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Progress of Renewable Energy in New Mexico

New Mexico is blessed with vast and easily developable renewable energy resources. The potential is staggering: The sunlight that falls on New Mexico contains roughly 34 times the entire energy demand of the United States. More down to earth, a three by five mile solar farm, with all the conversion efficiencies accounted for, could produce about 2000 megawatts at peak output, roughly the peak demand of the entire state.

For many years, however, developing these resources was, in the words of some power utility representatives, just a dream of “radical environmentalists," and “well meaning elitists”. But following significant advances in wind power, a seven-year coordinated effort by the New Mexico Coalition for Clean Affordable Energy (CCAE), strong leadership by Governor Bill Richardson and the Public Regulation Commission (PRC), and some bold first steps by Public Service Company of New Mexico (PNM), the state is now making significant progress in the development of its renewable sources and efficiency.

Progress to Date in New Mexico

Today, about 5 percent of New Mexico’s total electricity supply is supplied by renewable sources, primarily from about 407 megawatts (about $407 million worth) of wind power generation on New Mexico’s Eastern Plains. This is enough wind generation to power about 200,000 New Mexico homes on average, and it currently displaces about 1 million tons of greenhouse gas emissions per year. The current 5 percent is scheduled to increase to about 7-8 percent by 2011, at which point the investor owned utilities will satisfy the 10 percent targets currently set by state law (these utilities serve about 70 percent of the total load). In light of greenhouse gas reduction targets recently set by Governor Bill Richardson, and for other reasons, advocates, utilities, and state officials are now actively contemplating much larger increases by 2020, in the range of 20 percent-30 percent.

One new large wind farm was recently built by Xcel Energy simply to offset high natural gas costs. That utility’s portfolio in New Mexico, which normally depends in large part on natural-gas fired generation, will already have 17.8 percent wind in 2006, showing that large percentages are possible, and that renewables are cost effective.

Although utility customers have been able to ”net-meter” photovoltaic (PV) systems (spin their meters backwards with their own renewable energy) since 1998, the renewable energy era began in earnest for New Mexico when the PRC adopted a Renewable Energy Portfolio Standard, or “RPS,” in 2002, which was subsequently codified into state statute by the Legislature in 2004. This law requires investor owned utilities (co-ops and munis are exempt) to provide 5 percent of their power from renewable sources beginning in 2006, increasing to 10 percent in 2011. The law also requires that the renewable content “shall be diversified” as to source type, effectively meaning that it can’t all be wind power. The RPS also allows utilities to buy Renewable Energy Credits, or “RECs,” from other New Mexico utilities, or even from customers who generate their own power, to satisfy their requirements. To make non-wind sources more attractive, RECs from solar systems are credited at three times the value of wind power, while biomass and geothermal at twice the value of wind power RECs. These provisions are the basis for some incentives for distributed solar energy currently under consideration by the Public Regulation Commission (see below).

Energy efficiency programs for consumers worth about $15 million per year will appear soon in the form of rebates for energy efficient appliances, low income weatherization assistance, and other measures. State agencies, schools, municipalities, and tribes, are also now eligible for several million dollars per year worth of “clean energy grants,” and state agencies and schools are able to issue about $20 million in bonds for energy efficiency upgrades, and to use the net-savings for renewable energy projects.

Incentives for Solar Energy are in the Pipe

Incentives for distributed (non-utility) solar energy are likely to be in place by March of 2006 in New Mexico, and will likely be designed carefully to complement the new federal solar tax credits. One of these is a “production-based” incentive that, if approved by the PRC, will pay PNM customers that have grid-tied (net-metered) photovoltaic systems for the Renewable Energy Credits (RECs) their systems generate. This incentive will be “production-based” in the sense that customer-generators are paid for the actual green kilowatt-hours they generate. The utilities will then be able to apply these RECs to help meet their renewable energy percentage requirements under the RPS.

The payment level currently being proposed by PNM and CCAE to the PRC, following some recent hearings and negotiations, is 13 cents per kWh through 2018, which is about 5 cents greater than PNM’s retail power rate. This is a very strong incentive, and its level is partially justified by the three-credit multiplier for solar in the RPS law.

Because such customers are utility rate payers themselves, they will receive this payment for all the solar power they generate, whether they use the solar power themselves, or whether it’s fed back into the grid. The payments will also be in addition to the effective payment that customer-generators get by spinning their meters backwards under New Mexico’s net-metering law. Thus the total incentives from net-metering and the REC buyback will be worth about 8 + 13 = 21 cents per kWh, which over a six year period is worth about $3700, or 37 percent of a typical home solar electric system.

Approval of this program now rests with the PRC. Commissioners seem supportive, but some technical staff members are known to be skeptical of the idea. Staff recommendations will be made in December, and approval will likely occur before January 1st, 2006.

A grid-tied photovoltaic system on a home in Santa Fe, New Mexico

In addition to the production incentive, there are good prospects that the state will adopt a solar tax credit incentive in 2006, to provide some “upfront” incentive for solar systems (unlike the production incentive, which is spread out over many years). The 2005 Federal Energy Policy Act also contained a solar tax credit, which will provide a tax credit worth 30 percent of the installed cost of systems. Unfortunately, this credit is capped at $2000 for residences, which is good enough for small solar hot water systems (take note!), but not large enough for residential PV systems (there is no cap for systems owned by businesses, which is very good). Worse, the federal solar credits will only be available for two years. The purpose of a state credit, therefore, will be to both enhance and extend the federal credits. We, the CCAE, are proposing that the state credit will be structured to effectively increase the $2000 cap of the federal credit to $9000, and to extend solar tax credits for ten years.

The Governor has endorsed a solar tax credit bill for the spring session, along with several other bills. The CCAE and the administration have also presented the idea to several interim Legislative committees with good effect. The goal now is to keep the momentum going and get this incentive in place.

A good source for comprehensive information on the New Mexico and Federal clean energy incentives is www.cfcae.org.

Grid-Tied (net-metered) 10 kilowatt PV system at the Indian Pueblo Cultural Center, Albuquerque New Mexico

Future Outlook

Despite all the recent progress in New Mexico, it should be kept in mind that a clean, sustainable energy future is not yet assured – not by a long shot. Huge growth in renewable energy generation is still needed, and stopping global warming in time, for example, is still an extremely daunting task even if renewables continue to grow rapidly.

The combined threats of global climate change, nuclear proliferation, and dwindling oil reserves, are all reasons for the U.S. to undertake a major, unprecedented push for renewable energy right away. The potential political momentum for this is being diluted, unfortunately, by opportunistic attempts by conventional energy industries to capitalize on these very same threats.

Proponents of nuclear power, for example, are attempting a major revival of nuclear power in the U.S. and abroad, which is being greatly bolstered by aggressive nuclear development in China and many other countries. Global warming is now the battle cry of this effort, as many are no doubt aware. But nuclear weapons proliferation issues, which was generally simply ignored by the industry in the past, is also being used. In particular, its being used as a justification for the U.S. to develop new nuclear technology and also to dominate and control nuclear generation by companies that host U.S. nuclear technology. The idea is that we, the U.S., will let you have nuclear power, but only if you allow us to completely control the source of fuel and the technology you use.

This proliferation angle is all the more intensified by the fact that uranium ore sources with high proportions of U235 are relatively rare, such that a major increase in nuclear power generation will likely create extreme pressure for the development of breeder reactors that can convert U238 into plutonium (there is generally much more U238 in uranium ore than in U235).

Another source of dilution for political support of renewables is growing interest in “carbon sequestration,” which means storing greenhouse gas emissions by storing them underground in oil & gas wells and saline aquifers. While there might be a serious role for carbon sequestration given the seriousness of the global warming problem (the jury is still out on this in my opinion), enthusiasm for sequestration, bolstered by the enormous political influence of the fossil fuel industry, is already arguably diluting and weakening political support for developing renewable sources instead. The impact of this is subtle, but becomes more obvious when one investigates why a more aggressive shift to renewable sources is not underway. Many environmental groups are now pushing carbon sequestration, and there is some definite justification for doing so. But extreme care should be taken to insure that such efforts do not undermine the development of renewables.

Political support for renewables is especially critical at this time, because a host of specific, major tasks need to be completed now before we can be reasonable assured that renewable energy will be able to fully compete on its own. These include (but are not limited to):
1) Keeping sufficient incentives in place to keep the current subsidized growth rate of photovoltaics on track through at least 2016: The PV industry has been growing steadily at about 30 percent per year over the past decade, and recently broke the 1 gigawatt per year production mark (worldwide). Future cost trajectory estimates by National Renewable Energy and others suggest that PVs can be competitive on a widespread basis beginning about 2016 if these trends continue. This is only ten years off, and while many countries and individual U.S. states currently have strong incentives, the size of the industry is such that keeping this rate of growth, in the face of opposition, will be difficult.
2) Getting several thousand megawatts of Concentrating Solar Power (CSP) on the ground and running: This technology uses solar heat to generate steam or to heat air to generate electricity, or use high temperature PV cells. Some forms of CSP can incorporate energy storage (storage of heat in molten salts or as steam directly), while others can be “firmed up” efficiently with relatively small amounts of fossil generation. As such, CSP is extremely promising as a way to displace large amounts of fossil generation. Early projects in California have proven the technology, and a number of states and countries are now planning CSP projects. Studies by the Department of Energy (Sargent and Lundy Report), suggest that CSP can become competitive when the industry reaches a scale of 2000-4000 megawatts.
3) Getting “renewable-hydrogen” production and usage off the ground. Wind power, for example, and ultimately solar, will have a much brighter future if hydrogen energy storage can be developed to a large scale over the next two decades. There are no fundamental barriers to a hydrogen economy based on renewable sources: Hydrogen can be efficiently (70+ percent) produced by splitting water with renewable electricity right at filling stations and in buildings; Hydrogen can be efficiently stored in special carbon fiber wrapped tanks (already available commercially); and hydrogen can be effectively used in hydrogen-hybrid vehicles. The latter means we don’t have to wait for fuel cells – we could be driving renewable-hydrogen cars today if we could get auto manufacturers to offer them. Fuel cells are likely to be an effective hydrogen technology in 10 to 20 years, and they will likely vastly expand the applications for renewable hydrogen to power everything from laptops to entire cities.

The CCAE is committed to accomplishing these tasks, or at least having New Mexico help accomplish these tasks, to the greatest extent possible over the next ten years.

– Ben Luce, Ph. D.
Policy Director, Coalition for Clean Affordable Energy
www.NMCCAE.org
Email: BenLuce@NMCCAE.org