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Houston — El Paso Electric plans to rely on a combination of solar, wind, battery storage and natural gas generation to meet its peak demand needs in 2022-23, the company announced Wednesday, which drew mixed reactions Thursday from industry observers.

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The investor-owned utility, which has customers in Texas and New Mexico, announced Wednesday its selections from a competitive 2017 request for proposals for electric power supply and load-management resources, anticipating a need of 50 MW by 2022 and 320 MW more by 2023.

The winning bids include the purchase of 200 MW from utility-scale solar and 100 MW from battery storage.

EPE also approved plans to build a 226-MW natural gas combustion turbine at the company's existing 752-MW Newman Power Station, with commercial operation to start in 2023 at an expected cost of $143 million. The company also expects to buy 50 MW to 150 MW of wind and solar power "to provide for fuel diversity and energy cost savings," according to a news release.

SUN, WATER ISSUES AT PLAY

EPE "has some of the best solar resources in Texas, so any project sited close to them should be very low cost on a per MWh basis," said Joshua Rhodes, University of Texas Energy Institute research associate.

Noting that none of the planned resources require water for operation, Rhodes said, "water is a big deal in that part of the state."

EPE "boasts the world's largest inland water desalination plant, indicating that water is a large consideration for any type of development," Rhodes said Thursday in an email.

In a company statement, EPE President and CEO Mary Kipp said "this balanced combination of resources will work with our existing energy portfolio as we move to retire aging, less-efficient plants while continuing to meet our customers' changing energy needs."

CURRENT FUEL MIX

EPE now has 1,446 MW of natural gas-fired capacity and contracts for 633 MW of capacity from the 4-GW Palo Verde Nuclear Generating Station in Arizona, according to its website. EPE's renewable portfolio is small -- a 5-MW solar facility at Holloman Air Force Base and a 3-MW community solar project at EPE's Montana Power Station. The winning proposals, announced Wednesday, are subject to the negotiation and execution of contracts, the approval of relevant environmental and construction permits, and the permission of the New Mexico Public Regulation Commission and the Public Utility Commission of Texas.

Asked to evaluate the likelihood of such state regulatory approval, Eric Smith, Tulane Energy Institute associate director, said each regulated, vertically integrated utility files an integrated resource plan at the state level that "describes the political and economic logic behind their proposed power stack."

"They hope that it will fly with their regulators," Smith said in an email Thursday. "I believe that IRPs ultimately reflect the perceptions of utilities about what is salable to the PUCs and ultimately, the ratepayers, in that order."

During EPE's fourth-quarter earnings call, the company plans to update its five-year capital expenditure forecast as a result of projects included in Wednesday's announcement.

"EPE also anticipates providing preliminary projections during the call regarding the potential to enhance grid technology with the addition of advanced metering infrastructure," the news release states. "Legislative proposals regarding the clarification of the regulatory process to implement AMI are anticipated during the next Texas legislative session that convenes in January 2019."

-- Mark Watson, markham.watson@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com