Community solar will take $120 million in upgrades, utilities report to PRC

Mar. 21—It's not going to be cheap to upgrade an aging power grid to take on nearly 200 megawatts of community solar energy.

It will cost $120 million between the three investor-owned utilities that provide electricity to a majority of New Mexicans, according to the New Mexico Public Regulation Commission. The most costly project upgrades are in the Public Service Company of New Mexico's territory.

Community solar is a way for people to get solar energy without having to set up rooftop panels. Forty-five organizations got the OK last year to start the process of creating small-scale solar farms in New Mexico — chosen out of more than 400 applicants — to generate a total of 198 megawatts of power that'll later be transmitted through utilities' power lines to New Mexican households.

In a presentation to the New Mexico Public Regulation Commission on Thursday, PRC Director of Policy Administration Arthur O'Donnell said no community solar projects have permission to operate yet and are undergoing detailed studies.

He didn't specify when community solar could be up and running, but a renewable energy expert last year told lawmakers solar farms could come online in 2024 or 2025.

PNM has 29 community solar projects, Southwestern Public Service Co. has 10 and El Paso Electric has six.

The projects will require costly upgrades before community solar can really come alive. O'Donnell said getting the upgrades done will take from nine months to two years, per estimates from the utilities.

PNM expects its projects to face upgrade costs ranging from $582,000 to $13 million, O'Donnell said. In comparison, he said, SPS and EPE anticipate their distribution upgrades will each range from $268,000 to $1.1 million.

"In PNM territory, every project will face significant upgrade costs," O'Donnell said.

SPS is still analyzing potential transmission system impacts, which could add additional significant costs, O'Donnell said. He said the commission should follow up with the utility in a couple of months.

O'Donnell said the utilities are facing high costs because of feeder constraints — strain on the power lines carrying electricity from a substation to service areas.

He said almost all the community solar projects need a new conductor, and the most common upgrades necessary are reclosers and relays. He said in PNM territory, specifically, there are at least 12 substation upgrades needed, which include transformer additions that rack up costs.

O'Donnell said nearly all of the projects that need transformer upgrades are near low-income populations in Deming, Lordsburg and Silver City.

"The systems are old. They were not designed to accommodate this level of new generation coming on," he said.

He compared the landscape to the big wind and solar farms in northeast New Mexico.

"Really, it's a very different type of situation between that geography and the southwest," he said.

New Mexico is vying for federal aid that could help pay for some of the work needed. The Environmental Protection Agency has a $7 billion Solar for All fund aimed at expanding solar energy to low-income communities.

O'Donnell said the state's Energy, Minerals and Natural Resources Department requested $250 million from that pot, and the PRC would get $50 million of that "that could be used to help buy down some of the interconnection costs." He said it's likely there will be an announcement next month on if the state will get those dollars.

The solar projects

Nearly half the counties in the state have a community solar project. O'Donnell said 15 counties have at least one project within their boundaries.

The average number of projects per county is three, he said, and five counties exceed that average — Valencia, Otero, Doña Ana, Luna and Curry counties.

The legislation that enacted community solar in 2021 requires that nearly one-third of the energy generated goes to low-income communities.

O'Donnell said 31 of the projects are in U.S. census tracts with a low-income population greater than 40%.

"It is one of the main objectives of community solar to try and provide people who would not otherwise have the ability to install PV on their rooftops, especially low-income customers, to participate in the renewable energy," he said.

O'Donnell said there are about 655,000 New Mexicans served by investor-owned utilities that qualify as low-income.

He noted that's substantially more than the people enrolled in state energy assistance programs, which make customers automatically eligible for community solar. That creates challenges in terms of how subscriber organizations actually sign up New Mexicans to enroll in community solar, he said.

Speaking on project location, O'Donnell said the project spots worked out fairly well, even without the commission forcing it. Still, he said the PRC can consider in the future how to identify locations that might be better to both minimize the strain on the system and locate projects in proximity to the customers being served.

"We're trying to find the sweet spot of bringing distributed resources closer to the load that they serve," he said.

What do you think?

The PRC must report back to the Legislature by November on how community solar is doing and any changes that are needed. The state regulators must consider if the current 200 megawatt cap should change and any reallocation of power generation set among the three utilities.

Additionally, commissioners are seeking others' thoughts. They listed around two dozen questions in a request for information for program participants, all of which can be found on the PRC's online e-docket system.

The questions include if there should be any changes to the community solar rule, what the commission should consider when evaluating the power cap and market demand for community solar.

PRC attorney Russel Fisk noted that anyone interested in community solar can participate in the request for information. He said this is an informal stage of the rulemaking, which can help the commission formulate a proposed rule, and the PRC will have a formal hearing later on.

Commissioner Pat O'Connell said he's not sure how, if projects aren't online, the state regulators will speak to expansion by the November report deadline. He said he is broadly looking forward to the rulemaking.

"It's an opportunity to take advantage of what we've learned through the first iteration of the process," O'Connell said.