Paul attended the recent PNM stakeholder meeting and there was a lot of information discussed at the meeting including several potential paths forward for the utility. Paul and Wally spend some time discussing PNM’s path forward and what it means for ratepayers and taxpayers. You can find the sheet being discussed here.
The head of UNM’s economics department recently took a look at UNM’s budget and the funding cuts it has experienced over the past decade. Paul and Wally offer a dose of reality on higher ed spending in New Mexico and how generous State funding is for higher education in New Mexico.
New Mexico Congresswoman Torres-Small recently bucked her own party in voting against raising the national minimum wage to $15/hour. This was a good move on the merits, but what does it mean?
Finally, RGF has an upcoming event in Farmington.
Thanks for pointing out that PNM proposes to depreciate its new natural gas plants in 18 years vs. 30. This is a big deal because depreciation generates an annual expense the utility must cover in setting its rates. Faster depreciation means ratepayers pay more per year over a shorter service life.
Add to this the “stranded cost” of closing a coal plant that has not been fully depreciated. As I understand it, taxpayers are on the hook for the bonds the state will issue to cover this cost.
When it comes to utility rates, California here we come!
A couple of comments regarding PNM’s various alternatives:
Comparing the costs of keeping San Juan open vs. newly built renewables or natural gas plants:
The costs associated with the continuing use of coal powered stations such as San Juan are actually pretty high. For example, according to the Energy Information Agency, combined estimated variable and fixed operating costs in 2020 at conventional coal plants are around $3.5 per megawatt hour. See
https://www.eia.gov/outlooks/archive/aeo15/pdf/electricity_generation_2015.pdf
Add in any potentially capital costs required to keep the plant running over the next 20 years and it easily exceeds the levelized costs associated with new solar, wind or natural gas combined cycle plants.
“Have utilities ever misestimated costs with new technologies?” (with reference to batteries).
Yes they have, but the costs associated with solar/wind+batteries are pretty well understood, at least with regard to existing battery technologies (in particular solar+lithium ion batteries at utility scale). See Lazard’s analysis:
https://www.lazard.com/perspective/levelized-cost-of-energy-and-levelized-cost-of-storage-2018/
You also seem to overlook the potential cost uncertainties in a status-quo scenario or for a scenario that uses more natural gas. If a different administration comes into power one could see a return to the the Obama era clean power plan. With democratic majorities in congress and a democratic president, one could even imagine a carbon tax which would make coal or natural gas based electricity much more expensive. In any case, there is no guarantee that the current low natural gas prices will stay that way for the next 20-30 years.
I am just using PNM’s information in my analysis. For example, the overall cost of their most favorable transition is $4.7 billion (that’s $231 million annually over 20 years). They told me at the meeting they could save $30 million annually on fuel by abandoning San Juan Generating Station. Where does the additional $200 million annually come from? I’m sure there are maintenance savings, but that money still has to come from somewhere…taxpayers or rate-payers?
Given the really low information content of the material that PNM has given out it is almost impossible to evaluate their alternative proposals with any degree of certainty. One interpretation could be that they are comparing all costs (O&M, capital, fuel) for the various proposals compared to status-quo and found that the major cost savings would be through reduced fuel costs (but this is just a guess).
Your question ($30M saved vs. $200M extra spend – savings?) is certainly legitimate and deserves some sort of an answer.
Recent bill/voting analysis indicates that, so far, Torres Small has voted with AOC 93% of the time and with Pelosi 90% of the time. What her vote against the minimum wage increase means is that she hopes to come home with a fake claim that she is in touch with CD2 constituents, which she clearly is not.
The EIA study cited above was done in 2015 and was full of caveats, but most notably it incorporated a “cosmic” cost estimate for fossil fuel generation:
“In the AEO2015 reference case, 3 percentage points are added to the
cost of capital when evaluating investments in greenhouse gas (GHG) intensive technologies like coalfired power and coal-to-liquids (CTL) plants without carbon control and sequestration (CCS).”
The EIA cautions against comparing LCOEs because the cost to accommodate intermittency is not included, then they throw in a “carbon tax” and that really makes LCOEs worthless. Ditto the EIA.
The number I cited was just for operations and maintenance (including fuel) and didn’t include any capital costs. I used the 2015 study rather than more recent ones because the newer EIA studies don’t consider traditional coal plants.
Getting away from LCOE estimates and all the assumptions associated with them is the fact that as of 2017 around 16% of US coal fleet had been retired over five years and there are few plans out there to replace these with new ones. See
https://www.scientificamerican.com/article/will-the-u-s-ever-build-another-big-coal-plant/
Most new generation coming on line is by either natural gas plants or non-hydro renewables. See
https://www.eia.gov/todayinenergy/detail.php?id=38053
This indicates that in spite of the intermittency costs of non-hydro renewables that they are cost competitive in the current regulatory environment while coal is not.
FYI:
http://www.grantcountybeat.com/columns/libertarian-leanings/51980-coal-follies
Another FYI:
http://www.grantcountybeat.com/columns/libertarian-leanings/51814-public-service-of-new-mexico-s-big-con
Coal is not competitive with natural gas in the US. The rest of the world is a different story. See “Coal Follies” below.
“Intermittency costs” are huge. To have 24/7 reliable electricity using solar and wind requires very expensive battery backup. I don’t believe there is a place in the world where a grid that is “just” 40-50% renewables has Kwh costs less than 100% coal.
There’s an article by Francis Menton, “The Disastrous Economics of Trying to Power n Electrical Grid with 100% Intermittent Renewables,”6/14/19 that appears to be well researched. Google Bill Gates and Michael Shellenberger for global warmist opinions also citing the costs of renewables.
Intermittency costs aren’t necessarily huge, at least in the case of large distributed networks using a combination of wind and solar. A group of Stanford researchers have shown that for a number of large geographic regions, it is possible to cover all energy demand (not just current electrical, but also that of transportation after a conversion to EV’s and hydrogen powered vehicles) through a highly connected grid of renewable resources (primarily wind and solar) with long term costs comparable to current levels. See their paper in the proceedings of the National Academy of Sciences and the references contained therein:
https://web.stanford.edu/group/efmh/jacobson/Articles/I/CombiningRenew/CONUSGridIntegration.pdf
Their simulated power system is based on actual weather and electrical usage data and wouldn’t require massive investments into electrical storage capacity beyond some additional pumped hydro and that provided by EV’s (although it does recommend considerable investment into thermal storage systems for building heating and cooling).
All of their results have been published in peer reviewed scientific journals and have been extensively cross checked by third parties from various institutions. Although their results are based on simulations, it is the same sort of methodology used by utilities and independent power producers to estimate potential demand and costs associated for new plants and infrastructure.
That is quite a fantastic study. I would note two things.
First, it describes an extremely complex integrated grid system that does not exist today. If we were to colonize Mars, this might make sense. It might even make sense here on earth someday, but in the meantime, we are going to pay very large electric bills to achieve the new RPS goals in New Mexico, e.g. 40% by 2025.
The second point is that the study describes a system that depends very much on using hydrogen, from electrolysis I assume, to supply transportation fuel. Using hydrogen is perhaps a lot easier said than done. See the following:
https://ddears.com/2019/06/14/a-hydrogen-fantasy/
The advice I would give anyone seeking to eliminate fossil fuels is to go nuclear, a la Gates, Shellenberger etc. At the very least, let’s put RPS goals on hold until some sort of economical technology is in place.
Thanks for sharing that article, even though it is a mile or two above my head.
I wouldn’t argue with you that developing this complex grid would be a major problem. (The typical time to get approval for a new long distance power line is between 15-20 years, when it gets approved at all, usually due to challenges from, you guessed it, environmentalists).
I also think that transitioning to a hydrogen based transportation sector is a bit of pipe dream due to the additional infrastructure required, but it does have the advantage of synergizing well with intermittent renewables (using excess intermittent electricity production to produce hydrogen, rather than just curtailing it). The issue at hand (PNM’s plans) doesn’t really deal with transportation, so that can be overlooked for the moment.
Dealing with intermittency just from New Mexico’s perspective purely for electricity production will require either trading electricity out of state in wholesale markets or storage (or some combination of these). Geographically, New Mexico is pretty well positioned for trading since we are adjacent to the ERCOT (Texas) and Eastern Interconnections and are already part of the WECC Western Interconnection. Whether this option can be exploited economically will depend on the development of wholesale markets in these regions and probably some new or upgraded power lines going East. (The four corners hub is already well connected going West).
Solar plus storage is also starting to look economically viable due to rapid cost reductions in battery prices in the last couple of years. See
https://www.lazard.com/media/450774/lazards-levelized-cost-of-storage-version-40-vfinal.pdf
Still a lot of “ifs” here for NM 100% renewable at competitive costs (just electricity, not transportation, and net-zero, not island-zero), but not looking as patently absurd as it did even three or four years ago.
Francis Menton writes a terrific blog, Manhattan Contrarian, and in a blog last August he cited an article in MIT Technology Review which reviewed a study on how much it would cost for California to go 80% and 100% renewable.
https://www.manhattancontrarian.com/blog/2018-8-6-what-is-the-cost-of-getting-to-a-100-renewable-electric-grid
Using current technology costs, to get to 80% would cost California $1.9 trillion, 100% $7.2 trillion. A big part of the cost is accounting for SEASONAL variations in wind and solar, something we don’t hear much about.
Anyway, cut the $1.9 trillion by 90% and if my math is correct that’s $190 billion, enough to build 12 Diablo Canyon nuke facilities at $15B apiece which would supply 120% of CA’s current electricity needs. Lots of new EVs could be plugged in and there’s $10B left over to increase government salaries. Sweet deal.
Bottom line: sounds like it’s still patently absurd.
Why don’t we continue this conversation via email and stop boring Paul’s readers, assuming there are any still out there? I’m at elburropete@gmail.com. My blog site is silvercityburro.com where you will find that I am an islamophobic/cllimate-denier racist.