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Distorted electricity market needs a big fix

SANTA FE, N.M. — On Nov. 15, New Mexico’s Public Regulation Commission agreed with PNM’s proposal to buy and own renewable energy projects. That would enforce PNM’s monopoly even further. That’s the wrong direction

There is no sound economic reason to get forever stuck in a monopolistic energy market.

And there is certainly no environmental reason. The regular market mechanism is troublesome and distorted. And a struggling PRC keeps proving that it’s not equipped to try to replace such a mechanism.

New Mexico has an abundance of sun and wind. The transformation from fossil to renewable energy is urgent and especially feasible in New Mexico.

New cost-efficient renewable technologies are available. Independent producers and new business models are shaking up traditional energy markets. But New Mexico’s energy market is not open and not competitive. It needs fundamental system changes in order to benefit from new opportunities and to accelerate the application of renewable electricity.

A monopolistic model has served New Mexico’s electricity supply well for a long time, with one company in charge of generating, transportation and distribution electricity to customers.

This model has worked in stable times without external challenges. This model doesn’t work in modern dynamic times and requires adjustment.

In a market economy, it is free competition that secures the optimal allocation of means and provides the best results. The role of the government is to set conditions that guarantee that this market is competitive and that it operates under socially acceptable conditions.

Our energy market is not adapting because of vested monopolistic interest, market barriers for new entrants and market imperfections. This is a problem for New Mexico and obstructs a transformation to renewable energy. We are not embracing new opportunities.

New Mexico needs to establish a new set of conditions regarding sustainability of our electricity generation. New Mexico needs to restore competition, and secure open access for new technology and new entrants (challengers). This will accelerate the transition to renewable energy.

Fundamental system changes are urgently needed:

• New requirements for licenses to operate for electricity companies.

With its rich renewable resources, New Mexico can target high: require that 50 percent of our electricity come from renewable sources by 2030, like California’s goal, and close coal power plants well before 2030. There are plenty of potential renewable resources to replace this capacity for lower costs.

• Creation of an open market and restoration of competition, a system transformation from a monopolistic structure to open market access and competition.

Independent electricity producers must get access to New Mexico’s market. New capacity needs to be 100 percent renewable. It would be tendered nationwide, and allocated to and owned by independent third parties, and provide the needed capacity to replace New Mexico’s coal power.

New renewable electricity capacity could be leased to a separate transportation/distribution unit of PNM. Conflict of interest with PNM’s production unit needs to be excluded. In the longer term, the transportation and distributing infrastructure should be opened up and accessible for competitive third parties. A new legal structure and fair price calculation system is needed.

• Remove barriers for decentralized electricity generation, embracing local initiatives, and lowering the barriers and costs for solar system investments for individual households by streamlining current unnecessary, complicated and long application and review processes (by both municipalities and PNM).

Certified solar contractors should be allowed to bypass the application and review process, and install and connect household solar systems in a simple “one day” installation process.

We should challenge solar contractors to reduce relative high installation costs, and encourage new business and installation models that bring solar systems within reach of low-income families in New Mexico. There also needs to be room to experiment with new concepts from local initiatives and neighborhood energy cooperatives.

Hans Bakker lives in Santa Fe.