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The next generation of electricity production in New Mexico

Electricity generation in New Mexico has historically emphasized one fuel source. Before 1960, virtually all electricity generation in New Mexico was from oil and natural gas-fired powerplants. The opening of the Four Corners Plant in the 1960s and the San Juan Plant in the 1970s changed in-state electricity generation to almost 90 percent coal-fired as those two plants combined have a capacity of 3,968 megawatts. Thus, in 2000, 88.3 percent of the 32,396,000,000 kilowatt-hours of electricity generated in state came from coal-fired plants. In the last 25 years, only two major plants have come on line -- the rural co-ops coal-fired Escalante Plant (235 megawatts) in 1985 and the natural gas-fired Person Plant (140 megawatts) at PNM's former oil-fired plant site in 1999.

While the two coal-fired behemoths in northwestern New Mexico will likely operate for decades more, the next transition in electricity generation is underway. Currently planned new power plants (see table) include 2,900 megawatts of natural gas-fired plants and 300 megawatts from one coal-fired plant. If all of those plants came on line, more than a third of New Mexico's generation capacity would be from gas-fired plants within five years.

The actual transition will not be so rapid, as one of those plants has been cancelled by the company, another is on hold, others face public opposition (see Gas Plants and Socorro), and there are no adequate markets or transmission lines to support others. In addition, some of the gas-fired plants would be used only at peak times (in the summer or while other units are off-line for maintenance) while the coal-fired plants would continue to provide much of the base load capacity.

ENVIRONMENTAL CONCERNS

Fossil-fuel powerplants need a lot of water. Water-cooled coal-fired plants can use about 15 acre-feet of water per year per megawatt. Thus, the state's three coal-fired plants combined use -- and mostly lose through evaporation -- about as much water as the 17 billion gallons that Albuquerque used in 2001. Air-cooled plants use only about one-fifth the amount of water as water-cooled coal plants, although they are also more expensive and can operate less efficiently.

Companies with water-cooled natural gas-fired powerplants often say that they use very little water. A simple cycle system used for peaking purposes may use less than 100 acre-feet of water a year. But if that plant is converted to a combined cycle system the water usage could increase by 20 times or more to about one-third as much water per megawatt as water-cooled coal plants. Thus, the owners of gas-fired plants are acquiring water rights to significant amounts of water, at the same time that there is a significant shortage of water in New Mexico for municipalities, agriculture, and fish and wildlife habitat.

Air emissions are another significant concern about fossil-fuel plants. Coal-fired plants, even using "state-of-the-art" technology, emit hundreds of tons of carbon monoxide, nitrogen oxide, sulfur dioxide, volatile compounds, and particulate matter each year. Such emissions damage human health and the environment, and they contribute to global warming. In the deregulated electricity market, air pollution permits may be the only regulatory forum that allows for public participation, as is usually the case in New Mexico where the Public Regulatory Commission has little or no jurisdiction over the new plants.

RENEWABLE ALTERNATIVES

There is increasing support for electricity generation from renewable sources -- solar, wind, biomass. Some surrounding states have promoted wind energy much more successfully than New Mexico (see pages 6-7).

In New Mexico, the Coalition for Clean Affordable Energy (CCAE), composed of eight environmental and consumer groups including SRIC, are encouraging development of hundreds of megawatts of capacity from renewable sources. CCAE is using public education, legislative and regulatory advocacy, and work with companies and communities especially in support of wind power projects.

LEGISLATION AND REGULATIONS

One finding in New Mexico's Electric Utility Industry Restructuring Act of 1999 is that "protection of the state's environment and the promotion of renewable energy technologies are sensible endeavors that may be encouraged in the restructured electric industry." The law includes a System Benefit Charge (SBC) which would be included on all in-state retail kilowatt-hour sales, part of which would be used "to encourage the use of renewable energy." Because the start of the restructured system was delayed from January 1, 2002 as specified in the 1999 law until January 1, 2007, the SBC also has not yet come into effect.

For the past year, the New Mexico Public Regulation Commission (PRC) has been considering a rule that would enact a renewable portfolio standard for in-state electric utilities. The proposed rule (Case No. 3619) would phase in new renewable resources over several years, beginning in September 2003 and requiring at least 10 percent of a utility's retail generation be from renewable sources by 2007.

At the PRC public hearing on May 15, many organizations, individuals, including ranchers, and renewable energy companies spoke in favor of the renewable portfolio rule, which was supported overwhelmingly by those who spoke. Some utilities oppose the rule, saying that it would increase electricity costs and that the PRC did not have the authority to order it. The five-person PRC should issue a ruling within the next few months.

Other state and national legislation will affect the future of wind generation plants. In March, Congress passed and President Bush signed legislation to reinstate a two-year federal tax credit for wind generation. And this year the New Mexico Legislature passed a one cent per kilowatt-hour state tax credit for solar or wind facilities that are 20 megawatts or larger.

The national energy bill passed by the Senate in April includes a federal renewable portfolio standard that would require retail electricity providers to use renewable resources. The requirement would begin at one percent in 2005 and increase to ten percent by 2019. The House-passed energy bill has no such provision, and it is unclear what energy bill, if any, will become law.

While the "competitive" electricity market is supposed to provide choices to consumers, there is much work to be done before most people can choose renewable energy sources. It will take action by individuals and groups in support of legislation, regulation, and actual renewable projects. At the same time, the proposed new fossil-fuel plants threaten to absorb available capital and glut the markets, while using up diminishing supplies of natural gas and water and producing increased environmental damage. The choices that are made will profoundly affect present and future generations.