Four Paths to Renewables at San Juan

The Public Utilities Company of New Mexico has released proposals for shutting down the coal-powered San Juan Generating Station in the Four Corners area by 2020 in compliance with renewable energy standards set by the state's new Energy Transition Act.

The law was one of the most lauded—and controversial—bills passed in the 2019 legislative session earlier this year. For years, the San Juan Generating Station has been at the heart of bitter debates that pitted coal miners, environmental groups and consumer advocates against one another, with PNM caught somewhere in the middle. And in many respects, passage of the act entailed narrowly successful feats of legislative gymnastics in the effort to placate stakeholders on all sides.

The new law requires the state to transition to 50% renewable energy by 2030 and 100 percent carbon-free electricity generation by 2045, setting New Mexico on course to become a national leader in renewable energy standards. It also demands that PNM take measures to mitigate the economic impacts that the closure of the plant will have on local communities dependent on the jobs and the tax revenue from the coal-powered generating station.

PNM says it can do even better.

The utility's proposed plan of action includes four scenarios to replace the power generated by the San Juan station with 100% renewable energy by 2040, five years earlier than the requirements set out by the ETA.

Yet other stakeholders continue to raise doubts about the utility's proposed reliance on natural gas and the costs that will be handed off to ratepayers.

In brief, here's what PNM's four scenarios look like. All four contemplate complete shutdown and cleanup of the coal-burning power plant.

Scenario 1

The scenario most favored by PNM entails a combination of energy sources, including 350 megawatts of solar power generated at arrays owned by independent power producers across the state and a 280-megawatt fast-start natural gas plant that would be located in San Juan County, which the utility argues is necessary to mitigate the blow to the region's tax base. The remaining megawatts of replacement power would be split between battery storage and wind. PNM claims this would also be the most cost-efficient option for consumers.

Scenario 2

The second scenario would depend almost entirely on electricity generated by gas-powered plants in San Juan County. This scenario would offer the greatest source of tax revenue to the San Juan school district but the least reduction in CO2, and would raise costs to consumers.

Scenario 3

In the third scenario, the San Juan coal-powered plant would be replaced by a combination of solar, wind and battery storage across the state, with only 40 megawatts located in the San Juan school district.

Scenario 4

PNM's fourth scenario relies completely on renewable energy resources without any battery storage or natural gas.

While it's ultimately up to the Public Regulation Commission to decide how to move forward, PNM has recommended adoption of the first scenario. PNM's spokesman Ray Sandoval tells SFR the utility would phase out gas plants in the first and second scenarios by 2040. The reliability of the grid and the current cost of batteries make the third and fourth scenarios unfeasible. Depending solely on renewables, he says, is "a risky gamble." The company presented the ideas, however, because it anticipates competing interests will interpret the law in various ways.

Some consumer and environmental advocates say this is not good enough.

Santa Fe-based New Energy Economy was one organization that opposed the passage of the Energy Transition Act based on the costs that will be shouldered by ratepayers for shutting down the coal-fired plant. Under each of PNM's proposed scenarios, the utility will issue bonds to pay for the transition, including severance and retraining programs for coal plant employees and tribal nations affected by the closure.

Due to the cost for rate payers and the reliance on natural gas of PNM's recommended scenario, New Energy Economy continues to raise issue with the proposed transition plan.

"Natural gas emits methane, one of the most powerful greenhouse gasses that causes climate destruction," says Mariel Nanasi, director of NEE. "More than 600 cities in the world and the US House have either adopted or introduced resolutions properly naming what the world is experiencing, which is a climate emergency. Meanwhile, while PNM touted the transition to renewables, it's proposing gas as its preferred resource alternative. We need to move in the direction of energy efficiency and renewables as quickly as possible because we don't have time to waste."

Over the next several months, the utility's proposal will go to a hearing examiner, who will take concerns of outside parties into account and make a recommendation for the Public Regulation Commission, which will decide whether to approve the recommended plan, one of the alternatives, or send PNM back to the drawing board. The hearing has yet to be scheduled.

Editor's note: A previous version of this story contained an erroneous statement about refinancing debt.