PNM plan calls for eliminating use of coal

Solar, wind, natural gas, nuclear would replace San Juan, Four Corners plants

Public Service Company of New Mexico is proposing to shed all of its coal-fired electricity in the next 14 years and replace it with solar, wind, natural gas and nuclear power.

The company’s latest integrated resource plan — which looks out over 20 years to determine the cheapest, most reliable and environmentally friendly mix of resources — has found that shutting down the coal-fired San Juan Generating Station near Farmington in 2022 and relinquishing the utility’s 13 percent share in the nearby Four Corners Generating Station in 2031 would save consumers money in the long term.

The company published a first draft of the resource plan late Thursday. It’s now open for public comment before a final version is filed with New Mexico Public Regulation Commission in July.

The 20-year plan, which PNM is required by law to submit to the PRC every three years, outlines the most effective way to deliver reliable, affordable and environmentally stable energy going forward, said PNM Resources’ Chairwoman, President and CEO Pat Vincent-Collawn.

“Market forces are driving a rapid evolution of energy resources, and the current data clearly supports the replacement of the coal in our portfolio with an energy mix that includes more renewables and natural gas as the best, most economical path to a strong energy future for New Mexico,” Vincent-Collawn said in a statement.

PNM is already committed to closing two of four generating units at the San Juan plant next year to meet environmental regulations. To gain support from other organizations and the PRC for that partial shutdown, it agreed to begin evaluating other alternatives to San Juan in 2018, opening the possibility for full-plant closure after 2022, when San Juan’s current coal supply contract expires.

In preparing the new resource plan, the company compared the costs and benefits of two future scenarios, one with San Juan still operating after 2022 and one without. It modeled hundreds of different energy mixes under both scenarios to determine the lowest-cost option for consumers, which now appears to be not only shutting down all of San Juan, but exiting all holdings in the Four Corners plant, as well, when the coal supply contract there ends in 2031, said PNM’s planning and resources director, Pat O’Connell.

“The plan would get PNM entirely out of coal,” O’Connell said. “It would be replaced by hundreds of megawatts more of solar and natural gas, some nuclear and possibly wind resources.”

After the two San Juan generating units are shut down next year, PNM will still rely on coal for the production of about 700 megawatts of power.

The company has already issued requests for proposals to build more solar capacity on its grid to meet state mandates that it derive at least 20 percent of its electricity from renewable resources by 2020, O’Connell said.

Additional wind will largely depend on new transmission lines to transport electricity from New Mexico’s gusty eastern plains. Today’s transmission capacity is booked solid with current and planned wind projects.

As for nuclear, PNM already owns 288 megawatts of electricity output from the Palo Verde Nuclear Generating Station in Arizona. It leases another 114 MW, which the utility proposes to acquire after those leases expire in 2023 and 2024.

Nuclear and natural gas generation are critical baseload resources that can supply electricity 24/7, filling in for solar and wind when the sun doesn’t shine or the wind doesn’t blow.

“If we reduce our nuclear capacity, we’d have to replace that 24/7 baseload with carbon-emitting resources,” O’Connell said.

The integrated resource plan includes a four-year plan of action to continue testing all long-term assumptions on cost savings while paving the way for implementation in following years. That includes filing for full abandonment of San Juan in 2018, securing the Palo Verde leased capacity, initiating RFPs for alternative resources to fully validate cost assumptions, and identifying opportunities to expand transmission capacity from eastern New Mexico.

The company will also consider adding energy storage facilities to the grid, something that is still not cost-effective but could become so after San Juan is shut down, O’Connell said.

Many things have made alternative resources cheaper than coal. That includes low natural gas prices and declining costs for solar and wind.

But the key factor is changes in electricity consumption patterns, with energy efficiency and customer-sited solar installations significantly slowing growth in electricity demand, O’Connell said. The company expects rooftop solar and direct industrial use of renewable resources to grow a lot more in coming years.

As a result, the traditional model of relying almost wholly on 24/7 baseload plants to meet demand is a thing of the past.

“We need a new resource portfolio that accounts for all these changes, one that’s more flexible than what we have now,” O’Connell said.

Given all the changes, the cost of environmental regulations on carbon emissions is no longer a big factor in abandoning coal.

“It’s market forces that are driving these decisions,” PNM spokesman Pahl Shipley said.

Still, if the PRC approves PNM’s plan, ratepayers would face costs for shutting down PNM coal generation, and the economies of the Farmington area and the Navajo Nation would be affected.

“While this plan offers significant environmental benefits and is the most cost-effective for customers, we know that it will have an impact on the economy of the Four Corners area and the families and businesses that depend on the coal industry for income,” Vincent-Collawn said. “PNM will work with the communities that will be most affected and other stakeholders to mitigate the effects of these changes.”