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PRC approves all-renewable plan to replace power from San Juan

The San Juan Generating Station operating west of Farmington Monday November 25, 2019. (Eddie Moore/ Albuquerque Journal)

Copyright © 2020 Albuquerque Journal

The state Public Regulation Commission unanimously approved an all-renewable energy plan Wednesday morning to replace the coal-fired San Juan Generating Station near Farmington.

The 5-0 decision sets in motion plans for Public Service Company of New Mexico to sign power purchase agreements with third-party providers to build 650 megawatts of solar farms in San Juan, Rio Arriba and McKinley counties, plus 300 MW of backup battery storage. Investment in those new resources could total about $1 billion, bringing 1,200 or more construction jobs to the northwestern region of the state.

Commissioners said the plan, which was recommended by hearing examiners in the case, is the best option to meet environmental goals and other requirements specified in the state’s new Energy Transition Act. The ETA requires PNM to transition to 80% renewable energy by 2040 and carbon-free generation by 2045.

PNM had requested PRC approval last summer to abandon the San Juan power plant in 2022 to begin meeting ETA goals, which the commission granted last March. But commissioners still needed to approve new generating resources to replace lost electricity from the coal plant.

Various power replacement options were discussed in public hearings in January, including proposals to rely entirely on solar energy and battery storage, and others that called for some new gas-fired generation to shore up system reliability as more renewables are added to the grid.

In the end, commissioners accepted the recommendation by PRC hearing examiners to adopt an all-renewable approach proposed by the Coalition for Clean Affordable Energy. Examiners said the proposal would best meet the ETA’s environmental goals, as well as respond to the act’s emphasis on placing at least some replacement power generation in San Juan County to offset the impact of the coal plant’s closure on local communities.

PRC General Counsel Michael Smith told commissioners Wednesday morning that evidence presented by the examiners shows the CCAE plan will restore much of the tax base that San Juan County and the Central Consolidated School District there will lose after PNM abandons San Juan.

“It goes a significantly long way to replace the tax base with substantial investment in the school district and capital investment in the surrounding communities and counties,” Smith said.

The plan also satisfies reliability concerns while avoiding “unreasonably high” costs for the replacement power, Smith said. And, as an “additional benefit,” it doesn’t interfere with efforts by the city of Farmington and private company Enchant Energy Corp. to transform the coal plant into a carbon-capture facility after PNM abandons it. If successful, that project could preserve about 450 jobs.

Commission Chair Theresa Becenti-Aguilar, who represents the state’s northwestern region, said allowing the carbon-capture project to move forward alongside CCAE’s renewable plan was key to winning her support.

“It left the door open if Enchant Energy wants to pursue carbon capture,” Becenti-Aguilar said. “That’s the point I like the most.”

Commissioner Valerie Espinoza called it a “win-win” for the state.

In contrast, Commissioner Jefferson Byrd said he’s concerned about grid reliability given the CCAE plan’s significant reliance on backup battery storage. But he voted for it anyway as the “best bet” among the different options on the table.

Reliability is a critical concern for PNM, which had proposed a new 280-MW gas-fired facility as backup for solar intermittency, allowing the utility to slowly integrate emerging battery technology into the grid. Spokesman Ray Sandoval said the company will carefully weigh those concerns going forward.

“We are reviewing all options to implement this decision while maintaining reliable power for our more than 530,000 customers,” Sandoval told the Journal in an email.

PNM says CCAE’s plan could cost much more than its supporters estimate because the utility may need to buy expensive electricity on wholesale markets to maintain reliability as batteries are introduced into the grid for the first time.

CCAE, however, says its all-renewable plan would add only about 56 cents to average residential customers’ monthly bills compared with PNM’s proposal for backup natural gas generation. In any case, that would be offset by between $6 and $7 per month savings on customers’ bills once San Juan is shut down, according to CCAE.

The commission’s decision drew broad praise from environmental groups. Sierra Club Rio Grande Chapter Director Camilla Fiebelman called it a “new day” for New Mexico’s renewable energy future.

“The replacement power that the commission approved will lead to thousands of construction jobs and $1 billion in investment in northwestern New Mexico,” Fiebelman said in a statement. “This is what the Energy Transition Act was intended to do: save ratepayers money, move to renewables, help workers and communities transition all while investing deeply in the impacted community.”

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