PNM seeks 700 megawatts of new generation

The San Juan Generating Station is seen operating west of Farmington. (Eddie Moore/Albuquerque Journal)

Copyright © 2021 Albuquerque Journal

Public Service Company of New Mexico released two new “requests for proposals” Monday morning for energy developers to potentially supply up to 700 megawatts of new electric-generating capacity.

That includes an RFP for 200 MW of power to meet projected electric demand and to guarantee grid reliability when PNM abandons the coal-fired San Juan Generating Station near Farmington in June 2022.

New replacement generation is needed because one of the four solar farms with back-up battery storage that is planned to replace San Juan next year is behind schedule and won’t be operational in time, said PNM Vice President of Generation Tom Fallgren.

That project, a 100 MW solar facility with 30 MW of battery back-up, represents about 14% of the 950 MW of total San Juan replacement power that the state Public Regulation Commission approved last year. PNM filed an official notice with the PRC on Monday that 8minute Solar Energy – the utility-scale development company behind the 130 MW Rockmont Project in San Juan County – has missed critical deadlines. In fact, the company, which was contracted by PNM under order by the PRC, recently told PNM it can’t meet its contract requirements to bring Rockmont online by June 2022, Fallgren said.

“We needed to raise a red flag at the PRC that the Rockmont project won’t make the target date,” Fallgren told the Journal.

The PRC may need to decide if PNM should continue with Rockmont and let it come online later than expected, or replace it with another project, Fallgren added.

In addition, apart from the Rockmont problems, rolling blackouts in California during last summer’s record-breaking heat wave – plus the winter freeze this past February that left tens of thousands of Texans without power for days – show that New Mexico can’t depend on importing power from other states during extreme weather events, Fallgren said. When approving San Juan replacement power last year, the PRC assumed that 200 MW or more of out-of-state generation would always be available to purchase on the western wholesale market if needed when the sun doesn’t shine or the wind doesn’t blow.

But the California and Texas events cast doubt on those assumptions, and now, to ensure grid reliability in all situations, PNM wants at least 200 MW or more of additional local generating capacity always available.

“California and Texas have demonstrated that during extreme events there may be no market resources available,” Fallgren told the Journal. “There may well be regional electricity available during calmer months, say in the fall or spring, but not necessarily during critical summer months when extreme heat taxes regional generating systems, or during a deep winter freeze.”

As a result, PNM issued a second RFP Monday seeking an additional 500 MW of new generation. That will provide more reserve generating capacity for grid reliability.

In addition, that second RFP could reinforce state efforts to attract more companies to New Mexico while encouraging existing firms that want clean energy to expand operations here. That’s because that second RFP will produce information about more potential renewable projects that could be added to the grid if companies request it.

New Mexico offers some of the nation’s lowest-cost renewable generation for large customers, thanks to nearly 300 days of sunshine every year, plus billowing wind on the state’s eastern plains. Those readily-available, low-cost renewable resources helped attract Facebook to Los Lunas, and state agencies are now using clean energy as a major selling point to lure more companies here.

“Some major projects are in the works that we can’t discuss and that could be announced in the next few months,” Fallgren said. “We want to be prepared.”

It’s unclear how many additional megawatts of renewable capacity the utility might add to the grid for economic development purposes, but the new RFP can get the ball rolling if companies do commit to establishing or expanding operations.

“We’re being prudent to cover their needs if development opportunities do arise,” said PNM spokesman Ray Sandoval. “But we’d only build more generating capacity if projects really move forward.”

Still, PNM’s new RFPs could prove controversial, since the utility has requested proposals for “all forms” of energy. That could potentially include offers for new natural gas generation, something environmental groups oppose and the PRC specifically rejected when it approved San Juan replacement power last year.

But it could also include proposals for hydrogen generation, Sandoval said. That’s something developers are now pursuing in the Four Corners Area.

In any case, any new projects PNM proposes will need PRC approval to move forward. And in the meantime, it’s prudent for PNM to gather information from energy developers as it prepares to depart from San Juan, and as it plans future procurements to meet mandates in the state’s Energy Transition Act, which calls for 50% renewables by 2030, 80% by 2040 and 100% carbon-free generation by 2045, said Pat O’Connell, senior policy analyst with Western Resource Advocates.

“I don’t take issue with PNM asking for additional capacity for grid reliability,” O’Connell said. “RFPs are a good way to get information on potential projects. When they come to ask for approval from the PRC to add new capacity to customers’ bills, then they’ll have to prove their justifications for doing that.”

Doug Howe, a former PRC commissioner and past chair of the Western Energy Imbalance Market, said utilities throughout the West are now concerned about procuring enough electricity to avoid rolling blackouts like California experienced in last year’s heat wave.

“They’re all nervous about that, gun shy, and they want to be get ahead of it if there’s another summer like last year, or worse,” Howe told the Journal. “They think if they over-procure electricity, that’s better than under-procuring to not face outages.”

How much additional capacity PNM will need for grid reliability will have to be reviewed by the PRC based on evidence provided by PNM, Howe added.

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