Supply Chain Problems Threaten Utility’s Power Supplies

By Kevin Robinson-Avila | October 11, 2021

ALBUQUERQUE, N.M. (AP) — When Public Service Co. of New Mexico abandons the coal-fired San Juan Generating Station in June, the utility won’t have enough solar replacement power to pick up the slack because of supply chain issues caused by the global pandemic.

Three of the four solar projects meant to replace the coal plant won’t be fully operating until well after San Juan’s closure, creating potential power supply issues when consumer demand peaks in summer 2022, the Albuquerque Journal reported.

PNM is seeking agreements with other regional utilities for temporary backup power for when homes and businesses ramp up their cooling systems during summer. But with unprecedented heat waves stressing power grids throughout the West, the utility is struggling to secure needed San Juan replacement power.

Utility executives are “very concerned” about it, although the company does expect to lock in deals with power suppliers in time to meet consumer demand next summer, said Vice President for Generation Tom Fallgren.

“Do I lose sleep over it? Yes,” Fallgren recently told the state Public Regulation Commission. “Do I think we’ll solve it? Yes.”

The problems began in May, when developers of one of four solar projects meant to replace coal generation next year told PNM it would not be able to bring its planned “Rockmont” solar plant online in time for San Juan’s closure. The 130-megawatt Rockmont project _ with 100 MW of solar generation and 30 MW of backup battery storage _ accounts for about 14% of the total 950 MW of solar panels and batteries that PNM has contracted to replace San Juan.

The other sources include the 450-MW “Arroyo” solar and battery system in McKinley County, a 300-MW “San Juan” solar and battery project and a 70-MW “Jicarilla” solar and battery facility in Rio Arriba County.

Rockmont developers are behind because they never fully resolved right-of-way issues with land owners before completing their contract with PNM. That interrupted agreed-on construction timelines, pushing the developers into default on the contract, Fallgren told the Journal.

PNM is now working with other companies that have needed land rights in place to take over the Rockmont project.

But over the summer, the Arroyo and San Juan project developers also told PNM that supply chain issues caused by the pandemic have affected their construction plans, delaying completion dates for those projects as well. They could go partly online between June and December of next year, but they won’t be fully operational until spring 2023, at the earliest.

The central problem is importing solar panels from Asia. The pandemic significantly slowed factory production, and now maritime shipping is backed up at West Coast ports.

“The shipping delays have had a huge impact, not only for solar panels, but for many other products,” Fallgren said. “We do expect all the solar resources to come online in 2023, but we’re facing significant issues for next summer.”

Without temporary replacement power _ either by purchasing electricity on wholesale markets or through short-term, bilateral supply agreements with other utilities _ PNM’s reserve margin of power from its own generating systems would fall to just 5% next summer. That compares with a 13% margin it normally maintains.

Complicating the situation, recent PNM requests for proposals to purchase wholesale resources in preparation for summer 2022 turned up almost no responses. That’s because all Western states are struggling to lock in enough electricity for their own grids, given the unprecedented heat waves in recent years brought on by climate change.

“I think that just reflects how tight markets are becoming in the West,” Ron Darnell, PNM senior vice president for public policy, told the PRC in a recent presentation. “This is a challenging situation.”

Given the changing weather patterns, PNM and the PRC need to raise reserve margins, Fallgren said.

“In light of extreme weather conditions seen among our neighbors, we should look at expanding (reserve margins) up to 18% to 20%,” Fallgren told commissioners.

That would mean contracting for more generating resources in the near future, something the utility is now evaluating. But for now, it’s primarily focused on resolving the short-term supply issues for next summer.

The company is in advanced negotiations on bilateral supply contracts with other utilities. It may also temporarily lease some diesel generators and battery storage systems.

Some PRC commissioners have suggested delaying the San Juan closure until the end of next summer, but that would require complex negotiations with other plant co-owners, as well as a new coal-supply contract to run the plant.

“We don’t see extending San Juan operations as a viable option,” Fallgren said.

The PRC is closely monitoring the situation and will request regular updates from PNM, commission Chair Stephen Fischmann said.

“PNM is working full blast on a wide variety of ways to fill the power gap,” Fischmann said. “We’ll check in monthly to see how it’s going to get this resolved with minimal impact on consumers.”

Once the summer 2022 power issues are resolved, the PRC must continue working with PNM and other local utilities on long-term grid reliability and reserve margins, given the limited capacity now to depend on regional wholesale markets to fill in gaps as states work to transition their grids from fossil fuels to renewable resources.

“That issue is getting a lot of regulatory attention now on a regional basis to address resource adequacy and having enough generation to meet demand,” Fischmann said. “That might entail hanging on a little longer to generating plants that are scheduled for shutdown to make sure we don’t put ourselves in a bind.”

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