New Mexico's Key Solar Decision

The New Year is looking bright for solar energy in New Mexico. At the end of December, the New Mexico Public Service Commission released a decision that will make it possible for the state’s utilities to continue to invest in solar energy.

The Commission agreed with Vote Solar’s recommendation to maintain the solar carve-out within the state’s renewable portfolio standard (RPS) and our proposal to require the utilities to use a progressive methodology for pricing out renewable energy projects used to meet the RPS.

The methodology forces the utilities to take into account the benefits solar brings to the grid. Essentially, it requires the utilities to look at the net cost of solar and other renewable energy resources (i.e. the costs minus the benefits).

If you want to get into the weeds of the decision, read on.

Maintaining the diversity requirements: For years New Mexico’s largest utility, Public Service of New Mexico, has tried to dismantle the diversity requirements within the RPS. The rules require that 20% of the RPS is met with solar resources, 30% with wind, 3% met with distributed generation resources (i.e. ‘rooftop solar’) and 5% met with other resources. PNM has argued that the diversity requirement makes the RPS more expensive to meet, than say buying cheap wind from out of state.

The Commission disagreeing, noted that the RPS is not intended to be a least cost approach to resource procurement, but rather a decision by the Legislature that certain other criteria, including environmental impacts, be accommodated within utilities’ resource portfolios. The Commission states that diversity requirements that increase costs over the bare minimum needed to achieve the RPS percentages, while balancing those increased costs with other factors, is consistent with the RPS’s objectives and purposes. As a result, the Commission retained the minimum solar diversity percentage at 20% of the RPS.

Updating the methodology of the RCT: When the RPS was passed in 2007, the Legislature included a reasonable cost threshold (RCT). The RCT is a spending limit that caps how much the renewable standard can impact the electric rates of all customers that grows to 3% of each utility’s total annual revenue. PNM has argued for years that there is not enough funding available under the RCT to buy renewable energy to meet the diversity targets, particularly solar.

Again, the Commission disagreed. Drawing from the recommendations of Vote Solar, the Commission adopted a view of avoided costs related to renewable resources that include purchased power costs, environmental credits, and costs for capacity, transmission, or distribution that can be proven to result in actual reductions in costs to ratepayers.
In our view, the more inclusive view of solar benefits adopted by the Commission obviates the need to further increase the RCT to 4% and then 5%, as recommended by staff.

Finally, on the basis of promoting a larger market for New Mexico’s renewable energy, and enhancing local economic development, the Commission adopted a renewable energy credit (REC) reciprocity rule allowing RECs from other states to count in New Mexico provided the other state allows New Mexico RECs to count toward its RPS as well. We believe this is a good first step towards broader renewable energy markets.