N.M. shuns gas, chooses renewables to replace coal

Source: By Edward Klump, E&E News reporter • Posted: Thursday, July 30, 2020

Supporters of renewable energy and carbon-capture technology found reason to cheer in New Mexico yesterday as regulators endorsed a plan for the state’s largest electric utility to use solar and battery storage to replace capacity from a coal-fueled power plant.

But the utility itself — Public Service Co. of New Mexico, or PNM — didn’t get the outcome it sought.

PNM had proposed that natural gas-fired generation be among the resources used to replace its share of power from two coal-fired units at the San Juan Generating Station, which PNM plans to take offline in mid-2022.

The New Mexico Public Regulation Commission voted 5-0 for a plan to put about 430 megawatts of replacement resource capacity and $447 million of capital investment in a school district that includes the San Juan plant. That’s part of an overall plan featuring more than $1 billion of potential investment and some 950 MW comprised of solar and storage.

San Juan is in the Four Corners region of northwestern New Mexico, and its future is being closely watched as regulators and utilities across the U.S. weigh how to meet clean energy goals and standards. PNM, which was seeking to replace 497 MW of coal-fueled power, said it would review the regulators’ decision. Renewable advocates as well as Enchant Energy Corp., which is proposing carbon capture at San Juan, offered praise for the commission known as the PRC.

“The PRC’s decision to invest in clean renewable energy here in the Four Corners … will transform our communities,” Joseph Hernandez with a Native American group called the NAVA Education Project said in a statement. “It means new investments in our school district, hundreds of jobs for tribal families, and economic transition at a time when we need it more than ever.”

Yesterday’s order backs renewables and batteries without more natural gas and doesn’t require PNM to take power from the Enchant Energy project. But it gives Enchant latitude to go forward and build its project as a merchant generator that could provide baseload power, according to Peter Mandelstam, Enchant Energy’s chief operating officer.

“It’s a triumph for good public policy and it shows that a thoughtful, transparent and detailed docket can parse a very technical issue and come up with the right decision,” Mandelstam told E&E News.

Enchant Energy is working with the city of Farmington, N.M., to take control of San Juan and give it new life with carbon capture that removes over 90% of the CO2 from the power plant flue gas (Energywire, July 29). The possible carbon-capture price tag: $1.3 billion, plus additional project costs. Enchant Energy is positioning the project to use the federal 45Q tax credit program, which covers carbon capture.

Mandelstam has said Enchant Energy doesn’t need a power purchase agreement from PNM. But he said yesterday that “we are ready, willing and able to engage with PNM today to talk about why a low-cost, dispatchable, baseload generator” such as the Enchant Energy project would be a good option for the company.

‘The best bad idea we have’

Commissioner Theresa Becenti-Aguilar (D), the PRC chair, spoke during yesterday’s meeting about leaving the door open for carbon capture at San Juan.

But Camilla Feibelman, director of the Rio Grande Chapter of the Sierra Club, said PNM ratepayers won’t be on the hook for Enchant Energy’s carbon capture plan based on yesterday’s decision.

“It leaves the door open for them to continue to pursue carbon capture at San Juan, but it will be their own endeavor and they’ll have to find their own buyers for that energy,” she said.

Feibelman called the Enchant proposal a “snake oil sales scheme,” suggesting it is expensive and a set of false promises to Four Corners residents while also creating business for consultants. Mandelstam countered that the co-founders of Enchant are spending their own money while not seeking state or local tax breaks. He said Enchant is seeking to leverage federal tax credits and find risk capital investors and is “the exact opposite of snake oil.”

Enchant is benefiting from federal engineering and design and research funding. The city of Farmington has spent some time and resources exploring the future of the nearby San Juan facility. Proponents of carbon capture suggest it could save hundreds of positions tied to the coal plant and mining, as well as many indirect jobs in the region.

PNM, which has said it doesn’t plan to buy power from any Enchant Energy project at San Juan, offered a measured response to the PRC’s vote yesterday.

“We are reviewing all options to implement this decision while maintaining reliable power for our more than 530,000 customers,” the utility said in a statement. “PNM is focused on strengthening our infrastructure to support the company’s transformation to a 100 percent clean energy portfolio.”

Yesterday’s PRC decision followed a 5-0 vote in April that will pave the way for PNM to exit the San Juan plant and possibly close its two operating coal-fired units in mid-2022 (Energywire, April 2).

A key element is the Energy Transition Act, which New Mexico lawmakers passed in 2019 with clean energy standards and provisions to enable the use of low-cost bonds by PNM to recoup certain investments at San Juan.

The Energy Transition Act includes a 2045 zero-carbon resources standard for investor-owned electric utilities. New Mexico-based PNM Resources Inc. has said its PNM utility aims to have 100% emissions-free power by the end of 2040. Mandelstam said Enchant intends to comply with the ETA.

Commissioner Valerie Espinoza (D) called yesterday’s outcome a “win-win” for New Mexico, but Commissioner Jefferson Byrd (R) called it “probably a win-lose.”

“I have questions about the reliability on this issue, but I do believe this is the best bad idea we have,” Byrd said.

Larry Behrens, Western states director for a group called Power the Future, took issue with the renewables plan supported by the PRC. He said in a statement that higher power bills and higher taxes are ahead for New Mexico families. And he said promised jobs would be temporary, while the damage would be permanent.

“The eco-left would have New Mexicans believe their renewable agenda is so affordable they need the government to force customers to buy it,” he said.

Feibelman of the Sierra Club said she doesn’t believe reliability will be an issue under the plan the PRC backed.

In a statement, she applauded the commission’s decision and called yesterday “a huge day for our renewable, economic future.” She said the move will help in the shift to renewables and save ratepayers money. She said there could be thousands of construction jobs.

“The PRC decision shows that New Mexico can transition from dirty coal-fired energy to clean renewable energy, while providing investment and jobs for the impacted communities,” Feibelman said.