New Mexico’s Clean Energy Opportunity Knocks

Look out, clean energy leaders, there’s a new governor in town—and this one campaigned atop a wind turbine.

For New Mexico, a state laden with clean energy opportunity but hungry for clean energy vision, such tall heights yielded a long hoped-for sight: a leader reporting clean energy potential as far as the eye could see.

And though her feet are back on the ground, now-Governor Michelle Lujan Grisham’s eyes have stayed fixed to that horizon, using her inaugural address to double down on realizing the state’s clean energy potential by forcefully calling for policies that look up, look out, and establish a forward course.

Over the past eight years, clean energy progress—alongside so much else—has been spinning its wheels in the Roundhouse. But now, with gubernatorial leadership there to help give it a push, the time is ripe to act. And if the already-filed legislation is anything to go by, legislators are ready—renewables, energy efficiency, electric vehicles, energy storage, transmission planning, and more.

In her inaugural address, Governor Lujan Grisham staked out her clean energy vision and then declared: “We can achieve this, and I will not relent until it is done.”

Or in other words: to the 54^th Legislature, game on.

Recognizing the clean energy opportunity

In New Mexico, renewable resource potential abounds—the state is overflowing with sunshine, awash with steady wind, host to ample geothermal. Its universities and national labs are at the forefront of clean energy research, and businesses looking to capitalize on the transition are emergent.

But policy vision and guidance from the state? It’s gone all but missing in action. As a result, though progress continues, it has slowed in the face of uncertainty.

This has been a disappointing turn for New Mexico, which was not so long ago positioned among clean energy leaders, implementing a series of policies that catapulted its clean energy sector forward. Foremost among these? The establishment of a strong renewable portfolio standard (RPS), guiding utilities to incorporate a modest yet steadily rising share of renewables in their electricity sales, ultimately reaching 20 percent renewables by 2020—among the top targets of its time.

But though formative in shaping a new and promising sector, the state’s RPS targets haven’t been strengthened since. Many of New Mexico’s one-time policy peers have recommitted themselves to the proven tool by lengthening and strengthening their own RPSs, but similar efforts in New Mexico have repeatedly stalled.

The resulting policy vacuum could not come at a worse time.

Because as is happening across the nation, New Mexico’s power sector is in the midst of unprecedented change as coal plants retire in the face of cleaner and cheaper renewables and natural gas. It is simply more expensive to operate old coal plants than it is to build these new resources, resulting in a wholesale shift away from coal.

But the question for New Mexico—the massive, course-determinative question—is what gets built to take coal’s place? Renewables, or a lot more natural gas?

Without a renewed RPS, the scale threatens to tip too far toward gas if the state’s largest power providers get their way.

Using an RPS as guide

As a reflection of the policy’s central importance to realizing the clean energy vision, Governor Lujan Grisham made strengthening the state’s RPS the centerpiece of her clean energy plan. Such a policy is now poised to advance through the legislature, and its passage could not be more urgent.

Because above all else, a long-viewed RPS sets a clear and definitive vision of where the state is heading, and establishes waypoints for staying the course. So as each decision arises regarding what replaces coal, an RPS ensures that eyes are to the horizon and investments are considered in context. What’s more, it signals to the nearly two-thirds of Fortune 100 and half of Fortune 500 companies with clean energy commitments of their own that New Mexico is the right place to invest.

Critically, the value of an RPS is predicated on the appropriateness of its targets and the details of its structure. The current proposed legislation makes important updates to the policy’s design and has waypoints of 50 percent renewables by 2030 and 80 percent by 2040 for investor-owned utilities, and similar shares but slower timelines for rural electric co-ops.

These targets are in line with recent technical and economic analyses by the Union of Concerned Scientists and the Natural Resources Defense Council, which independently found that such targets are not only technically achievable, but economically preferable, too. Indeed, both analyses concluded that such a steadily escalating share of renewables produces the least-cost option for the state—not to mention good jobs, significant investment dollars, and improved outcomes for public health and the environment.

Unfortunately, the power sector is anything but a free market, and winning on the merits does not guarantee coming out on top. Utilities in the state are increasingly comfortable with higher levels of renewables thanks to the existing RPS: Public Service Company of New Mexico (PNM) has stated support of higher shares of renewables on the system, and Southwestern Public Service Company’s (SPS) parent corporation, Xcel, just declared its intentions of going 100-percent zero-carbon by 2050. However, major gas buildouts are still being discussed, meaning continued carbon and co-pollutant emissions as well as the threat of ratepayers facing another round of costly stranded assets not long down the line.

With a strengthened RPS, there would be guardrails in place to buffer against such risks.

Tracking the 54^th legislature

The 2019 legislative session runs from January 15 through March 16. There is significant pent-up demand for progress on a wide array of issues, meaning legislators’ plates will be filled, and it’ll be a race to the finish to get things passed.

On the clean energy front alone, there are a series of policies in addition to the RPS that will meaningfully bolster the clean energy transition and work to ensure that all New Mexicans can benefit. We’ll be looking for a few key areas in particular, including:

• Ensuring a just transition from coal: The shift away from coal is proceeding in New Mexico, bringing enormous benefits but also threatening to leave the workers and communities who have long been powering the state at a loss. With concerted effort, like supporting workforce transition, economic development, and targeted placement of renewables, the impacts of the transition can be dampened, and new opportunities can emerge. One potentially helpful tool is called “securitization,” which achieves lower-cost financing to facilitate the transition and consequently frees up funds that can be deployed to support development efforts.
• Increasing renewables deployment: A number of policies will be looking to boost uptake of renewables from a range of angles, including state renewables procurement, tax credits, increased access through community solar, workforce development, energy storage, and transmission planning.
• Changing energy use: Energy efficiency is the single most effective tool for reducing emissions and lowering costs. An update to the state’s energy efficiency standard will remove disincentives currently curtailing utility efforts; this change will lead to meaningfully reduced customer bills. So too will concerted efforts for energy conservation projects specifically supporting low-income customers, for whom energy costs represent a disproportionate share of income.
• Electric vehicles: Transportation is now the largest source of greenhouse gas emissions in the US, and the electrification of the transportation sector supports significant emissions reductions—and enormous public health benefits, too. The first step in the process is increasing electric vehicle uptake, which includes lowering barriers for purchase, and lowering barriers for use.

In many ways, New Mexico is perfectly positioned for the moment at hand. The chance to be nimble in shaping what replaces coal persists. But this window of opportunity is closing, and fast. Major power project decisions are looming on the horizon, and the time is now to offer certainty on the path forward for investments and labor alike; to assure that the commitment to pushing the energy transition forward is here, and clear, and to the benefit of all.