Pinnacle West Capital Corp. 's ( PNW ) core business wing, Arizona Public Service ("APS"), in collaboration with Luke Air force Base ("AFB") will construct a new utility-scale solar plant on a 100 acres land which the former will lease from Luke AFB. The company is leasing the land under the Enhanced Use Lease program, a joint initiative between public utilities and Air Force, to promote renewable energy.
APS will lease the land for a period of 30 years from Luke AFB for $6 million. Construction of the solar complex is anticipated to commence from the fourth quarter of 2014. The 10 megawatt (MW) plant will be integrated into Pinnacle West's AZ Sun Program and will be operational by summer of 2015.
The solar project will generate adequate electricity to power 2,500 residences in Arizona and will aid in curbing greenhouse gas emissions of 12,000-15,000 tons per year. The latest project will bring the total solar energy capacity to 170 MW under the AZ Sun program which will sufficiently power over 42,000 customers in Arizona.
As of now, Pinnacle West has 8 projects under its AZ Sun program that are already operational or in the development phase. The program is the cornerstone of the company's future renewable expansion plan.
Pinnacle West has been aggressively broadening its renewable operations to seize on the growing opportunities in the solar market. Lower installation cost throughout last year helped the solar industry as weighted average price for photovoltaic modules fell 15% in 2013. Solar accounted for 29% of overall new capacity generation added in 2013, up 10% from 2012 as per Solar Energy Industries Association.
Meanwhile, the Energy Information Administration predicts that utility-scale solar capacity will expand by 57% within the 2013 and 2015 period. In early Jun 2014, the biggest incentive came to renewable producers when the Obama Administration announced a proposed 30% reduction in carbon emissions from coal-fired plants by 2030 from the 2005 levels. We believe Pinnacle West's clean energy expansion efforts are coming at an opportune moment which will bode well for its future growth.
Currently, the company holds a Zacks Rank #3 (Hold). Investors may also consider better-ranked utility stocks like NRG Energy Inc. ( NRG ), Korea Electric Power Corp. ( KEP ) and Entergy Corp. ( ETR ). All these stocks hold a Zacks Rank #1 (Strong Buy).
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