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PNM's Plan To Scale Back Two Solar-Incentive Programs for Cost Reasons Draws Sharp Retort

By Michael Hartranft
Copyright © 2009 Albuquerque Journal
Journal Staff Writer

          PNM's newest plan to meet the state's renewable energy requirements has thrust it headlong into a solar storm, drawing sharp objections from installers, a statewide trade group, Albuquerque Mayor Martin Chávez and Gov. Bill Richardson.
        The company wants to scale back two programs that provide incentives for customers' solar systems that generate power they use and sell back to PNM — including imposing limits on new participation after Jan. 1 and reducing the maximum size of systems for large installations.
        In addition, the utility plans to introduce a program that would enable customers to have PNM-owned solar arrays installed at their homes and businesses.
        Some green power advocates say PNM is throwing up roadblocks for New Mexico's growing solar industry even as the nation pushes for clean energy and jobs.
        "We are going to fight this very hard," said Patrick Griebel, board member and legal counsel for the Renewable Energy Industries Association of New Mexico, which represents about 25 companies.
        "It basically sends the message at the same time you have the state pouring tens of millions, I think hundreds of millions of dollars, into trying to create a solar industry ... you have the utility saying 'we don't want to play, we, in fact, want to kill the homegrown industry,' " he said.
        The proposals are part of PNM's Renewable Energy Portfolio Procurement Plan for 2010, filed with the state Public Regulation Commission last month.
        The plan, which requires PRC approval, outlines how the company intends to meet a 2010 mandate that 6 percent of its retail energy comes from renewable sources such as wind, solar and biomass.
        It also looks ahead to 2011, when the percentage increases to 10 percent and specific diversification requirements come into play.
        After the Legislature adopted the renewable energy requirements, state regulators adopted regulations that allowed PNM to charge all its customers a surcharge of up to 2 percent to pay the higher cost associated with alternative energy sources.
        PNM president and CEO Pat Vincent-Collawn defended the plan as the company's best attempt to meet state requirements while staying within that cap.
        She also said the plan would help the solar industry rather than hurt it.
        Richard Oot, a board member of the Renewable Energies Industries Association who works for Everguard Solar, had a different assessment.
        "For PNM to file this type of document and basically pull the rug out from (under) these programs is just astounding," he said.
        The cap, called the Reasonable Cost Threshold, will be 1.8 percent of customers' overall electric charges in 2010. It increases to 2 percent in 2011. PNM has estimated the 2 percent would generate about $16.2 million.
        PNM pays, or credits, between 13 and 24 cents per kilowatt hour for electricity generated at private installations. That's much more expensive than the cost power from its other coal, natural gas or nuclear power plants.
        The credits, in effect, mean the solar programs are being subsidized by all ratepayers, Vincent-Collawn said.
        "Obviously, no answer is perfect for everybody, but we tried to limit the subsidies," she said. "If I live in TorC or Silver City or somewhere else and I don't have solar on my house or am not part of this program, I'm still paying for it."
        No shortage of critics
        Albuquerque Mayor Martin Chávez said the city opposes any caps on the solar incentive programs, and environmental health director John Soladay said the city also has problems with the proposed utility-owned, customer-sited program.
        "They're proposing a third-party ownership program where they're the third party," he said. "The issue with that is, once they have that right, and this is strictly from an economic standpoint, they can dictate rates all the way through.
        "It is not advantageous for the city or the state and it is definitely limiting when it comes to green jobs."
        The governor's office also has issues.
        "PNM's renewable procurement plan for 2010 includes some positive elements, such as the use of dairy biogas for electricity production," said Sarah Cottrell, the governor's energy and environmental policy adviser.
        She said, however, that the proposal to limit participation in residential and commercial solar programs "reduces the opportunity for clean energy generation in our state and sends a negative signal to the economic development community."
        Under the solar programs, PNM credits customers 13 cents per kilowatt hour generated and used for customers with solar arrays up to 10 kilowatts — usually homeowners and small businesses. They pay 15 cents for those with systems 10 kilowatts to 1 megawatt in size, usually large businesses, government buildings and the like.
        Electricity produced in excess of what the solar system owner uses is fed back into the power grid and the customer receives additional credit, at the rate of about 9 cents per kilowatt hour for residential customers.
        Needing more resources
        According to PNM's filing, the company has enough resources to meet the 6 percent renewable portfolio requirements in 2010 but will need additional resources to achieve the 10 percent standard as well as diversity requirements that go into effect in 2011.
        At that point, wind and solar power each must account for at least 20 percent of renewables with other resources such as biomass making up at least 10 percent.
        Toward that end, PNM says it is working on agreements to construct about 70 megawatts of combined wind and solar power facilities to come on line in 2011.
        PNM says it will be able to meet the wind portion of the renewable portfolio within the 2 percent cost threshold, but not biomass and solar.
        Public Regulation Commissioner Jason Marks said a utility can be "excused" if it makes a good faith attempt.
        He noted that of the state's three investor-owned utilities, PNM is the only one maintaining it can't meet the requirements with a surcharge of less than 2 percent.
        Greibel said his organization is skeptical of the way PNM calculated the cost threshold.
        "The formula they're using is incorrect and we're going to show that in the PRC procurement case," he said. "We've hired an economist to look at that and our preliminary reading is they're using the same fuzzy math they did last year."
        Limiting participation
        PNM's four-month-old large solar program has one participant so far, Emcore Corp. with an 82-kilowatt system. For that program, PNM wants to reduce the 15-cent credit to 13 cents, bringing it into line with the small program and "what we've seen in the market for the prices for those installations," said Cynthia Bothwell, Integrated Resource Planning Department manager.
        The company also proposes reducing the maximum solar system size to 250 kilowatts, which it says would ensure the program isn't dominated by a few large customers.
        In addition, it proposes to limit total participation in the solar program to 4.2 megawatts, and end the program for new customers on Dec. 31, 2010, sooner if the limit is reached.
        In its filing, PNM noted that as of June it had 20 pending large program applications that would give it total capacity of 3.2 megawatts, which it says means it needs only 3.75 more megawatts to meet its distributed generation diversity requirement for 2011.
        One megawatt is enough electricity to power about 400 average homes, PNM says.
        "When we originally proposed this program, we were hoping to get approximately 1 megawatt per year," Broderick said. "So based on just four months this program has been open, we already have 3.2 megawatts."
        PNM has no immediate plans to end the small program, but proposes to limit new participation starting Jan. 1.
        As of last week, the small program had about 465 participants with 1,365 kw of installed capacity, according to PNM. With the proposed limits, the program would have a total of 3,823 kw of installed capacity in 2011.
        "Once again, it's a cost issue," Broderick said.
        Utility owned
        Beyond that, PNM is developing plans for a utility-owned, "customer-sited" solar program to be introduced next year. "We'd pay (other companies) to have it installed and maintained and we'd give customers lease payments for use of their roof or parking lot of wherever it'd go on," Vincent-Collawn said.
        The plan would open the door to people who want to use solar energy but can't afford the upfront investment, she said.
        The company also plans to funnel the installation work to New Mexico businesses. "I would say that what we're trying to do is help the homegrown solar industry," she said.
        Oot and others are still wary.
        "That's their way of basically forcing all of us out," Oot said. "They've (PNM) held control the way energy is produced, distributed, sold, you name it, in this state forever, and they're threatened because the new day is around the corner where people are generating their own power, producing it for their own use, their own buildings ... They want to keep all the horses in the barn."

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