In what is becoming a trend in the Western US, Public Service Co of New Mexico plans to exit coal-fired generation by 2031 in favor of renewables and natural gas-fired generation, according to its integrated resource plan.

"A portfolio of renewables, gas generation, and, potentially storage, provides the best balance of cost and reliability and results in a significant reduction in the environmental impact associated with supplying energy over the 20-year planning period," PNM said in the plan released Wednesday.

The plan's preferred portfolio achieves low customer costs by replacing baseload resources with resources that have lower operating costs and greater flexibility to produce energy while better matching customers' expected power use, the resource plan said.

PNM's resource plan mirrors a pattern across the West, where utilities are exiting or reducing their reliance on coal-fired units. Those utilities include Idaho Power, NV Energy, Portland General Electric and Tucson Electric Power, among others.

In February, a group of utilities led by Salt River Project decided to retire the 2,250-MW Navajo coal-fired plant near Page, Arizona, in the face of low power prices from gas-fired plants that make generation from the plant relatively more expensive.

In its resource plan, PNM said it will begin exploring in 2017 joining the growing Western Energy Imbalance market to maintain opportunities to make real-time power purchases.

PNM owns 2,189 MW of generation, including some leased capacity at the Palo Verde nuclear plant, and has power purchase agreements for 456 MW of renewables and gas-fired generation, according to the plan.

PNM PLANS SAN JUAN RETIREMENT

In the near term, PNM intends to retire one of the largest power plants in the West, the 1,800-MW San Juan coal-fired generating station near Farmington, New Mexico.

PNM has already agreed to retire two San Juan units with a combined capacity of 837 MW at the end of this year to comply with the US Environmental Protection Agency's regional haze rule.

After the units shut, PNM and an affiliate will own 562 MW of capacity at the two remaining units while Tucson Electric Power will own 170 MW and three public power entities will own 116 MW.

Under PNM's plan, the plant's last two units would retire when a coal contract ends on June 30, 2022.

PNM estimates retiring San Juan in 2022 would save the PNM Resources utility roughly $70 million to $450 million over 20 years across several scenarios under a mid-load growth case.

PNM intends to replace the San Juan capacity with a mix of renewables, mainly solar, plus gas-fired peaking capacity and possibly energy storage.

Looking further ahead, PNM would exit the Four Corners power plant in Fruitland, New Mexico, in 2031 when a coal contract ends, according to the resource plan. The utility has a 200-MW stake in the 1,540-MW plant.

COAL OUTLOOK DRIVEN BY INDUSTRY TRENDS

PNM said its plans to drop coal-fired generation from its portfolio is driven by trends that have strengthened since the utility's last resource plan was issued three years ago.

Gas prices have continued falling on increased production and a boost in pipeline capacity, according to PNM. Also, the costs of building gas-fired plants has dropped and the technology has become more efficient, it said.

PNM needs more renewables to meet the state's 20%-by-2020 renewable portfolio standard and the demand for green energy from large customers, according to the plan.

At the same time, PNM's load forecast has dropped compared with three years ago because of the state's tepid economy, energy efficiency savings and reduced use by large customers.

PNM expects to issue an all-source request for proposals in the fourth quarter OF 2017 to replace the San Juan plant. The utility expects to identify preferred locations for the new resources, according to the plan.

The utility also intends to release a renewable resource solicitation so it can meet its RPS obligations and supply green power to a Facebook data center, according to the plan.

In addition, PNM said it will consider adding 400 MW of transmission capacity between Albuquerque and eastern New Mexico to access potential wind generation.

--Ethan Howland, newsdesk@spglobal.com

--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com

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