PNM submits PPAs for San Juan replacement; could serve as model for Four Corners coal exit

Utility Public Service Company of New Mexico has filed its replacement plan for the coal-fired San Juan Generating Station, including power purchase agreements for renewables and energy storage. 

The state utility commission initially approved a replacement portfolio of 650 MW of solar resources, 300 MW of battery storage and 40 MW of demand-side management resources under third-party ownership. PNM filed the power purchase and energy storage agreements (ESA) for commission approval Monday. Spokesperson Kelly-Renae Huber said that the utility has asked the commission to issue a final ruling on the replacement plan no later than 4 December. 

The commission has already approved PPAs for 300 MW of solar and 40 MW of storage from Clenera’s Arroyo Solar Project as well as 50 MW solar and 20 MW of storage from the Jicarilla Solar Project, built on Jicarilla Apache Nation land. The utility still needs commission approval for an additional 110 MW of battery storage from the Arroyo project, and PPA approval for 200 MW solar and 100 MW storage from the San Juan Solar I Project as well as 100 MW solar and 30 MW storage from the Rockmont Solar Project, located in the Central Consolidated School District. However, the filing also submits a request for approval of a single 299 MW PPA and 130 MW ESA that would replace the separate PPAs and ESAs of the Rockmont and San Juan projects. 

Hearing examiners Anthony Medeiros and Ashley Schannauer offered four different scenarios for replacement power, with a preferred portfolio of 100 percent renewables. PNM, however, had been in favor of a plan that featured both renewables and natural gas. 

“We did propose four different scenarios of replacement mixes to replace the San Juan Generating Station and the one we were recommending, which is not the one the commission ultimately accepted, was the lowest-cost, most-reliable, and had a combination of natural gas, solar and battery storage,” Huber said. 

In addition to replacing the power from the generating station, PNM has a goal of being 100 percent carbon-free by 2040. 

Intervenors in the case, who won out in the end, however, wanted to see renewable energy that, in accordance with the Energy Transition Act, was a just transition for the community surrounding the coal plant. The state’s Energy Transition Act (ETA) requires 80 percent renewables from PNM by 2040 and 100 percent carbon-free by 2045. 

The filing also details the responses the utility received for an RFP for the 40 MW of demand-side resources. PNM said it anticipates filing those agreements by 30 October, however it has requested a separate proceeding as it is still negotiating contracts from responses. 

Intervenors Stephanie Dzur and Cydney Beadles, who proposed the commission go 100 percent renewable in a replacement plan instead of implementing natural gas, said they were looking for project bids that would provide renewables and assist the community surrounding the coal plan. In accordance with the ETA, they searched for a portfolio with zero ratio of capital to fuel costs while providing a tax base to the community. 

"We were looking for not only clean, renewable projects, but we were looking for bids not selected that were located in the school district to replace the tax base they were losing with the coal plant shut down," said Beadles, senior staff attorney at Western Resource Advocates. 

"This new law, the Energy Transition Act, is not just about energy. Its about a just transition...it tries to give all of those workers and people affected by the closure of the coal plant a soft landing," said Dzur, attorney for the Coalition for Clean and Affordable Energy. 

Dzur said the completely renewable portfolio brings PNM's resource mix from 20 to 40 percent renewables, at a cost that would have been within 1 percent of the cost of natural gas portfolio over 20 years.

The success of the San Juan replacement plant could serve as a baseline for the state's other coal plant, the Four Corners Generating Station, as well as future coal plant shutdowns across the country. Beadles said that the plant is located in the same part of the state, so the interests aligning with the ETA do apply. However, as PNM has a smaller interest in the plant, it could primarily be up to the majority owner in Arizona on how replacement power goes.

"Hopefully, this will be a model for how you can begin a just transition when these plants close..." said Pat O' Connell, senior policy analyst at Western Resource Advocates. "Hopefully because this happened in Arizona and works well, Arizona will adopt just transition principles and so when the majority owner of Four Corners exits that plant, it will get the New Mexico impact plus an additional benefit to the community coming from Arizona." 

"We do hope that its a model that other states facing coal plant shutdown will look to and adopt some or all of," Beadle said. 

Going forward, Huber said that the utility will be focusing on reliability and infrastructure to meet its goals. At present, PNM has plans to leave the Four Corners plant when contracts expire in 2031. 

“Our transformation to a 100 percent clean energy portfolio will also require that we focus on optimizing our future resource mix and strengthening our infrastructure to ensure the deliverability and reliability of new resources we integrate into our grid,” Huber said.