Copyright © 2019 Albuquerque Journal
The countdown to the 2022 shutdown of Public Service Company of New Mexico’s coal-fired San Juan Generating Station began Monday, after the utility filed its long-awaited plan with regulators to close the plant and replace it with alternative resources.
The plan, filed with the state Public Regulation Commission, calls for shutting San Juan’s remaining two operating units when the plant’s coal contract with the nearby San Juan Mine, and its partnership with other owners of the generating station, end in 2022.
It calls for replacing power from San Juan with a mix of solar, wind, battery storage and natural gas. It also offers three alternative plans for consideration, including two that exclude natural gas. But the utility says the alternative options are more expensive, and the ones without natural gas could threaten grid reliability.
PNM proposes to recoup $348 million in unrecovered, or “stranded,” investments it made in San Juan through low-cost bonds that utility customers would pay for through a surcharge on their bills, something state legislators and Gov. Michelle Lujan Grisham authorized this year under the state’s new Energy Transition Act, which takes effect today. The bonds would help pay for about $742 million that PNM proposes to invest in new solar, wind, battery storage and possibly natural gas as replacement power for San Juan.
Energy Transition Act
The plan puts PNM on a path to meet the Energy Transition Act’s aggressive carbon-reduction mandates. That includes a steady increase in the electricity public utilities derive from renewable resources, starting with 40% of all their electricity by 2025 and growing to 50% by 2030, 80% by 2040, and 100% carbon-free generation by 2045.
PNM’s plan would allow it to reach 34% by 2023, putting it close to the first 2025 mandate, said PNM Vice President for Generation Tom Fallgren.
“This is a first step toward that goal,” Fallgren told reporters in a conference call Monday afternoon. “It puts us in a good position to meet the state’s new renewable portfolio standard.”
PNM’s plan actually calls for about 920 megawatts of new generation and battery storage capacity, including a massive 300 MW solar farm, plus two smaller facilities for a total of 370 MW of solar power. It also includes a new 140 MW wind farm, four backup battery systems totalling 130 MW of capacity for when there’s no sun or wind, and a new 280 MW natural gas-fired “peaking plant” that the utility can turn on and off as needed.
The utility says that mix of replacement resources represents the cheapest way to replace San Juan with the most reliable resources to assure grid stability while still achieving the carbon-reduction goals outlined in the Energy Transition Act.
‘Balancing the cost’
“Each step we take toward 100 percent emissions-free must balance the cost, the environment and reliability,” said PNM Resources Chairman, President and CEO Pat Vincent-Collawn in a statement. “The San Juan replacement plan we put forth will not only save customers money, but will have one of the largest solar facilities in the U.S. and the one of the highest percentages of battery storage anywhere in the country.”
The company says its plan would immediately save the average residential customer about $7.11 on their monthly bills during the first year after shutting San Juan because of savings from closing the aging and expensive coal plant and replacing it with cheaper sources of generation. Over time, costs will rise, but less so than if PNM continued to operate San Juan, according to PNM.
Overall, the plan would cost ratepayers about $4.68 billion over 20 years, making it the cheapest of four different potential San Juan replacement “scenarios” that the utility outlined in its filing with the PRC.
Four scenarios offered
The company offered three other alternatives to its own plan to respond to input from environmental and community groups that advocate for different types of replacement power. Computer modeling was used to find the cheapest and most-reliable generation mixes while accommodating varying demands from other groups, PNM said.
The alternatives included one plan to locate most replacement power in San Juan County to offset the local economic impact of shutting San Juan, and two plans that only rely on renewable resources with no new fossil fuels.
• The San Juan-focused plan calls for 476 MW of new natural gas plus 140 MW of additional wind generation, with no new solar or battery storage. It would cost $4.73 billion, or about $54 million more than PNM’s recommended plan over 20 years, according to the utility.
• One of the all-renewable plans calls for adding 500 MW of solar generation, 140 MW of wind, and 410 MW of battery storage, costing $4.83 billion, or $156 million more than PNM’s recommended plan.
• The other all-renewable plan calls for 975 MW of solar and 1.2 gigawatts of wind. It would cost $5.54 billion, or $774 million more than the PNM plan.
Apart from the additional cost, PNM says the all-renewable alternative could create grid instability, violating laws on system reliability.
The utility outlined different potential scenarios to allow regulators, environmental groups and other participating parties to compare alternatives during hearings that the PRC is expected to schedule in the coming months.
PNM will also hold two stakeholder meetings this month, including one July 9 in Farmington and another July 18 in Albuquerque.
“This is the first time we’ve filed multiple resource scenarios at the PRC,” Senior Vice President of Public Policy Ron Darnell told reporters Monday. “We hope it will lead to a more open and collaborative process.”
Environmental groups say they’re anxious to dig deeper into PNM’s plan and the alternatives going forward. Sierra Club Rio Grande Chapter Executive Director Camilla Feibelman said her group wants renewable-only replacement power without any natural gas.
“Our initial numbers show that battery storage plus renewables are the cheapest alternative, but this is the beginning of a conversation,” Feibelman told the Journal. “We’ll all have an opportunity to see the models and come up with the best alternative.”
Steve Michel, deputy director of Western Resource Advocates’ Clean Energy Program, said shutting San Juan will reduce carbon emissions by millions of tons per year, lead to hundreds of megawatts of new renewable generation, and save PNM customers more than $80 million in 2023, after the coal plant closes.
“This is all done pursuant to the recently passed Energy Transition Act and shows how good outcomes can be achieved when people work together to solve problems,” Michel said in a statement. “Going forward, we will be looking closely at the proposal to see what improvements can be made.”
Support for displaced San Juan workers
Public Service Company of New Mexico’s plan to close the coal-fired San Juan Generating Station includes $20.6 million in severance pay and worker re-training for about 203 employees at the coal plant and 242 workers from the San Juan Mine. It also includes $20 million for local economic development initiatives.
Those funds will be generated through income from bonds that PNM will sell to recoup unrecovered, or “stranded,” investments in the coal plant. The bonds will be repaid by customers through a surcharge on their bills, which state government authorized under the new Energy Transition Act.
For more information on PNM’s San Juan abandonment and power replacement plan, go to www.pnmnextstep.com. For information on assistance programs for San Juan displaced workers, visit www.pnmforyou.com.