Copyright © 2020 Albuquerque Journal
New Mexico’s utilities are drawing up the most comprehensive plans in decades to completely overhaul the state’s electric grid to reach 100% carbon-free generation by 2045.
That’s the ultimate goal outlined in the state’s new Energy Transition Act, which took effect last June. It requires all three of New Mexico’s major public utilities to derive 40% of their electricity from renewable resources by 2025, 50% by 2030, 80% by 2040, and then 100% carbon-free by 2045.
It’s a tall order, but the utilities – Public Service Company of New Mexico, Xcel Energy subsidiary Southwestern Public Service, and El Paso Electric Co. – are all on board, with the first substantial transitions already underway.
In fact SPS, which serves about 385,000 customers in West Texas and New Mexico, expects to double the amount of renewables on its system this year alone, from about 20% now to about 40% in December, reaching the state’s 2025 goal four years ahead of time. The additional renewable electricity will come from the utility’s Sagamore Wind Project, currently under construction in Roosevelt County, which will be New Mexico’s largest wind farm when it goes online at the end of the year.
“Xcel has been a leader on renewable energy,” said David Hudson, Xcel president for the Southwestern region. “We’ve been procuring a lot of renewables in recent years because of cheap prices and favorable economics for our customers, so we’re ahead of the ETA mandates.”
SPS says the state’s new requirements are well aligned with Xcel’s corporate goals of reducing carbon emissions from its multistate grid by 80% below 2005 levels by 2030, and reaching 100% carbon-free generation by 2050.
“We worked on and supported the ETA,” Hudson told the Journal. “We think the 2030 goals are not an issue. We can get there in reliable and cost-effective ways.”
PNM, the state’s largest utility, with about 535,000 customers, also expects to achieve the 40% and 50% renewable goals on time without any major system reliability concerns or price shocks for customers. It’s adding a 140-MW wind farm to its system this year, which will bring its renewables to 20% of its electricity.
It plans to shut down the coal-fired San Juan Generating Station near Farmington in 2022 and replace it with a mix of renewable generation, backup battery storage and possibly a natural gas peaking plant. That will propel the utility to 34% renewables by 2023.
At that point, after adding in PNM’s share of electricity from the Palo Verde Nuclear Generating Station in Arizona, about 65% of utility generation will be carbon-free, PNM Vice President for Generation Tom Fallgren told the Journal.
“Shutting San Juan is a huge step,” Fallgren said. “In terms of carbon-free generation, it will jump us to the head of the pack among utilities in the U.S., and will even make us a world leader.”
El Paso Electric, which serves about 430,000 customers in West Texas and southern New Mexico, is also adding more renewable resources to its grid, including the state’s first major utility-scale battery storage systems. The company has just over 10% renewables on its grid, but it announced plans in December to add 100 megawatts of battery storage, including a 50-MW stand-alone battery to shore up the grid, and another 50-MW battery to be installed alongside a new 200-MW solar power system.
“Our ability to grow our renewable energy portfolio with additional solar is maximized with the addition of battery storage capability,” EPE interim CEO Adrian J. Rodriguez said in a statement. “By being able to introduce large-scale battery storage into our region, we will, for the first time ever, be able to harness the power of the sun from our solar facilities and utilize the energy at night and during cloudy days.”
The three utilities’ current plans, however, are only the first phase of a major transition that will be followed by incremental steps to reach the longer-term ETA mandates of 80% renewables and carbon-free generation.
And that path forward will be riddled with challenges and likely contentious debate as the utilities phase out carbon-emitting fossil fuels and choose new resources to replace them.
“We will be transitioning 40% to 50% of our energy portfolio just over the next decade,” Fallgren said. “That’s a pretty significant transition in a very short period of time.”
PNM already is facing significant opposition to its current plans to close San Juan, which could cut about 1,500 jobs in the Four Corners region directly and indirectly connected to the power plant and nearby coal mine. The financing plan to pay for plant shutdown includes $40 million in assistance for laid-off workers and local communities, and some of the replacement power will be located in San Juan County to create jobs and restore at least part of the local tax base lost by San Juan’s closure.
But the city of Farmington and its utility, one of six with an ownership stake in San Juan, is pursuing an agreement with private company Enchant Energy to convert the power plant to carbon-capture technology and keep running it after PNM and four co-owners abandon it in 2022.
Environmental groups are also pressuring PNM to replace San Juan power with all-renewable resources. In particular, they oppose the utility’s proposal to build a 280-MW natural gas peaking plant near Farmington, which PNM says is needed to ensure grid reliability, providing 24/7 backup power to bridge the intermittency of new solar and wind generation when the sun isn’t shining and the wind stops blowing.
Such conflicts over how fast to phase out natural gas and rely primarily on renewables and battery storage systems will likely grow more intense as PNM and other utilities work toward the ETA’s 2030 targets and beyond.
PNM executives say cost and grid reliability must be carefully assessed with every change in resources.
“Reliability becomes more challenging as we introduce more renewables,” said PNM Vice President of Operations Todd Fridley. “As we transition our energy portfolio to the ultimate set of ETA renewable targets, it will take significant work to ensure that reliability is met.”
Those challenges will loom large in the 2030s as utilities move from 50% to 80% renewables.
“Once we get to 60% to 70% of renewables on the grid, that’s when we’ll face much greater reliability issues,” said Hudson of Xcel. “That’s when we’ll have to look at new technologies that are now still under development.”
Today’s lithium ion battery systems can offer two to six hours of backup power. But utilities will need up to 12 hours to get to 80% renewables, PNM says.
Alternative battery systems with more storage capacity are emerging. But it will take time to fully develop and prove their reliability in the field, and the cost must come down before placing them on the grid.
The utilities also are closely watching development of carbon capture technologies for natural gas plants that could allow them to continue burning gas carbon-free as backup power.
“A lot is happening with carbon capture to burn gas in a closed-loop system to not emit CO2,” Hudson said. “There’s different types of technology being developed that we’re looking at.”
Transmission will be another key challenge going forward. As more renewables are added in remote places, such as wind in eastern New Mexico, PNM will need to add more transmission lines to get that electricity to end users.
That will add costs to the energy transition, something critics fear will cause rate shock in the future. But utility executives say today’s low prices for solar and wind greatly offset the costs for replacing fossil fuels, and prices are expected to keep falling as technology innovation continues.
In fact, PNM projects nearly a $7-per-month savings on average customer bills in 2023 by shutting San Juan and replacing it with cheaper renewables.
In addition, the comprehensive grid overhaul that’s only now beginning is not a matter of simply adding renewables on top of existing resources, which would stack up the costs going forward, PNM says. Rather, it’s about replacing aging fossil fuel plants that will need to be retired anyway over the next 20 years.
Attaining 100% carbon-free generation will require multiple strategies, said Laura Tabor, sustainability and resilience officer for the Energy, Mineral and Natural Resources Department’s Energy Conservation and Management Division.
“There’s definitely no silver bullet on to how to do it,” Tabor said. “We need to get a handle on all the potential strategies and solutions and find the best ones that fit New Mexico’s needs.”