Solar in New Mexico Hits Snag

It doesn’t take a solar industry wonk to know that New Mexico gets a lot of sunshine.In addition to this bountiful solar resource, the state also has arenewable energy standard on the books mandating that, by 2020, allinvestor-owned utilities must generate at least 20 percent of theirelectricity from renewable resources. Of that amount, four percent mustcome from solar.

Despite these advantages, New Mexico is far from living up to itssolar potential. According to the Interstate Renewable Energy Council(IREC), the state in 2008 counted a total of one megawatt of grid-tiedPV capacity — on par with Minnesota and just lagging Vermont. [You cansee the full IREC report here (PDF).]

One of the challenges — recently outlined by Staci Matlock of the Santa Fe New Mexican — has been a disagreement over the role of third-party developers. As she reports,

[a] bipartisan group of legislators has filed a briefwith state regulators on an issue that will affect who providesrenewable energy in New Mexico.

The state legislators support allowing third parties — entitiesbesides Public Service Company of New Mexico — to own and operate solarplants and other renewable energy systems under contract with theutility’s customers.

PNM, the state’s largest utility, contends such third-party arrangements within its exclusive service area are illegal.

Not to be overly dramatic, but this is, in effect, a turf battle.Presumably, third-party energy developers — like SunEdison, who isworking on a 20-year solar power purchase agreement with the city ofSanta Fe (a PNM customer) — have more experience owning and operatingsolar facilities than your typical electric utility. Utilities, fortheir part, probably don’t want a third party edging into the marketand, in effect, selling power to their customers. In this case, PNM hasalready made clear its aimto own outright a significant chunk of solar energy capacity within itsservice territory. As the third party with lots of experience,SunEdison is a potential threat to PNM stated objective.

Proponents of allowing third parties into the mix — including 26legislators and Gov. Bill Richardson –  argue that the move isnecessary to enable public entities, like municipalities and schools,to finance the purchase of renewable energy systems. (Such entities arenot eligible for the 30-percent federal tax credit. Third parties,however, are.) Adding third parties also promotes competition, which isgood for customers. Here’s more from Matlock:

Santa Fe’s City Council approved a 20-year poweragreement June 24 with SunEdison to place solar photovoltaic systems oneight city-owned properties that will be tied into the electric gridserviced by PNM.

SunEdison will sell the generated solar power at a fixed rate to thecity and can benefit from state and federal tax credits. SunEdisonapplied to PNM for a 15-cent per kilowatt hour renewable energy credit.PNM is required to provide a certain amount of renewable power.

Egolf said the third-party question is critical to helpinghospitals, churches, schools, cities and nonprofits benefit fromrenewable energy. “They don’t qualify for the tax rebates and credits,”Egolf said. “When you lose the third party, you lose one of the mostsuccessful financing mechanisms.”

But Don Brown, a PNM spokesman, said, “We think the deal Santa Fe istrying to do is actually not legal under state law. When you have athird party producing power and selling it to a PNM customer, thatrepresents deregulation.”

Oh snap! The state’s Public Regulation Commission is holding a hearing on the matter. Stay tuned.

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