Renewable Portfolio Standard

Summary

In March 2004, New Mexico’s governor signed into law the Renewable Energy Act (S.B. 43), creating a state renewable portfolio standard (RPS). By 2020, investor-owned utilities (IOUs) are required to generate 20% of total retail sales from renewable energy resources, and rural electric cooperatives are required to generate 10% of total retail sales from renewable energy resources. This requirement was later increased by S.B. 489 of 2019.

Eligible Technologies

Renewable energy is defined as electric energy generated by low- or zero-emissions generation technology with substantial long-term production potential; solar; wind; geothermal; hydropower facilities brought in service after July 1, 2007; fuel cells that are not fossil fueled; and biomass resources, such as agriculture or animal waste, small diameter timber, salt cedar, and other phreatophyte or woody vegetation removed from river basins or watersheds in New Mexico, landfill gas, and anaerobically digested waste biomass. Distribution cooperatives may count energy produced by geothermal heat pumps towards their requirements, per H.B. 263 enacted in April 2015.

The statute explicitly states that renewable energy does not include electric energy generated from fossil fuels or nuclear facilities. Changes to the statute in February 2023 clarify that utilities can use energy from qualified net metered systems towards their goals, but only the excess net energy that is actually delivered to the utility.

Requirements

IOUs and rural distribution cooperatives are required to generate 20% of total retail sales from renewable energy resources by 2020, increasing to 40% by 2025, and 50% by 2030. After 2030, New Mexico utilities must continue to transition to carbon free resources. By 2040 80% of the retail sales of electricity by just IOUs must come from renewable energy resources. However, through 2047, utilities are not required to displace any zero carbon resources to comply with the standard. By 2045, zero carbon resources must supply 100% of all retail sales from IOUs. Rural distribution cooperatives have a target of zero-carbon by 2050, composed of at least 80% renewable energy.    

Rural electric distribution cooperatives are required to have renewable energy account for 5% of retail sales in 2015, increasing at a rate of 1% annually until January 1, 2020, at which time the RPS is 10%. S.B. 489 of 2019 added additional requirements for later years of 40% by 2025 and 50% by 2030. By 2050, zero-carbon resources must supply 100% of all retail sales; 80% must come from renewable energy sources. The 2050 is applicable only if 1) the target is technically feasible, 2) the cooperative can still provide reliable electric service while implementing the target, and 3) implementing the target will not cause electric service to become unaffordable.

Credit Multiplier

Each kWh of renewable energy generation by solar technologies that were developed and operational before January 1, 2012, by a distribution cooperative or through the wholesale contract obligation of the wholesale supplier counts as 3.0 kWh for RPS compliance purposes.

Compliance

Utilities document compliance with the RPS through the use of renewable energy certificates (RECs). A REC represents all of the environmental attributes from 1 kWh of electricity generated from a renewable energy resource. RECs used for RPS compliance on or after January 1, 2008, must be registered with the Western Renewable Energy Generation Information System (WREGIS). RECs that are not used for compliance, sold, or otherwise transferred may be carried forward for up to 4 years.

Each year on May 1, June 1, or July 1 (depending on the IOU), an IOU must submit a procurement plan for the upcoming 2 years to the PRC. This procurement plan report describes the procurement and generation of renewable energy for the upcoming plan year and a suggested procurement plan for the following year. The PRC order approving the procurement plan only reflects the procurement for the upcoming plan year, however.  At the same time, each IOU is required to submit an annual renewable energy portfolio report on the previous calendar year, describing actual retail sales and subsequent reductions due to RCT, large customers, or exempt customers as well as actual procurement. 

Electric cooperatives must report to the PRC annually by April 30 on its purchases and generation of renewable energy during the preceding calendar year.

Cost Mitigation Measures

Investor-Owned Utilities

This RPS compliance requirement may be adjusted for the following three reasons.

First, provisions in current law limit the potential cost of complying with the RPS. In any given year, if the cost to procure renewable energy is greater than the reasonable cost threshold (RCT), a public utility may reduce its procurement down to the RCT percentage level. However, the condition excusing performance under the RPS in any given year may not serve as an excuse to delay procurement of sufficient resources to meet the increasing RPS compliance requirements in future years. As of 2023, the RCT is the average annual levelized cost of $60/MWh at the point of interconnection with the transmission systems, adjusted for inflation after 2020.

Second, the large customer cap also constrains the amount of renewable energy that can be procured.  For non-governmental customers who consume more than 10 million kilowatt-hours (kWh) per year, renewable energy procurement is limited so as not to exceed either 2% of the customer’s annual electric charges or $99,000, whichever is less. After January 1, 2012, the $99,000 limit is inflation-adjusted by the amount of the cumulative change in the Consumer Price Index, Urban (CPI-U) between January 1, 2011, and January 1 of the procurement plan year.

Third, the Renewable Energy Act (Chapter 62, Article 16 NMSA 1978) was amended in 2014 (effective May 15, 2014) to exempt any political subdivision of NM or any educational institution with a fall semester enrollment of at least twenty-four thousand students provided they met the following criteria: (i) has an excess of 20,000,000 kWh of electricity consumption at a single location or facility, regardless of how many meters it has; (ii) has its own capacity to generate renewable energy; and (iii) certifies that it will spend 2.5% of the annual electricity charges to further develop customer-owned renewable energy generation.

Electric Cooperatives

The RCT for cooperatives is 1% of its gross receipts from business transacted in New Mexico for the preceding calendar year. Cooperatives are not required to incur RPS compliance costs above this level. These levels were established in S.B. 418 (March 2007).

In addition, S.B. 418 established a “renewable energy and conservation fee” to support programs or projects to promote the use of renewable energy, load management, or energy efficiency. Distribution cooperatives may collect from its customers a fee of no more than one percent of the customer’s bill, not to exceed $75,000 annually from any single customer.