The debate about how to offset the generation power that would be lost after the closure in June 2022 of the 847-MW coal-fired San Juan Generating Station is finally over, as the New Mexico Public Service Corporation (PNM) has elected to step forward instead of San Juan with four solar+storage projects.
As state regulators ordered PNM to purchase San Juan replacement electricity from utility-scale renewables earlier this summer, the decision is not entirely unexpected.
The four schemes expected to replace the generating station would all be located in the same town as the generator in Farmington, New Mexico. 650 MW of solar generation and 300 MW/1,200 MWh of accompanying energy storage constitute the quadruplets. Two of the projects have already been approved by state regulators: Arroyo Solar, which has a storage capacity of 300 MW and 150 MW/600 MWh, and Jicarilla Solar I, which has a capacity of 50 MW and 20 MW/80 MWh.
PNM is pressing hard to gain regulatory approval before Dec. 4 for the other two sites, San Juan Solar 1 (200 MW of generation and 100 MW/400 MWh of storage) and 201LC 8 m (100 MW and 30 MW/120 MWh), so that construction will commence in January to achieve commissioning in June 2022.
The contracts are also projected to raise property-tax receipts of up to $74.7 million over the 20-year terms of the agreements and produce nearly 500 jobs each month during the construction of the contracts.
The acceptance of the power procurement contract by PNM represents the ultimate death blow to a long-shot retrofit project for carbon capture promoted by elected officials in the City of Farmington and Enchant Electricity. It is worth remembering that 5% of San Juan is owned by the city of Farmington.
Energy analysts and green supporters, including Karl Cates, an IEEFA analyst, had earlier blasted the carbon-capture plan.
In its business proposal, the retrofit was still rife with various gaps, which neglected such basic issues as who would purchase the electricity from such a complex and high-priced undertaking, how it would be distributed, and who would finance it, “said Cates.”
Along with the State Energy Transformation Act, which mandates 50% of the state’s power to come from renewables by 2030 and 80% by 2040, the price point was a crucial decision in the approval of the PNM proposal.
Wholesale electricity costs are $18.65 per MWh for the Arroyo plant, $19.73 for the Jicarilla plant, $26.65 and $27.35 for the San Juan Solar I and Jicarilla Solar I plants, respectively. Coal-fired generation, by contrast, runs from $66 to $112 per MWh, and combined-cycle fired gas generation is $44 to $64 MWh. Both of these figures are based on the most recent annual energy cost calculation by Lazard.
The carbon-capture plan was a long-shot from the outset, according to Cates, as state regulators and PNM were still focused on replacing solar generations. At that point, what programs would be included, not what money, became the issue.
According to Cates, this initiative, as critical as it is for the energy transformation in New Mexico, sends a clear signal to the rest of the country.
If this kind of dedication is made by a utility of this scale, other utilities will look at it and respond accordingly, ” said Cates”. We have the Energy Transformation Act, part of which is policy-driven, but I have to assume that much of it is market-driven. Some offers are 18-25 per MWh, which is cheaper energy. It’s as much of a corporate decision as anything. They’re a managed service that needs to be attentive to its rate base. It is one way of getting there.
Source – here