Replacement resources for the Public Service Company of New Mexico's coal-fired San Juan Generating Station are experiencing widespread supply chain issues and will not be available to meet summer 2022 peak loads, utility officials told state regulators July 28.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
The last two units at San Juan are slated to close in June 2022 and PNM, the state's largest electric utility, has been working to replace it with solar power purchase agreements and energy storage agreements, which are currently delayed until fall 2022.
"Based on what we know today, we are going into the summer of 2022 with a 5% reserve margin," Ron Darnell, senior vice president of public policy, said during the July 28 weekly New Mexico Public Regulation Commission meeting. "We believe the potential shortfall of reliable power for the 2022 summer peak season could total as much as 450 MW solar and 130 MW storage."
A 5% reserve margin would mean PNM is about 100 MW away from possible outages, which is very concerning, said Tom Fallgren, PNM vice president of generation.
"I'm convinced that together we'll solve it," Fallgren said.
To try to fill the gap, PNM issued two requests for proposals:
- Potential long-term resources of up to 200 MW for any resource type as part of the utility's long-term generation portfolio, and
- Short-term market resources through the 2022 summer season and possibly for 2023 for any resource type.
"The results from both RFPs, unfortunately, have not changed our outlook that we have a resource shortfall for the summer 2022 season," Darnell said about how the capacity offered in the 2022 RFP or the market 2022 RFP was not enough to cover the expected shortfall. "This reflects how tight the current markets are becoming in the West. This is a challenging situation."
PNM received three proposals for the long-term RFP that were very problematic and expensive, Fallgren said, adding PNM didn't see a reasonable path forward "in both the regulatory and contractual worlds" for the three resources. One bid was received for the short-term RFP, which was very expensive and a financial asset. PNM is looking at a number of other options outside the RFP process, such as bilateral agreements and bringing mothballed resources back online.
PNM wants to work with commission staff as short-term solutions will require immediate commission review to be available for summer 2022, Darnell said.
"We still plan for the selected resources to ultimately be in service," Darnell said. "In the interim, we need to find temporary solutions that can provide for appropriate system reliability in 2022."
COVID-19 strikes supply chain
"Unfortunately, most of the solar panels are not manufactured in the US," Fallgren said about a global economy, adding the delta variant is impacting other countries differently than in the US due to vaccine capacity. "What we're seeing is some major manufactures have shut down their facilities for about a month and now you see the backlog of that. ... We're going to continue to see complications for at least the next year."
This delay has escalated adequacy concerns for summer 2022, said Mark Fenton, PNM executive director of regulatory policy and case management.
"In the utility world, 2022 is not that far away when you consider what has to be done to ensure you're meeting supply," Fenton said.
The commission approved the San Juan replacement projects in July 2020 and directed PNM to negotiated PPAs for 650 MW solar and 300 MW battery storage, Darnell said. Expediated contracts meant developers committed to bringing projects online within 19 months. Shortened timelines, and pandemic-related equipment and supply chain delays have created challenges.
"Because the timelines had no margin for error, they need project assumptions to work out perfectly," Darnell said.
The developer for a 100-MW solar and 30-MW storage contract stepped out, Darnell said. This is in addition to the PPA for the Photosol San Juan Solar LLC 200-MW Solar Project and related 100-MW ESA, and a PPA for the Centaurus Arroyo LLC 300-MW Solar Project and related 150-MW ESA that are now delayed.
"At this time, they don't expect to meet commercial operation dates by the time San Juan closes," Darnell said.
PNM's reserve margin today is 13%, but is advocating for that to be raised to 18% or 20% due to extreme weather conditions and following the lead of neighboring regions, Fallgren said about how there used to be some excess capacity in the West region, but that is all gone.
San Juan background
San Juan-1 is currently out of service after its cooling tower collapsed June 30, further raising concerns about the plant's timeline.
The commission approved in April 2020 PNM's request to abandon its interest in the 847-MW coal -fired San Juan plant. PNM recommended abandoning San Juan units 1 and 4, opened in 1973 and 1982, respectively, after the existing coal-supply agreement expires June 30, 2022.
PNM has a goal of 100% carbon-free energy by 2040. Governor Michelle Lujan Grisham signed the state's Energy Transition Plan in March 2019, setting a statewide renewable energy standard of 50% by 2030 and goal of 80% by 2040, leading to the 100% carbon-free power goal by 2045.