Representatives along the Rio Grande corridor are being hammered in social media and mail fliers for failing to the support the “Energy Transition Act” – SB 489. The realities of this legislation are significantly more complicated than the simplistic view provided in those advertisements.
SB 489 was enacted in the 2019 Legislature with many moving parts, all of which had to mesh in order to garner sufficient support to pass. The first element was PNM’s desire to be free of coal-fired power generation. This had less to do with environmental considerations than with the raw economics. With the current and projected price of natural gas, it very simply is cheaper to produce dispatchable power with natural gas rather than with coal. The problem was that approximately $300 million of pollution control equipment costs on the San Juan coal plant would be stranded with the conversion to gas. The solution developed by PNM was to securitize low-interest-rate bonds with revenues irrevocably backed by ratepayers. The only problem with this approach was that the environmental community really didn’t think that much of natural-gas-fired generation either, even though emissions from this source are considerably less than coal.
The environmental community objections were overcome through the mechanism of increases in the renewable energy portfolio standard (RPS). This mandate, which now stands at 20%, is scheduled to increase to 50% by 2030 with a softer “target” of 80% by 2050. The difference between the 50% mandate and 80% target is that the mandate must be met without regard to price or availability. Over 50% other factors alongside the fact that the source is renewable may be considered.
What’s not to like here? The environmental community is happy. The power providers are in support or, at minimum, neutral, and the environment has achieved a significant emissions benefit over the course of the policy. The only folks standing outside looking in the window are the citizen ratepayers of New Mexico.
California is the closest state to provide a comparison, as it some time ago adopted a similarly aggressive RPS. The United States Energy Information Agency reports that, over the last 15 years, California’s average retail price of electricity has doubled. A KW-Hr unit of power in California is almost twice what the same unit costs here. What is worse is that, according to the historical chart, the trajectory of these prices remains solidly upward. With subsidies going away, and battery storage technology still hideously expensive, it would appear that we are hoping that some technology will develop down the road to make this policy affordable. That technology is not currently on the horizon.