouts and blackouts are already an imminent threat, and the threat is only getting worse. Indeed, in August 2024, Arizona registered its highest peak electricity demand ever recorded.

Electricity demand is expected to grow by 15 percent in the next five years. This rapid growth is expected primarily due to the growth of data centers and the power demands of artificial intelligence. Arizona will need to add substantial new reliable electric capacity, and this must be accomplished quickly.

Against this backdrop, Arizona regulators and policymakers are recklessly approving the shut-down of numerous baseload power plants. The Navajo coal power plant closed in 2019, despite being perfectly operational. The Cholla coal power plants are slated to shut down this year, despite being perfectly operational. The Springerville coal plant is slated to shut down in 2031. The Colorado Generating Station coal plant is scheduled to shut down in 2032. None of these closures are operationally necessary, but are politically driven.

Climate activists claim new solar power projects can and will fill the demand gap from shutting down coal. They are dangerously mistaken. Even in Arizona, solar power facilities provide power at less than 30 percent of their rated capacity. This means that during the vast majority of the time, baseload natural gas, nuclear, and coal power plants are required to keep the lights on, the air conditioners running, and critical infrastructure functioning.

Building massive redundancy in solar projects provides little help, as the same intermittency that keeps solar production under 30 percent of rated capacity will debilitate the newly built solar facilities at the same time as existing solar facilities. At night, and when clouds obscure the sun, no solar power would be produced no matter how many solar facilities exist.

Building new coal or natural gas plants is more affordable than building new solar. Shutting down perfectly operational and already paid-for coal power plants in order to replace them with expensive new solar power projects is even more uneconomical.

Arizonans pay the highest electricity prices in the American Mountain West and Southwest regions. During the past 10 years, Arizona electricity costs have skyrocketed by a whopping 36 percent. This has added more than $500 per year to the average Arizona household’s electricity bills, let alone the higher costs of goods and services that reflect higher energy costs. Arizona’s rate of electricity price increase is far higher than the national average. This is driven largely by Arizona replacing existing operational baseload power with solar power.

Coal power currently provides just 7 percent of Arizona electricity. It is affordable, reliable, and increasingly environmentally benign. For all the talk of desired diversity in energy sources, shutting down Arizona’s few remaining coal power plants is antithetical to energy diversity and an all-of-the-above energy policy.

Shutting down coal power is completely unnecessary. If, however, a political decision is made to shut down coal power, it should be replaced by natural gas or nuclear power. These baseload power sources are available on demand and mitigate the very real risk of imminent power shortages. Moreover, they are far more affordable than solar power.

In the peer-reviewed science publication Journal of Energy, economists examined the levelized full system cost of electricity (Idel, R., “Levelized Full System Costs of Electricity,” Energy, 259 (2022) 124905). The “full-system” component accounts for real-world added costs imposed by intermittency, extended transmission line requirements, and other factors that are often left out of generic so-called levelized electricity costs. The peer-reviewed study reports the following costs per megawatt-hours (mwh) of power generation from competing sources:

Solar                      $413

Wind                       $291

Nuclear                $122

Biomass              $117

Coal                        $   90

Natural Gas     $   40

The above numbers were specific to Texas, and primarily west Texas. Solar irradiance in Arizona is moderately higher than in west Texas. Applying the full-system levelized formula to Arizona might reduce solar power costs to the mid-$300s in $/mwh, which is still approximately quadruple the cost of coal power and nearly 10 times the cost of natural gas power.

The full-system levelized cost numbers above explain why the world as a whole continues to increase the amount of coal power it generates and uses, even while the United States and Western democracies are dramatically reducing coal power. The chart below shows the global growth in coal power production.

Source: Statista, Global coal power generation 2023 | Statista.

Utilizing coal power rather than solar power gives the rest of the world substantial competitive advantages over American and Arizona businesses that must use prohibitively expensive solar power.

So, why do utility companies nevertheless lobby to shut down existing coal power and replace it with new solar power projects? Arizona’s monopoly utilities love shutting down existing and perfectly operational baseload power plants because they are guaranteed an approximately 10-percent profit on the money they spend, including the cost of building new solar projects. Arizona’s Eagle Eye solar project, scheduled to open this year, costs $650 million to build. That means the monopoly utility gets a guaranteed $60 million profit on construction costs alone. Construction costs for larger solar projects can cost $2 billion, $3 billion, or more. That means a guaranteed utility profit of $200 million or more per project. A utility pushing for more solar power has nothing to do with saving consumers money and everything to do with stuffing the utility’s own pockets.

For the benefit of Arizonans, existing baseload power plants should not be shut down. If a political decision is made to shut them down anyway, new baseload power plants should replace them.

Thank you again for the opportunity to present this testimony.