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Renewable Advocates, Critics Clash Over ‘Diversity’ Rules

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New Mexico solar industry leaders say their market could collapse if regulators approve a proposal to allow utilities to choose their alternative energy sources instead of requiring solar as part of the energy mix.

The state Attorney General’s Office and New Mexico Industrial Energy Consumers want the Public Regulation Commission to eliminate so-called “diversity requirements.” Those obligate utilities to acquire a specific mix of solar and other electric resources to comply with the state’s “renewable portfolio standard,” or RPS.

The requirements drive up ratepayer costs, they say, by forcing electric companies to buy more-expensive resources, such as solar and geothermal power, instead of seeking cheaper alternatives such as wind. They also want utilities to be able to buy Renewable Energy Credits on the open market to satisfy alternative-energy goals.

But solar industry leaders and renewable advocates say the mandated diversity is essential to ensure electric system reliability, and to sustain the state’s budding market for utility-scale and customer-owned solar installations.

The Renewable Energy Industry Association and the Green Chamber of Commerce have launched a petition and letter campaign to push commissioners to maintain the requirements, and to do so before two new commissioners take office in January.

“If they eliminate them (requirements), it would substantially reduce the pressure and leverage we now have to continue building solar programs,” said Randy Sadewic, president of Santa Fe-based photovoltaic installer Positive Energy Solar. “It would have a very adverse effect on the industry.”

The diversity issue is part of the PRC’s current rule-making process to establish a methodology for utilities to calculate costs for renewable power. The RPS requires them to derive 10 percent of their electric generation from alternative energy this year, and 20 percent by 2020. To protect ratepayers, the PRC set an annual cost cap that limits renewable expenditures to 2.25 percent of customers’ bills this year, and 3 percent after 2015.

But diversity requirements make cost-cap compliance difficult. That’s because utilities must derive at least 20 percent of their renewable electricity from solar, 20 percent from wind, and 10 percent from “other” sources such as geothermal or biomass, despite significant price differences among those resources.

Compliance would be much easier if utilities could simply choose the most affordable alternative energy, said Peter Gould, general counsel for Industrial Energy Consumers.

“Diversity quotas have been the single largest factor driving up procurement costs,” Gould said.

PRC staff is proposing adjustments in how much wind, solar or other energy must be procured to make diversity compliance more flexible. Solar industry leaders and renewable advocates oppose huge cuts, but most are open to adjustments.

“It’s the wrong answer to zero out solar, but there’s plenty of room for discussion about the right amount for a diverse energy portfolio,” said Green Chamber CEO Allan Oliver.

They’re also pressuring the commission to rule on cost calculations and diversity requirements before year-end, when Jason Marks and Doug Howe – the commissioners most active in the case – leave the PRC.

Marks told the Journal he’ll push for a vote in mid-December.

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