The debate over how to replace the generation capacity that will be lost following the closing of the 847-MW coal-fired San Juan Generating Station in June of 2022 is officially over, with Public Service Company of New Mexico (PNM) opting to move forward with four solar-plus-storage projects in San Juan’s stead.
The announcement is not altogether surprising, as state regulators ordered PNM to procure San Juan replacement power from utility-scale renewables earlier this summer.
The four projects slated to replace the generating station will all be located in Northwest New Mexico, with a couple close by to the generator. The quadruplets are comprised of 650 MW of solar generation and 300 MW/1,200 MWh of accompanying energy storage. Two of the projects have already been approved by state regulators: Arroyo Solar, which clocks in at 300 MW and 150 MW/600 MWh of storage and Jicarilla Solar I, with 50MW and 20MW/80 MWh to its name.
PNM is pushing hard for regulatory approval of the other two projects, San Juan Solar 1 (200 MW of generation and 100 MW/400 MWh of storage) and 201LC 8m (100 MW and 30 MW/120 MWh) prior to Dec. 4, so that construction can begin in January, in order to achieve a June 2022 commissioning.
The projects are also expected to generate up to $74.7 million in property-tax revenues over the 20-year terms of the deals and create roughly 500 jobs per month during the buildout of the projects.
The viability of carbon capture
The approval of PNM’s power purchase plan marks the final death blow to a long-shot carbon-capture retrofit proposal that was being promoted by elected officials in the City of Farmington and Enchant Energy. It’s worth noting that the City of Farmington owns 5% of San Juan.
The carbon-capture proposal had previously been slammed by energy experts and renewable advocates alike, including Karl Cates, an IEEFA analyst and author of a research brief published today regarding the new PNM plan.
“The retrofit was riddled already with numerous holes in its business plan, which overlooked such fundamental questions as to who would buy the power from such a complicated and high-priced project, how it would be transmitted, and who would finance it,” asserted Cates in the brief.
The point of price, along with the state’s Energy Transition Act, which calls for 50% of the state’s electricity to come from renewables by 2030 and 80% by 2040, were key determination’s in the approval of PNM’s plan.
In terms of wholesale energy prices, the Arroyo project comes in at $18.65 per MWh, the Jicarilla project at $19.73, the San Juan Solar I and Jicarilla Solar I, respectively, at $26.65 and $27.35. In comparison, coal-fired generation runs $66 to $112 per MWh, and combined-cycle gas fired generation is $44 to $64 MWh. Both of these estimations are based on Lazard’s most recent annual assessment of energy costs.
According to Cates, the carbon-capture proposal was a long-shot from the start, as state regulators and PNM alike were always focused on replacing the generations with solar. At that point, the issue became which projects would be included, not which resources.
The bigger picture
As important of a step as this plan is for New Mexico’s energy transition, according to Cates, it sends a strong signal to the rest of the region.
“When a utility of this size makes that kind of commitment, other utilities are going to look at it and respond accordingly,” Cates told pv magazine. “Some of it is policy-driven, we have the Energy Transition Act, but I have to believe that most of it is market-driven. These are deals that are from $18-25 per MWh – that’s cheap electricity. it’s a business decision as much as anything. They’re a regulated utility that must be responsive to its rate base. This is one way it gets there.”
There are few regions better suited for solar than the American southwest, and many of the area’s utilities have adjusted their long-term integrated resource plans accordingly, in order to take proper advantage of the cheap, reliable electricity that solar provides.
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