Change is coming to New Mexico.
As recently as 2011, coal accounted for more than 70 percent of in-state electricity generation; now it’s under 60 percent, and falling fast. Coal simply cannot compete in the face of cleaner, cheaper resources coming online.
But with this change comes opportunity. New Mexico has a chance now, before its coal plants and coal mining operations have closed, and before jobs have been lost, to chart an intentional path toward a clean energy future that is considerate of both the benefits and challenges that such a transition will bring. By committing to an energy plan dominated by renewables, policymakers in the state can secure good jobs, significant capital investment, and a brighter, cleaner, and healthier world for all New Mexicans.
And as highlighted in our new analysis, Committing to Renewables in New Mexico: Boosting the State’s Economy, Generating Dividends for All, this can all be achieved while keeping costs for consumers affordable, and electricity service reliable.
Recognizing the imminent transition ahead
In New Mexico, it is no longer a question of whether the state’s coal plants will retire, but when. This past summer, the state’s largest utility, Public Service Company of New Mexico (PNM), concluded that its most cost-effective portfolio of resources was the one that was entirely coal free. From a company that had been just a year prior staunchly defending its need to keep coal plants running, this announcement marked a stunning turn.
The question that follows, though, is what gets built to fill the gaps?
New Mexico has a nearly unparalleled array of renewable resource potential available to it, from strong and steady winds, to countless days of uninterrupted sun, to ready access to geothermal. These incredible resources mean that for the state, developing clean energy is particularly cost-competitive. And project developers have been flocking to New Mexico in response—right now, more than 1,800 MW of wind are under construction or in advanced stages of development.
The trouble is, a number of these clean energy projects and the ones that have preceded them have been built to serve out-of-state customers, not New Mexicans. Slowly the state’s utilities have been awakening to the cost-saving potential of investing in these resources themselves. But that interest is threatened to be overshadowed by some utility calls for a much larger buildout of natural gas.
Critically, our analysis shows that a growing dependence on natural gas would be short-sighted, and not in the best interest of consumers.
Studying the horizon, and finding all signs point to renewables
We set out to understand the different electricity pathways the state could take as coal plants retire and new resources are brought online to replace them. We found that no matter how you slice it, the least-cost future is one characterized by a high level of renewables. Indeed, our research found that renewables—and not natural gas—provided the best deal for consumers and the New Mexican economy.
So why the need for a policy, when the market suggests green all the way?
Because these market-based findings run counter to some utility plans in the state, which propose to keep building out natural gas over time. A policy commitment to a high-renewables future, on the other hand, makes sure that these clean energy opportunities are diligently considered and pursued.
And what incredible opportunities they are.
When we modeled steadily strengthening the state’s existing renewable portfolio standard (RPS) from its current target of 20 percent by 2020 to 50 percent by 2030 and 80 percent by 2040, we found that the policy could ensure the achievement of widespread benefits for New Mexicans, including:
Significant capital investment, on the order of $6 billion between 2016 and 2030 and $7.2 billion between 2017 and 2040, funding the development of 2,200 megawatts (MW) of wind and 870 MW of solar by 2030, and total on-the-ground capacity reaching 3,650 MW of wind and 3,900 MW of solar in 2040.
- Investments in wind and solar driving the creation of nearly 2,400 new direct, indirect, and induced jobs in construction, operations, maintenance and other related fields by 2030, as well as the annual potential for $9.5 million in land-lease payments by that time.
- The affordability of electricity costs for consumers, with typical monthly electric bills for households in most years lower than they were in 2016.
- Cleaner air leading to improved health—savings from the reduction in SO2 and NOx health effects alone could total approximately $305 million by 2030—and reduced water consumption on the order of 90 percent from coal plant retirements.
It’s clear that when the state commits to a clean energy future, the benefits and opportunities are significant, and long-lasting.
Good policy is needed to point the way
In New Mexico, when it comes to strengthening the state’s existing RPS, the goal is not to pick winners—it’s to ensure that winners will be picked. It’s also about defending against the alternative, where a growing dependence on natural gas risks saddling ratepayers long into the future with the costs of stranded assets, or infrastructure that would be abandoned before it had been paid off due to the country’s inevitable shift away from fossil fuels.
Last legislative session, SB 312 was introduced to strengthen the RPS, as modeled in this analysis. The effort ultimately stalled, but it’s expected to be revisited in future sessions. Policymakers would do well to take the time between to strongly consider how such a policy can leverage the investment benefits of regulatory certainty, and how that can help keep utilities pushing forward with clean energy progress.
At the same time, achieving a clean energy future in New Mexico requires more than any single policy can deliver. For example, the simultaneous strengthening of the state’s energy efficiency resource standard would bring down costs across the board.
An increased focus on demand-side solutions, such as broader implementation of time-varying electricity rates and targeted guidance to shift loads like through the electrification of hot water heaters, can similarly ease the integration of high levels of renewables.
So too can energy storage, as well as a proactive planning process to ensure that necessary transmission expansions are supported. Participation in broader energy markets can help balance loads, and save customers money. Finally, focused attention must be devoted to worker retraining, and developing viable and vibrant economic futures for communities currently dependent on coal.
Opportunity awaits. Policymakers have the chance to be proactive and actualize that positive potential now, and they should—not just for the benefit of New Mexicans today, but also for decades to come.
Update 10/20/2017 12:52pm: Minor updates to the text were added to further clarify the importance of strong renewable energy policy in the state.