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Diversity targets work, so why the rule change?

New Mexico law requires electric utilities to acquire “diversified” portfolios of renewable energy projects, “taking into consideration the overall reliability, availability, dispatch flexibility and cost of the various renewable energy resources made available.” But in 2007, five years after the renewable portfolio standard’s initial enactment by the Public Regulation Commission, portfolios were 100 percent wind power, with no prospects for more than token solar energy development.

Wind power is a great, low-cost source of pollution-free electricity, but it provides no dispatch flexibility, can be hard to manage at very high levels of penetration on the electrical grid and, in New Mexico, tends to be unavailable on summer days when our power needs are greatest.

Solar energy, like wind, is abundant in our state but doesn’t require long transmission lines. And while solar is also an intermittent source, its production naturally tends to overlap with highest electric demand. Solar also has good prospects for cost-effective storage.

New Mexico also has opportunities for biomass and geothermal energy production, very valuable to the grid because of reliability and dispatchability, but not available on the same scale as wind and solar.

In 2007, the PRC took these and other factors into consideration and determined that the best way to achieve the diversity required by law was to set targets: at least 20 percent of renewable energy portfolios should be solar, 20 percent wind and 10 percent biomass or geothermal. The PRC also set quotas for customer-sited generation – 3 percent of all renewables by 2015 – recognizing the higher costs for smaller systems, as well as the benefits to distributing power generation throughout the grid. It was assumed that most of what was left unspecified would be filled out by low-cost wind.

Diversity targets worked in New Mexico – as they have in 15 other states. By December 2012, 150 megawatts of utility-sponsored solar and 20 megawatts of customer solar had been built to meet the PRC’s targets. Another 30 MW of solar was built due to Gov. Bill Richardson’s renewable energy policies.

New Mexico went from having enough solar generation on the grid to serve about 50 average households to enough to serve more than 65,000.

PNM has an exciting 10 MW geothermal project underway and future prospects for large-scale biogas projects using dairy waste were good until the recent moves to undermine the 2007 rule. Diversity targets have also ensured that the economic development benefits of renewable energy have been spread across the state and across industries.

Utilities initially opposed the targets but came to realize that they provided predictability and reduced litigation. The cost projections relied upon in 2007 were roughly borne out: Diverse portfolios including meaningful amounts of solar power have been implemented without raising total electric rates by more than around 3 percent.

Moreover, the 2007 rules stated that less diverse portfolios would be allowed whenever necessary to ensure that costs never exceed a 3 percent threshold. Thus, arguments that diversity targets need to be scrapped to protect consumers from excessive costs don’t stand up to scrutiny.

During my eight years on the PRC, I heard from hundreds of constituents who wanted utilities to acquire more renewable energy, and especially more solar power, and from only a handful in opposition. Local and national opinion polls confirm that large majorities want and are willing to pay for cleaner electricity, especially solar.

Experts agree that a diverse portfolio with a lot of wind and solar will be our lowest-cost route to environmentally sustainable energy supplies.

It’s unfortunate that PRC members who recently voted to undermine the diversity rule did not undertake to study the facts or to follow state law, or even examine the consequences of their rule change – which is likely to be that renewable energy development in New Mexico grinds to a halt.