State renewables standards increasingly vulnerable
The Arizona Corporation Commission has voted unanimously to repeal the renewable energy standard and tariff, or REST, rules, which were adopted in 2006 to incentivise and expand renewable energy production in the state.
"The mandates are no longer needed and the costs are no longer justified", the Commission said, adding that since the programme's inception utilities have collected more than US$2.3bn in REST surcharges from consumers to meet renewables mandates. "The renewable energy landscape has changed dramatically in the last two decades," the Commission stated.
The move could be the start of a growing trend in which state-level policy could mimic federal-level anti-renewable sentiment. Ohio is sunsetting its RPS after 2026 and North Carolina rolled back its 2030 carbon reduction target, both citing affordability concerns and Michigan has introduced legislation to return its focus to baseload power generation. "More states could revisit commitments under economic pressure", Deloitte said in recent report.
In 2024, a total of 28 states with renewable portfolio standards drove 37% of renewable energy growth in the US, Deloitte reports. And even in the face of the setbacks of 2025 in terms of federal tax credit availability, state programmes were expected to be a source of continuing momentum.
Arizona's utilities have met the standard that requires them to generate 15% of their energy from renewable sources by 2025. As of 2025–2026, renewable energy accounts for approximately 16% to 20% of Arizona's total net electricity generation, driven heavily by solar, and the REST programme has stimulated more than US$11.6bn in solar investments since its inception.
The Commission maintains that "some utilities are saddled with above-market solar contracts that were entered into to comply with the REST rules", and added that Arizona Public Service customers are paying higher rates because of "costly contracts" it would not have signed if not for the REST rules.
"For example, APS has paid US$1.1bn for solar power through a 30-year contract entered into in 2013 with Solana power plant", the Commission said. "Under the contract terms, APS customers so far have paid US$274.3m more than the solar power was worth in the market. Ratepayers will continue to pay above-market prices for at least 17 more years". The price of the Solana plant is 15 cents/kWh versus today’s utility-scale solar average of 2.5 cents/kWh, according to commentary from the Holland & Hart law firm.
The 280MW Solana project is owned by Atlantica Sustainable Yield and Liberty Interactive and its power is sold to Arizona Public Service. The project was completed in 2013 and was the first US solar plant to use molten salt thermal energy storage.
"For renewable energy developers and investors, near-term project stability is largely preserved, as existing contracts and programmes remain intact, and, in many cases, renewables remain cost-competitive without a mandate", the law firm commentary noted.
"However, removing the renewable procurement mandate may introduce longer-term uncertainty, particularly for distributed generation developers who relied on utility incentive programmes funded by REST surcharges, and for project developers and investors who valued the standard as providing a predictable baseline of ongoing utility demand for renewable generation. The combined effect of the REST repeal and potential federal Inflation Reduction Act modifications could also meaningfully affect project financing".
The future for Arizona power resource procurement will be in the form of all-source request for proposals when utilities need to serve new load or demand, according to ACC vice-chair Rachel Walden. “This ensures the lowest cost, most reliable solutions," Walden said. "All energy contracts and production must pass a true cost benefit test without the government placing their finger on the scale.”
The repeal is not final yet, however, Holland & Hart said. It must clear an Attorney General review by April 2 and legal challenges are expected.
At the start of the year a total of 29 states and Washington DC had adopted mandatory renewable portfolio standards and utilities could comply by generating their own renewable energy or purchasing renewable energy credits. The number had once been higher but eight states and one territory allowed their RPS targets to expire and Montana repealed its RPS in 2021, according to the National Conference of State Legislators.
Proponents of repeal often argue that RPS policies create market distortion, force utilities to use intermittent power sources that require costly backup capacity, and increase electricity rates for consumers, according to the Institute for Energy Research.
Michigan’s renewable energy targets have increased significantly over the past decade. In 2016, lawmakers increased the requirement from 10% to 15% by 2021, and utilities were successful in meeting the target In November 2023, the legislature expanded the mandate again, requiring utilities to reach 50% renewable energy by 2030. In 2023, Michigan lawmakers passed legislation, along party lines, requiring the state to achieve net-zero carbon dioxide emissions by 2050.
Last week, Michigan House Republicans revealed a commitment to repealing the 2023 law. State Representative Pauline Wendzel introduced Project Lighthouse, a package of legislation that she says is intended to lower energy costs and improve grid reliability by prioritising baseload power including advanced nuclear.
Opponents of the RPS like Wendzel argue on multiple fronts, including the state's risk of blackouts and its lack of efficiency in generating solar power when compared with sunnier states. They also cite rising construction costs, higher solar panel prices due to tariffs, the loss of 30% federal tax credits that could make projects not economically viable, and lack of transmission availability.
