Opportunity Knocks. What Will Our Answer Be for Replacement Power?

 

Bianca Sopoci-Belknap

 

New Mexico is at a crossroads when it comes to energy. In order to comply with federal emissions regulations, a deal was reached last year between Public Service Company of New Mexico (PNM), the U.S. Environmental Protection Agency (EPA), and the state of New Mexico to close Units 2 and 3 of the San Juan Generating Station. The retirement of these units represents 850 megawatts (MW) of coal capacity and roughly half of the plant. This is good news. The San Juan Generating Station is considered one of the dirtiest coal plants in the country, responsible for over 60,000 air-quality violations, more than 12 million tons of carbon dioxide (CO2) emissions per year and consumption of more than six billion gallons of clean water per year (NMED: 2012). This closure will reduce carbon emissions by 6.5 million tons and significantly reduce levels of coal ash, nitrogen oxides, sulfur dioxides and other hazardous air pollutants, as well as save over four billion gallons of water annually. This coal plant closure marks the greatest environmental improvement in New Mexico in the last 50 years.

 But the critical question is, what will the replacement power be? This question is being faced by states across the country as aging coal plants are being retired. The decision on replacement power will be made by the New Mexico Public Regulation Commission (NMPRC) this fall, and it represents an unparalleled opportunity to shift New Mexico’s energy portfolio, rapidly deploy solar and wind projects in the state, drastically cut emissions and end New Mexico’s dependence on coal and nuclear. The energy investments made in this replacement-power case will effectively set the state’s energy future for decades to come.

This opportunity comes at a time when solar and wind are outbidding coal across the country and are positioned to compete even more favorably when new carbon regulation and pending coal-ash regulation come online. Nevada, Colorado, Iowa, Illinois, New Jersey and California are all divesting from coal and exceeding their renewable energy (RE) standards—realizing the financial and economic benefits that clean energy brings for ratepayers and the environment in today’s market. In Nevada, the state’s goal of 25 percent RE by 2025 helped create more than 2,000 solar jobs and drive more than $100 million of new investments in the state. Iowa is well on its way to producing 40 percent of its electricity from renewable sources. That state is home to more than 3,000 wind turbines and 4,000 wind-industry jobs. Tens of billions of dollars have flowed into Iowa through investment in the industry and by direct payments to landowners for use of their land for operating wind farms. Investor-owned utilities in the region are reading the writing on the wall and shifting their portfolios away from coal investments. For example, El Paso Electric, which also provides energy in New Mexico, has declared that its entire portfolio will be coal-free by 2016. BHP, one of the world’s largest mining companies, has decided to exit the coal-mining business worldwide due to declining market opportunity.

 The good news is that New Mexico ranks second in the country for solar potential and 11th in the country for wind potential. We have abundant resources to replace this coal capacity. If we choose to invest in solar and wind with natural gas to augment, we can surpass these states in RE deployment, lead the nation in clean energy and create a surge in New Mexico’s struggling economy.

The bad news is PNM’s proposal before the PRC.

PNM is proposing to replace its share of the plant scheduled for early retirement (418 MW) by purchasing coal shares in the remaining units from California companies that are exiting the plant, nuclear from PNM’s parent company, PNM Resources in Arizona, and natural gas. PNM’s proposal filing includes the following six items:

  1. Purchase of 132 MW more of coal from SJGS Unit 4 for $52.5 million
  2. Importation of more nuclear (134 MW) from its Palo Verde nuclear plant in Arizona, rate-base valuation of $335 million
  3. Construction of a new, natural gas plant (177 MW) in Farmington for $189 million (though PNM has no customers there)
  4. Development of 40 MW of solar power or inclusion of 40 MW of additional natural gas
  5. Full recovery of $257 million in undepreciated assets for the closure of SJGS Units 2 & 3 (also known as “stranded assets”)
  6. Pollution controls—selective noncatalytic reduction (SNCR)—on SJGS Units 1 and 4 for $164 million

 

A team of local entities including the city and county of Santa Fe, led by advocacy group New Energy Economy, has intervened in the PRC case and has developed a compelling argument for an alternative replacement-power plan based on wind and solar. The case they are building proves that RE is actually less expensive than PNM’s coal and nuclear proposal, as submitted, and would provide an estimated $65 million/year in cost savings to New Mexico’s ratepayers, in addition to unprecedented environmental and public-health benefits. It would also take the state’s RE portfolio from 7 percent renewables to 33 percent renewables in three years. This plan would be able to meet New Mexico’s peak demand with a combination of replacement power based on solar, wind and natural gas. This alternative plan has been modeled by professionals using the same Strategist forecasting software PNM uses. The difference is that capital costs and the price of environmental regulations were included, and caps on the amounts of renewables included were lifted.

 

WHAT’S AT STAKE FOR NEW MEXICANS IF THE PROPOSED PLAN IS ADOPTED?

Besides our climate, our health and our environment, ratepayers will be paying more for energy (roughly $90 million a year starting in 2018) and will be shouldering the burden of financial risks associated with rising coal-fuel costs, pollution-control costs, carbon costs, coal-ash disposal costs, nuclear decommissioning costs and environmental cleanup. While other utilities in the region are taking proactive measures to reduce their coal exposure due to these factors, PNM is moving in the opposite direction in order to protect its legacy investments at the expense of New Mexico’s ratepayers.

 

HOW CAN YOU MAKE SURE NEW MEXICO DOESN’T LET THIS OPPORTUNITY FOR ENERGY TRANSITION PASS US BY?

I encourage you to get involved in the advocacy campaign by contacting New Energy Economy (www.newenergyeconomy.org), educate everyone you know and join more than 7,000 New Mexicans in making your voice heard by contacting all of the members of the NMPRC (http://www.nmprc.state.nm.us/) to let them know that you do not support PNM’s replacement-power plan and to demand a replacement-power plan based on renewables. The time for transition is now!

 

Bianca Sopoci-Belknap was born and raised in Santa Fe. She is a climate organizer with New Energy Economy serves as the director of Earth Care and the chair of the city’s Sustainable Santa Fe Commission.