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Renewable Energy Development in New Mexico
by Allan Sindelar
New Mexico has been moving on a deliberate path to become the Clean Energy State since “net metering” – the right to spin your electricity meter backward and be credited for the energy – became law in 1999. Our state is now considered to be among the top states in the country for renewable energy and is poised to grow rapidly in photovoltaic (PV) and renewable energy. Here is an overview of recent developments and an outlook for the near future.
Last month Governor Richardson signed an executive order that outlines the state’s course to building a comprehensive green economy. The order carries out recommendations and goals detailed in the report developed by the Governor’s Green Jobs Cabinet. The cabinet identified five immediate goals, including:
• To become a leader in renewable energy export
• To become the center of the North American solar industry, including research and development, manufacturing and installation of solar elements in buildings
• To lead the nation in Green Grid innovation
• To continue being a leader in green building and energy efficiency
• To have an educational system that prepares students for jobs in green technologies
Governor Richardson has walked his talk. We have a 10% state income tax credit for renewable energy systems (in addition to the 30% federal credit) and no gross receipts tax on solar equipment.
Power Purchase Agreements
Third-party power purchase agreements (PPAs) have been approved by the NM Public Regulation Commission (PRC). What does this mean? A PPA is an agreement between a solar provider and a customer to purchase ongoing solar power at long-term rates. The provider installs and maintains the solar equipment on a customer’s rooftop or property. The customer pays only for the power generated by the facility – not solar equipment or installation – greatly reducing the risk and complications of implementing a solar electricity solution. It’s a proven way for governments and nonprofit organizations (schools or churches, for example) to install solar, because the tax benefits are passed on to a third party company that finances the investment.
This issue had good public and administration support but was fought by NM’s largest utilities. The PRC approved PPAs in December, but legal issues with a third party selling power will likely require legislative action or force the state supreme court to decide the issue. Legislation to ratify this has been proposed in this year’s short legislative session.
In July, PNM proposed to sharply limit future growth in renewable energy. PNM’s proposal drew a heated public reaction, generating more comments to the PRC, which sets utility rates and policies, than any issue in years. The utility was eventually told by the administration to work with a range of stakeholders, including the renewable energy industry, to develop a better program.
Through a precedent-setting process, PNM and stakeholders developed a new renewable energy procurement plan that provides for a significant increase in distributed generation (PV systems) with PNM’s full support. This landmark plan recently filed with the PRC is subject to their approval. It will ultimately affect procurement plans of all regulated utilities in NM.
This plan proposes to install up to 79 megawatts of PV over the next three years and stay within cost limits established by the PRC. The plan eliminates “net metering” and the existing Renewable Energy Certificate (REC) program for new customers with PV systems, and replaces these incentives with a Solar Performance Program. This type of incentive program is commonly known as a Feed-in Tariff program or FIT. Instead of a REC payment that is fixed over time and net metering where the value of production is equal to the value of the retail electricity costs (which will change over time), the Solar Performance Program will pay a fixed rate for production over a term of 15 years for systems under 100 kW. The fixed rate represents the avoided costs plus a REC payment.
The Solar Performance Program payment will be between 26 and 22 cents for each kilowatt-hour generated over the 15-20 year term of the program. The starting rate and term of this payment is based on the system size. These Solar Performance Program rates will drop 2 cents for new participants as levels of capacity are met, reflecting the expected drop in the cost of solar. For example, a homeowner who installs a small PV system today under the existing program gets about 23 cents for a 12-year term. As utility rates increase, program benefits also increase so the homeowner is unaffected by rising costs of electricity for the portion that they are providing for themselves. Under the new program the rate is a fixed 26 cents for 15 years. After a combined 1800 kW of systems sized under 10 kW are installed, the rate for a homeowner installing a PV system and new to the Solar Performance Program will be 24 cents over 15 years. Each successive 1800 kW threshold will bring another 2 cent drop until it reaches 16 cents.
Santa Fe County’s Property Tax Program
Financing has been one of the biggest obstacles to developing the renewable energy field. Last year’s passage of two bills in the NM legislature paved the way for cities and counties to set up property tax financing of renewable energy systems. A local agency would provide financing to install a solar system, and repayment would be paid along with property taxes. Besides allowing homeowners of modest means to install solar, two significant benefits differentiate property tax financing from borrowing from a lender: as the loan becomes attached to the property, it doesn’t show up as an obligation under your credit; and the obligation stays with the home, so when the home is sold, the new homeowner takes over the payment.
Santa Fe County has approved a program that is now in its implementation phase. The county hopes to have the application process in place in early spring. (See article, page …)
2009 saw a substantial drop in PV module prices due to global market shifts and the recession. Spain illustrates the former: last year Spain installed about three billion watts of PV. The Spanish program was poorly managed and ultimately terminated, so installations ceased, leading to a global market glut. The banking collapse led to financing for large solar projects suddenly disappearing. As a result of both, PV module prices dropped an average 25%. Since PV modules represent more than half of total system cost, this has been a huge benefit for the buyer. We do not expect this to last, as demand picked up at the end of 2009, and some manufacturers have recently increased their prices.
Huge Systems Coming
In recent years, utility-scale renewable energy has almost entirely been large-scale wind energy, with a number of large wind farms built on NM’s eastern plains. We are suddenly hearing announcements of large PV plants as well. Southwestern Public Service, which serves the northeast corner of the state, announced plans to build five ten-megawatt (MW) PV plants in Lea and Eddy counties, and PNM just announced a contract for 22 megawatts of PV. One megawatt is a million watts of PV, equal to 5,000 modern 200-watt PV modules. To put this in perspective, these plants together will power about 17,000 NM homes.
Federal Money Flowing
The Obama administration has made clean energy a core focus, providing federal support and funds to numerous projects. Much of this comes through ARRA economic recovery funds, with NM receiving a healthy share. Grants have recently been announced for Clean Energy Workforce Training ($6M), Clean Energy Manufacturing ($38M), Green Training ($10M), Battery Abuse Testing at Sandia ($4M), Geothermal ($7M), Energy Efficiency ($8M) and more.
Green Workforce Development and Training
For years, San Juan College in Farmington offered the only accredited solar training program in NM, and it became nationally respected for its quality. Now many of the state’s schools are scrambling to develop new programs in sustainable technology and renewables. With recession job losses, schools offering workforce training programs to meet demand are very popular. Community colleges with such programs include Santa Fe CC, Central NM CC, Northern NM CC, and Dona Ana CC.
The Rise of Mainstream Solar
The exponential growth of solar power has been on homes and businesses with utility power as well as utility-scale installations. Off-grid power, the original use of PV, is becoming a tiny part of the industry, almost a niche market. This rapid growth has many new solar companies starting up, as little more than a contractor’s and business license are required. For the purchaser of a system, the best resource remains referrals from satisfied friends and neighbors. Some resources can help sort the most skilled solar companies from newcomers. NABCEP (www.nabcep.org) is a voluntary national certification for PV and solar thermal installers, requiring training, experience, continuing education, adherence to a code of ethics, and passing a rigorous examination. Solar Estimate (www.solar-estimate.org) allows homeowners to compare contractors and read customer reviews of a contractor’s work. Both the NM Solar Energy Association (www.nmsea.org) and the state industry association (www.reia-nm.org) have installer directories, although neither offers a ratings service. NM’s Construction Industries Division (www.rld.state.nm.us/cid/index.htm) allows a check for required licensure.
You can sign up to receive a statewide Green Economy newsletter at http://www.edd.state.nm.us/greenEconomy/overview/index.html.
Allan Sindelar installed his first off-grid PV system in 1988, founded Positive Energy Inc. of Santa Fe in 1997, and has lived off-grid since 1999. He is a licensed commercial electrician and a NABCEP-certified PV installer. Email: email@example.com
About the author
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