Copyright © 2022 Albuquerque Journal
Public Service Company of New Mexico consumers will likely face blackouts this summer and in summer 2023 unless the utility and state regulators find emergency solutions to cover expected shortages during peak demand, officials say.
The state Public Regulation Commission will discuss the potential crisis during its open public meeting Wednesday.
PNM and some commissioners say extending operations for a few months at the coal-fired San Juan Generating Station, scheduled to shut down in June, could resolve immediate problems facing the utility and consumers this summer.
But PNM executives say the utility will almost certainly face critical shortages again in summer 2023 because the PRC has yet to approve new resources to replace some of the power it currently receives from the Palo Verde Nuclear Generating Station in Arizona, where two PNM leases for electric supply will soon expire.
PNM, New Mexico Attorney General Hector Balderas and some industry experts say poor decision-making by the PRC on replacing San Juan power with renewable resources without approving adequate back-up generation to ensure grid reliability has created a vulnerable situation in New Mexico’s transition from fossil fuels to renewables.
PRC commissioners say the crisis is caused in part by unforeseen circumstances and criticized PNM for not submitting its proposals earlier.
Generally, PNM strives to have a 12% “reserve margin” of power, which refers to additional internal electric generating availability on PNM’s own grid to meet spikes in demand.
But, for this summer, it projects less than a 1% margin, said PNM Director of Integrated Resource Planning Nick Phillips.
And in July and August, it’s actually a negative 3.4% reserve margin, meaning the utility doesn’t even have enough generating capacity to meet normal peak demand during those months, much less unexpected spikes from extreme heat or other issues, such as unscheduled plant interruptions.
The need for more adequate utility and regulatory management in the new energy economy is now generating alarm among such elected officials as Balderas, whose office is responsible for enforcing consumer protection measures.
“I’m very concerned, especially for our elderly residents, because we could be facing blackouts during high heat periods this summer,” Balderas told the Journal. “… I’m very frustrated by this situation, and I will speak with the governor and Public Regulation Commission leaders about it, because lives could be at risk.”
Background
PNM officials and others criticized the PRC for rejecting PNM’s proposal to build a 280-megawatt “peaking” natural gas plant – which can rapidly ramp up and down as needed – alongside new renewable generation when it ruled on San Juan replacement power in 2020.
The PRC instead approved an all-renewable replacement portfolio with only solar energy and back-up battery storage, to be supplied by four large-scale solar facilities, each one to be built separately by different energy developers.
In addition, the commission delayed final approval for the new solar facilities until summer 2020, months after PNM said it could face a time crunch in getting the plants fully online to coincide with the San Juan closure in June 2022. The late PRC approval also forced PNM to renegotiate the solar contracts with developers – a six-month process that did not conclude until early December 2020, when the PRC gave the final go-ahead to begin building the facilities.
That put PNM and the developers in an extra vulnerable situation when global supply-chain log jams caused by the coronavirus pandemic hit industry operations everywhere in spring 2021. Lengthy delays in getting needed components – particularly solar panels made in Asian countries – set back construction timelines on all four solar projects, none of which will now be fully operational until at least year-end 2022.
PRC commissioners say the utility shares responsibility for the current situation by not getting complex proposals in early enough to provide sufficient time for thorough evaluation.
And throwing blame around won’t resolve the pending crisis, much of which was created by unforeseen circumstances, particularly the pandemic-induced supply-chain issues that nobody could have predicted, said Commissioner Steve Fischmann.
“It’s Monday-morning quarterbacking,” Fischmann told the Journal. “COVID-19 and the supply-chain issues contributed to a set of circumstances that no one could have guessed. We need to stay focused on solving the problem for customers and not getting into a blame game.”
But, with the accelerated transition to a renewable electric system in New Mexico and elsewhere, such regulatory bodies as the PRC must consider new ways to reliably manage the grid, according to industry experts. That’s particularly true as extreme weather events caused by climate change grow more frequent, stressing the entire western grid and creating what could become chronic power shortages, such as during intense summer heat waves that send electric demand soaring as consumers everywhere crank up their air conditioners.
Wholesale market breakdown
The Western Electricity Coordinating Council recently warned that, as states rapidly transition to renewables, extreme weather events could create substantial energy shortages over the next few years, significantly disrupting wholesale power markets. That means, as states move to replace round-the-clock generation from fossil fuel facilities with intermittent solar, wind and battery-based electricity, such local utilities as PNM can no longer rely on power imported from other states to meet consumer demand during peak periods or emergency situations.
That, in good part, is what led to rolling blackouts in California in summer 2020. And it’s a critical factor creating this summer’s crisis situation in New Mexico, said PNM Director of Wholesale Power Marketing Steven Maestas.
PNM made two open-market “requests for proposals” for wholesale power and bilateral purchases from other regional utilities in May 2021 after realizing some of the San Juan solar replacement facilities wouldn’t come online until months after the coal plant closes this June. But the company got virtually no responses, Maestas said.
“As of late, neighboring utilities typically aren’t selling any excess energy on the daily or long-term markets,” Maestas told the Journal. “Going forward, it will be hit or miss, with power availability varying day to day.”
PNM was able to secure some purchased power for part of the summer from a few sources, such as the Tri-State Generation and Transmission Association and El Paso Electric. But not enough to make up for projected shortfalls, particularly in July and August, which are the hottest months with the highest consumer demand, said PNM’s Phillips.
If summer heat remains moderate this year, PNM will still face difficulties meeting demand.
“But if there’s a West-wide heat wave such as in 2020, that’s when we could face a more serious risk of catastrophic outcomes, not just for us, but throughout the western region,” Maestas said.
San Juan extension
With little, if any, new power available on the wholesale market going into summer, delaying the San Juan shutdown until late September may be the most logical solution for this year.
Some PRC commissioners are open to that possibility.
“PNM has indicated that they may need to keep San Juan open for a period of time to get us through the summer peak,” Commissioner Fischmann said. “We have to keep an open mind to make sure electric service continues. … We need to consider all options and that might be the best solution.”
PRC Chair Joe Maestas said the commission needs to work with PNM on rapid solutions.
“We need to do our best to be nimble in processing these requests, like extending San Juan operations,” Maestas told the Journal.
But PNM says San Juan is not an option for next year. Other utilities that co-own the plant would almost certainly balk at signing a new operating agreement, and they would also need to negotiate a new coal contract for the plant.
And that may put PNM in an even bigger bind for summer 2023 because the PRC has still not approved replacement power for the Palo Verde nuclear power leases that expire in 2023 and 2024, making it impossible at this point to get the proposed replacement facilities online in time for summer 2023 peak demand, said PNM Vice President of Generation Tom Fallgren.
“We’re going to face the same grid reliability concerns in summer 2023 as we are facing this year,” Fallgren told the Journal.
Regulatory conundrum
For next year, Commissioner Maestas suggested that PNM consider extending its Palo Verde leases, postponing renewable replacement to a later date.
But PNM executives say the problems it is facing this summer and next year could have been avoided if the PRC had accepted PNM requests to expedite replacement power approvals, and if commissioners had listened to utility experts when they said a peaking gas plant should be included in the San Juan replacement portfolio to ensure grid reliability.
Attorney General Balderas said he’s concerned that the PRC has “handcuffed” the utility from securing enough infrastructure and backup generation as it transitions to a renewable grid.
“There’s consensus support in the state to transition to renewables, but we need to do that safely and reliably,” Balderas told the Journal. “… The PRC needs to take responsibility for not approving the backup generation and other capital investments needed to support the transition, and for the delays in approving replacement power. It seems the commission is not considering the urgency of these issues for consumers.”
