PNM’s zero carbon math problem

Not only did the Public Service Company of New Mexico (PNM) successfully lobby in the 2019 Legislature for a 50% renewable mandate by 2030, it has now put itself on record as saying it’s going to be “zero emissions” by 2040. And one actually neat feature is that at any given time you can find out how much electricity PNM is getting from so-called “renewables.” In looking at it over a few days that amount ranges up to the mid-30% range by day and drops to single digits at night.

Of course, we at the Rio Grande Foundation are highly skeptical of that transition and the costs it will foist on New Mexico rate-payers and we made that argument in committees and in the media during the legislative session. PNM’s website has some interesting graphics regarding the transition. You can find them below. The first shows how they are going to change their electricity portfolio in the decades to come:

Next, we see a chart showing more details. But what we don’t see is the math. That is where we have the problem.

So, we start out -286 MW for the shutdown of units 2 & 3 at San Juan Generating Station.

Add in 50 MW of solar coming online this year and we’re at -236 MW. We subtract another 562 with the total shutdown of San Juan (and we’re at -798 MW by 2022. Another 200 MW comes offline with the shutdown of Four Corners Power Plant in 2031 and we’re -998 MW total.

Finally, PNM wants to eliminate an ADDITIONAL 1081 MW of natural gas generation between 2028 and 2040. So, that means PNM will reduce electricity generation by 2,000 MW of traditional electricity generation between 2017 and 2040.

According to the chart below PNM’s capacity at the end of 2017 was 2,801 so PNM is swapping out more than 70% of its electricity generation and only has specific plans for 50 MW of that total. Of course PNM’s 2040 “zero carbon” goal is NOT synonymous with 100% “renewable,” but even if PNM rapidly ramps up on nuclear power from Palo Verde, where does all that “renewable” electricity come from? We don’t know. More importantly, while PNM claims that “renewables” will be cheaper, real-world experience indicates otherwise.

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6 Replies to “PNM’s zero carbon math problem”

  1. Since public utilities are at the mercy of state regulators, PNM made a sound business decision. If they tried to make the case that renewable mandates are impractical and expensive, they would be pilloried by politicians and environmentalists and would inevitably lose. Going with the flow offers the least risk because regulators are required to allow utilities to recover their costs through rate increases. If regulatory commissioners decline to protect ratepayers, that’s not PNM’s problem.

  2. PNM, like most regulated public utilities, has a guaranteed return on assets (I think in the range of 10% to 12%). In other words, regardless of how much PNM has to invest to produce electricity, it must price its electricity high enough to produce its guaranteed ROA (Bend over ratepayers!). Notice that PNM did not make much of a ruckus about closing down coal fired San Juan?

    Here is something I found on the internet about utilities’ guaranteed ROA:

    Because utilities are regulated, their allowed ROE is set by PUCs. The average ROE across 93 industries and almost 8,000 firms for the US market is 14.49%. As one might expect, utility companies – with an average of 10.13% – are on the lower end of the spectrum because they are viewed as less risky investments.

    Rate of return varies significantly from state to state, as each PUC has exclusive authority to regulate utility operations as they choose. In AEE’s Power Portal database, which tracks ROE for over 100 investor-owned utilities across the country, the highest allowed ROE belongs to Alabama Power Co., at 13.75% while the lowest belongs to United Illuminating Co. (CT) at 9.15%.

  3. Good to see discussion on N.M.’s biggest utilities future electric generation plans.

    A couple of comments:
    1. The “replacement assets” comparison is not highly meaningful.
    – The amount of generation that PNM is retiring is not necessarily equal to the generation nameplate capacity that must be built. Currently, PNM has a very high “reserve” or excess capacity margin that should probably be brought down. The “utilization” metrics of each generation asset are also critical to the understanding, as is the ability for utilities to purchase power on the open market.
    2. Concern about N.M.’s transition to renewables is always warranted. However, RGF’s ardent support for coal power, which costs more than twice what solar and wind cost today in N.M. (as measured by cost of electricity at the power plant busbar) hardly seems consistent with RGF’s stated goals for state prosperity. I DO however believe that all constituencies should be represented, even those who are rent seeking.
    3. The point above about utilities earning rates of return is certainly true. The issue however is not that PNM seeks to earn a rate of return, but that the existing N.M. utilities regulatory model is outdated and broken. The “utility model”, which awards monopoly service areas in return for public regulation of utilities, was first setup by FDR in the 1930’s. The PRC/utility battles currently ongoing in N.M. are not even focused on the right questions.
    A much better model would be to measure N.M. utility rates against those of other states, and let the utilities earn outsized returns if they deliver the lowest utility rates in the USA. N.M. could succeed at this because the state enjoys the lowest cost solar and wind generation costs in the United States.
    A new utility financial model such as the one suggested would also make it far easier for those unschooled in the complexities and nuances of the electricity generation business to opine knowledgeably….it would be analogous to measuring highly complex companies on a quarterly EPS basis.

  4. As we know, Australia, England, and Germany are reconsidering and reevaluating “renewables” as they have tripled the price of electricity delivered, forcing peolple out of their homes, and other minor inconveniences.
    China is adding more coal powered plants than Australia has. Annually?
    No, or VERY FEW (one or two) nations signed to the paris Accords has complied as yet.

    Without reliable storage in absolutely huge quantities (Raising costs even further by massive percentages) the idea of renewables other than nuclear is plain crazy. Get a grip, and get studying. Like the cell phone issue (If I can see it ever, I don’t want a tower, but I want service), I suspect when I put a wind tower on my land, great complaints will arise from the opposition to viewshed changes. I (and County) received complaints about my water tank and windmill.

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