Driven by economics, Public Service Co of New Mexico plans to exit all its coal-fired generation by 2031, according to a draft integrated resource plan released April 20.
"The results of the IRP illustrates that energy needs are changing, and replacing coal supply with renewable energy and more flexible generators will save money in the long run," the draft IRP said.
PNM's proposed portfolio is the least-cost option because it cuts the fixed costs and operations of PNM's existing baseload coal-fired resources while increasing the utility's flexibility to produce energy that better matches with customers' expected energy use, according to the draft plan.
The finding follows a decision in February by a group of utilities to retire the 2,250-MW Navajo plant in Arizona in the face of low natural gas power prices that make generation from the plant relatively more expensive.
Also, in an effort to maintain opportunities to make real-time power purchases, PNM said it will explore joining the growing Western energy imbalance market. PNM owns 2,323 MW and contracts for 468 MW of renewables.
In the near term, the resource plan focuses on one of the largest power plants in the West, the 1,800-MW San Juan generating station near Farmington, New Mexico. PNM has already agreed to retire two San Juan units totaling 837 MW at the end of this year to comply with the Environmental Protection Agency's regional haze rule. After the units shut down, PNM and an affiliate will own 562 MW in the two remaining units while Tucson Electric Power will own 170 MW and three public power entities will own 116 MW.
Under PNM's proposed plan, the plant's last two units would retire when a coal contract ends on June 30, 2022.
Retiring San Juan in 2022 would save PNM about $80 million to $450 million over 20 years across several scenarios under a mid-load growth case. PNM intends to replace the San Juan capacity with a mix of renewables, mainly solar, plus gas peaking capacity and possibly energy storage.
The draft plan would lead to a major shift in PNM's generating portfolio, with coal falling to 12.3% in 2025 from 58.7% of the utility's energy supply this year. Gas-fired generation would jump to 22.9% from 5.8%; solar would increase to 14.5% from 3%; wind would climb to 16.3% from 8.2%; and nuclear would rise to 33.5% from 24%, according to the utility's estimates.
PNM owns 288 MW at the Palo Verde nuclear plant in Wintersburg, Arizona, and leases 114 MW under contracts that expire in 2023 and 2024. The utility would retain the expiring leases, according to the draft IRP.
Looking further ahead, PNM would exit the Four Corners power plant in Fruitland, New Mexico, in 2031 when a coal contract ends, according to the draft plan. The utility has a 200-MW stake in the 1,540-MW plant.
The draft plan calls for several solicitations, including ones for renewables and energy storage this year. PNM expects to issue a request for proposals in 2019 for flexible gas-fired generation.
PNM also intends to study building transmission to access wind generation in eastern New Mexico, an area with strong wind resources but limited transmission capacity.
PNM intends to seek legislation that would allow it to securitize to help it recoup stranded costs related to retiring the San Juan plant, which the utility said would lower customer costs and provide funds for replacement resources. PNM expects its peak load to grow from 1,830 MW this year to 1,948 MW in 2026, according to the draft IRP.
At least one environmental group supports PNM's draft proposal. Sierra Club Rio Grande Chapter Director Camilla Feibelman said Friday that "PNM's announcement that early retirement of San Juan and Four Corners coal plants will save customers money is a clear demonstration that coal is no longer economically sustainable."
PNM will hold a public meeting Tuesday on the draft plan and intends to file a final plan with the New Mexico Public Regulation Commission in July.
