New Mexico’s Plan to Shut Down Coal Without Leaving People Behind

New Mexico has passed a key threshold in its transition away from fossil fuels.

Public Service Company of New Mexico, a utility owned by PNM Resources, will build 650 megawatts of solar power and 300 megawatts of battery capacity to divest its share of the San Juan coal plant in 2022. The unanimous decision last week by the Public Regulation Commission makes New Mexico a test case for how to move away from coal power without decimating the communities that supplied and operated those plants.

“It speaks to just how quickly the economics of storage are changing,” New Mexico Sen. Martin Heinrich, a Democrat, told Greentech Media over the phone Thursday. The decision marks a new scale of battery deployment for New Mexico, though projects of that size are underway in other states.

Over the last couple of years, many major U.S. electric utility companies have charted courses to carbon-free or carbon-neutral power by midcentury. But little consensus exists on how quickly to start the process of shutting down the most carbon-intensive plants or what resources should replace them. Some utilities still plan to build ample gas plant capacity to manage a reliable transition, while others have already signed deals for batteries to shift renewable generation on demand.

Heinrich, who has advocated for expanded clean energy deployment, said the San Juan decision resonates beyond the borders of his home state.

“If you’re a utility going through the same sort of transition that we are in New Mexico, you should look very closely at whether any of that replacement generation should come from gas,” he said. “You don’t want to be in a position where you end up replacing one stranded asset with another.”

But he also cautioned that buying clean energy is not enough. The energy transition must include investment and economic planning to reinvigorate the areas hit by coal retirements.

Concentrated job loss in coal communities

Some states passed laws that set a target for achieving clean electricity. When New Mexico did so, it also included language about financing early coal-plant retirements in ways that save money for utility customers and allocating millions of dollars to support the coal communities in transition.

The northwestern corner of the state hosts New Mexico's three active coal plants: San Juan, Four Corners and Escalante. The density of the coal workforce there makes for a challenging economic transition.

“This is going to be hard,” Heinrich said. “I’m not one of those folks that tries to oversell the fact that we’re going to be dealing with such a job loss that’s concentrated in one community.”

It’s crucial to build as much as possible of the new energy in the communities hit by the retirement of coal, Heinrich said. But since solar and batteries are so efficient at operating — they don’t need the sort of full-time operational staff that thermal plants require — the solar and battery plants won’t replace the old jobs on a one-for-one basis, he said.

The solution has to be broader than retraining within the energy industry. Even the Southwestern mining industry, which Heinrich’s father and grandfather worked in, has winnowed the number of jobs it needs to operate the mines as technology improved.

“Your economic development policy, it’s wise to diversify that, and not be reliant on any single economic driver for a community,” Heinrich said.

The Four Corners region has room to grow in the outdoor recreation industry, he added. And now that the COVID-19 pandemic has forced millions of people to work from home, investments in rural broadband could make it possible for people to enjoy the New Mexico quality of life while doing jobs that used to happen elsewhere.

What is clear is that holding onto outdated technology is not a sustainable economic development strategy.

“This macro transition that we’re going through in energy is going to happen because it’s being driven now by the economics,” Heinrich said.

"Not a culture war"

Momentum for a cleaner grid is not just building in New Mexico. The topic took on new relevance in presidential politics last month when Democratic candidate and former Vice President Joe Biden adopted the goal of clean electricity by 2035.

“I think 2035 is a completely doable goal,” Heinrich said. “Based on the studies we’ve seen, not only is it a doable goal, it’s a goal that will save electrical consumers money.”

Following through on this plan will force more conversations about declining job prospects in fossil fuel hubs and where the new jobs arise.

The New Mexico approach is to couple the long-term clean energy target with an intensive focus on the communities currently powering the state to ensure they don’t get left behind. That principle is also invoked by activists pushing for what they term a “just transition.”

“Get everybody at the table,” Heinrich said. “This is not a culture war; this is about embracing jobs of the future and cleaning up our air.”

Replacing existing coal plant contracts with new solar power is also a clear money-saver for many utilities, according to a new study from think tank Energy Innovation. The research indicates that municipal and cooperative utilities could exit 22.5 gigawatts of coal power in favor of solar by 2025 while saving money for their customers.