Renewable Energy Incentives

in New Mexico and Bordering States

 

 

Compiled by Benjamin Luce*, for the Annual Conference of the New Mexico Solar Energy Association (NMSEA), August 17-19, 2001, Cuba, New Mexico.

 

 

 

 

Table of Contents

 

 

 

 

1.        Overview   2

2.        Definitions of New Policy-Based Incentives. 4

3.     Status of Renewable Energy Incentives in New Mexico. 6

4.     At-a-Glance Summary of all Renewable Energy Incentives in  

        New Mexico and Neighboring States  8

5.        Renewable Portfolio Standards in Arizona, Nevada, and Texas  9

6.     Green Pricing Programs in NM and Bordering States  11

7.     Rebate Programs for Renewable Energy. 16

8.     Tax Credit Incentives. 17

9.     Loan Programs. 18

10.       New Mexico’s Wind Resource. 18

11.       New Mexico’s Solar Resource potential 18

12.            Some Renewable Energy Policy Organizations in New Mexico  19

 

 

 

 

 

 

 

 

 

 

 

 

*President, NMSEA. Email: lucien@cybermesa.com, phone: 505-660-4041

 

 

1.    Overview

 

With the exception of Oklahoma, New Mexico is suddenly finding itself surrounded by neighboring states with aggressive policies and incentives for both utility and residential scale renewable energy development. Some of these incentives, mostly financial, have been in place since the late eighties or early nineties. More recently, very strong and relatively new types of incentives, in particular something called “portfolio standards” have been implemented. This has already led to hundreds of megawatts (a megawatt is enough to power roughly 1000 homes) of renewable electricity generation and is likely to lead to thousands of new megawatts of renewables by the end of the decade. Thus, the long predicted explosion in renewable energy technology is now finally underway.

 

Note: Most of the information on neighboring states quoted in this document was derived from the Database of State Incentives for Renewable Energy (DSIRE), which can be accessed online at http://www.dsireusa.org. Comprehensive information about state incentives can be found there, including links to relevant websites and names and information on contacts.

 

The incentives mostly responsible for the existing utility-scale generation in neighboring states are:

1.      The Renewable Portfolio Standard (RPS) adopted by Texas, which essentially mandates the addition of renewables to the mix in significant percentages, and

2.      Voluntary Green pricing programs in Colorado and Texas, which rely on consumer demand and were initiated with the help of aggressive consumer recruitment campaigns. In Colorado, some of these campaigns were conducted by a nonprofit environmental group called the Land and Water (LAW) Fund of the Rockies, who worked with the utilities outside the of official regulatory process. 

 

Both of these types of incentives are expected to elicit similar progress in Arizona and Nevada over the next year or two, and could easily do so if implemented in New Mexico because New Mexico has the necessary resources in spades.

 

In addition to policy-based incentives, a whole range of financial incentives, including rebates and tax incentives, are also in place in states bordering New Mexico. These are extremely important for the successful development of residential scale renewable energy businesses, as well as utility scale generation.

 

New Mexico, lags significantly behind her neighbors. New Mexico’s deregulation legislation did mandate a systems benefit fund (see below), and made a weak recommendation that the PRC investigate the possibility of renewable portfolio standards. On this basis, the PRC promulgated a portfolio standard rule (see below). Following the deregulation disaster in California, the legislature has delayed the implementation time for electricity deregulation by five years, and this delay applies to both the systems benefit fund and the portfolio standard as well. 

 

Moreover, despite some preliminary attempts in the last legislative session by some legislators to introduce bills to remedy this situation, financial incentives for renewable energy generation in New Mexico are simply nonexistent.

 

The Solar Industry of New Mexico needs, and deserves, aggressive and effective legislative action to promote renewable energy development now. The solar industry of New Mexico stands to suffer great harm if action is not taken soon, for the following reasons:

·        Businesses tend to grow exponentially, because their growth rate is proportional to their income. Incentives in other states are now giving a major boost to their companies: It follows that New Mexico solar energy businesses will be hopelessly out-paced by their out-of-state competitors.

·        Out-of-state companies are gaining an increasing share of renewable energy sales in New Mexico right now, particularly through online sales exempt from gross receipts tax. We need incentives such as a gross receipts tax exemption to keep New Mexico solar businesses competitive.

 

Finally, New Mexico needs good incentives for renewable energy generation as her electricity infrastructure will be growing substantially in coming years, i.e. new power lines, new distribution hardware, new power plants. Now is the time to promote renewable energy development, instead of simply maintaining New Mexico’s old pattern of total reliance on non renewable and non distributed energy sources.  Future infrastructure development can then proceed in environmentally friendly and economically beneficial ways,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.    Definitions of New Policy-Based Incentives

 

In addition to conventional incentives, such as tax incentives, several new policy mechanisms have emerged in the 1990’s to foster renewable energy. These have emerged mostly in the context of electricity generation, to promote adequate competition and customer choice. These are:

 

So far, renewables portfolio standards have been implemented at the state level only, although proponents have been lobbying for a number of years for a federal RPS.

Green pricing programs have been enormously successful (see below), because consumers are truly interested in them.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.    Status of Renewable Energy Incentives in New Mexico

 

 

Initially, the PRC proposed a rule that simply required that a minimum of 5% of renewable electricity. The Attorney General and others, however, complained that this did not adequately protect consumers from possible increased rates that could occur if the renewable energy available was of very high price.

 

The Coalition for Clean Affordable Energy (CCAE), of which NMSEA is a member organization, agreed that cost should be an issue, and recommended that a price cap of $.003 (“three mils”) per kilowatt-hour (kwh), on average, be imposed. For an average consumer who uses 500 kwh per month, this would cap the increase in monthly bills at 500 times $.003 = $1.50.

 

The PRC settled instead on a cap of $.001 (“one mil”) per kwh. For an average consumer who uses 500 kwh per month, this would cap the increase in monthly bills at 500 times $.001 = $.50.

 

Thus, in summary, the final RPS rule promulgated by the PRC mandated that the utilities would have add a percentage up to 5% renewable energy as long as the average bill would not be increased beyond one mil per kwh, or roughly $.50 per month per residential customer. 

 

It is interesting to ask how much renewable energy could actually be supported with this cap. Assume for the moment that wind power costs an extra two cents per kwh wholesale, which is reasonable if we assume that wind power costs 5 cents per kwh wholesale, a realistic figure these days, and also that coal fired electricity costs 3 cents per kwh, which is roughly what PNM has reported as their cost in recent years. Then each consumer who pays an extra $.50 per month can in principle purchase $.50/$.02 = 25 kwh of wind power each month. Since the average consumer in New Mexico uses about 500 kwh per month, so this represents 25/500 = .05 = 5% of the total amount of power they consume. Note that this percentage is actually in line with the target set by the RPS!

 

This suggests that the RPS standard issued by the PRC might be at least marginally effective. Since New Mexico’s entire electricity load is approximately 1.9 Gigawatts (average – according to 1998 usage statisitics), then the maximum amount of wind power that could be supported  would be about .05 x 1.9  = .095 Gigawatts or 95 megawatts. Because utility-scale wind turbines are approximately 1 megawatt, and because they can produce power about 1/4 of the time, this is equivalent to about 380 turbines. The installation of 380 turbines in New Mexico would be a significant event! In practice, this estimate is probably very optimistic – a price cap of $1.00-$2.00 per month instead if $.50 would probably stand a much better chance of actually getting new generation installed, especially at the start.

 

The Environment Department has already conducted a series of stakeholder meetings and has drafted a procedure for the evaluation of renewable energy project proposals. NMSEA and CCAE, among others, participated in these meetings. Of course, the SBF cannot be implemented as things currently stand until New Mexico proceeds with electricity deregulation.

 

 

 

4.    At-a-Glance Summary of all Renewable Energy Incentives in New Mexico and Neighboring States

 

The following table summarizes the incentives in neighboring states, as obtained from the Database of State Incentives for Renewable Energy (DSIRE), which can be accessed online at http://www.dsireusa.org.

  

 

Incentive

Arizona

Neveda

Colorado

Oklahoma

Texas

New Mexico

Public Benefit Fund

 

 

 

 

 

1-S (delayed)

Generation Disclosure

1-S

1-S

 

 

1-S

1-S (delayed)

Portfolio Standard

1-S

1-S

 

 

1-S

1-S (delayed)

Net-Metering

1-S

1-S

1-S,2-L

1-S

1-S, 1-L

1-S

Line Extension Analysis

1-S

 

1-S

 

1-S

1-S

Solar Contractor Licensing

1-S

1-S

1-L

 

 

 

Renewable Enegy Equipment Certfification

1-S

 

2-L

1-S

1-S

 

Solar & Wind Access Laws

1-S

1-S

1-S,1-L

 

 

1-S

Construction and Design Policies

1-S, 2-L

 

1-S,3-L

 

1-S,1-L

 

Green Power Programs

 

 

 

 

 

 

Green Pricing

4-U

1-U

3-U,6-L

 

3-U, 3-L

1-U

Green Power Purchasing/Aggregating

1-L

 

3-L

 

 

 

Public Education/Assistance

2-L

 

3-L

 

2-L

1-L, 1-S

Demonstration Projects

2-L

 

2-L

 

2-L

2-L

Research and Outreach

 

 

 

 

 

1-S

Personal Tax

2-S

 

 

 

 

 

Corporate Tax

 

 

 

 

1-S

 

Sales Tax

1-S

 

 

 

 

 

Property Tax

 

1-S

 

 

1-S

 

Rebates

1-L

1-L

1-S

 

1-L

 

Grants

 

 

 

 

 

 

Loans

1-S

 

 

 

1-L

 

Industry Recruiting

 

1-S

 

 

1-S

 

Leasing Programs

1-U

 

 

 

1-U

 

Equipment Sales

 

 

 

 

1-U

 

 Key: S-State, L-local, U-utility

 

Note that New Mexico has only a few listings, and is conspicuously lacking in both conventional financial incentives such as tax incentives, and strong policy incentives such as renewable portfolio standards and systems benefit (except for, as described above, some of these would be provided for to some extent if New Mexico’s deregulation legislation were to put into effect).

 

5.    Renewable Portfolio Standards in Arizona, Nevada, and Texas

The following table compares the renewable portfolio standards of states bordering New Mexico in more detail. This data was compiled from the dsire databased referenced above and from more detailed information published online by the various public utility commissions and legislatures involved.

 

Provisions

Arizona

Nevada

Texas

Total Amount Mandated by percent

1.1%

15%

(about 3.3%)

Total Amount Mandated in megawatts

(about 180 MW)

 

2000 MW

Effective Date

3/30/01

1/1/03

1/1/02

Target Date for Total Amount

2009

2013

2009

Trading Credits Program

Yes

Yes

Yes: Adminstered by state

Eligible Technologies

Solar Thermal Electricity, Photovoltaics, Wind, Biomass, Hydro, Geothermal Electric, Waste,

Solar Thermal Electricity, Photovoltaics, Wind, Biomass, Geothermal Electric

Solar Thermal Electricity, Photovoltaics, Wind, Biomass, Hydro, Geothermal Electric, Wave, Tidal, Landfill Gas

Applicable Sectors

Utility, Investor-Owned Utility, Publicly-Owned Utility, Rural Cooperative,

Utility, Investor-Owned Utility, Publicly-Owned Utility,

Utility

Initial Minimum

0.2%

 

400 MW

Year Enacted

2000

2001

1999

Existing Renewables

 

 

880 MW

Penalties

Yes

Yes-administrative fines

lesser of $50 per MWh or 200% of the average cost of credits traded during the year

Minimum required amount of solar

solar must make up 50% in 2001, increasing to 60% for 2004 through 2012

Solar must be 0.5% of total electricity delivered, to be achieved beginning 2004 by adding at least .01% annually

Solar must make up at least 5% of  the renewable energy generated

Funding for building of new generation

Funding from existing system benefits charges and a new surcharge to be collected by the state’s regulated utilities.

Cost of doing business

Cost of doing business

 

 

Note that although Arizona’s program has roughly a factor of ten times smaller target in terms of total number of megawatts, most of Arizona’s renewable energy will be solar, which is about 10 times as expensive as wind, geothermal, and other renewables. Therefore, on a cost basis, Arizona’s standard is quite comparable to the others.

 

 

RPS Implementation Schedules:

Arizona Schedule:

 

% Renewables ------Date  
0.2%-----------------2001  
0.4%-----------------2002  
0.6%-----------------2003  
0.8%-----------------2004  
1.0%-----------------2005  
1.05%---------------2006  
1.1%-----------------2007 - 2012  

 

Caveat – Arizona’s standard also specifies that if the cost of solar technologies do not decrease to a Commission determined cost/benefit point by the end of 2004, the portfolio requirement will not continue to increase.
 

Texas Schedule:

 

MW New Renewables-----------Date  
400 MW ----------------------- 01/01/2002  
400 MW ----------------------- 01/01/2003  
850 MW ----------------------- 01/01/2004  
850 MW ----------------------- 01/01/2005  
1,400 MW --------------------- 01/01/2006  
1,400 MW --------------------- 01/01/2007  
2,000 MW --------------------- 01/01/2008  
2,000 MW --------------------- 01/01/2009 – 2019

 

Nevada Schedule:

 

% Renewables -- Date  
5% -------------------- 01/01/2003  
7% -------------------- 01/01/2005  
9% ------------------- 01/01/2007  
11% ------------------ 01/01/2009  
13% ----------------- 01/01/2011  
15% ----------------- 01/01/2013  
 

 

More on Arizona’s RPS funding surcharge: The new surcharge is capped at 35¢ per month for residential customers, $13/month for non-residential, and $39/month for customers with loads over 3 MW. In total, at least $15 - $20 million is expected to be collected annually for the EPS.

 

 

 

 

 

6.    Green Pricing Programs in NM and Bordering States

Green pricing programs are one of the great successes of the 1990s for renewable energy, and many now exist in the United States. Roughly one in five Americans can now choose to have some or all of their electricity supplied by renewable energy sources. Public support for these programs was established through many surveys of public opinion. Public Service Company of New Mexico (PNM) has even conducted a small focus group study in Albuquerque, which indicated strong support comparable to that found in other states. What follows is are fairly detailed descriptions of green pricing programs in New Mexico and neighboring states: the main things to note here are the prices being charged and the success of the programs to date in signing up customers. This data illustrates overwhelmingly that customers not only say they want green power, but that they buy it when it has been properly marketed to them (the latter is not always the case!).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.    Rebate Programs for Renewable Energy

 

Arizona: Tuscon Electric Power is offering their customers who have qualifying solar access (southfacing roof, appropriate pitched, unobstructed sun) a rebate worth $2000 per kilowatt of  PV installed. The customer may either buy a system from a third party owner (in which case the utility will pay the customer $2000 per kilowatt), or may buy one of two kits offered by the utility at $6000 per 1 kW. The program has a net-metering option as well. The utility is having some problems with their kits at present due to lack of availability due to high volume sales in CA, and also due to problems with efficiency loss of panels in the hot AZ climate – they are presently developing a fix to this problem.  

 

Nevada: The Conservation Department of the City of Boulder City Public Works offers renewable energy rebates to its customers under its Energy Efficient Appliance Program. Both commercial and residential customers located in Boulder City, NV, are eligible for this program. These rebates only cover conversions from existing electric water heaters to solar water heaters. The utility offers $200 from its own funding reserves for each forty-gallon tank that is replaced. The rebates have only been in place since 1988. They are promoted by Boulder City Public Works through periodic new releases and flyers distributed at credit unions, the local library, and the utility’s office.

 

Colorado: The Governor's Office of Energy Management and Conservation (OEMC) in cooperation with the Colorado alternative fuels industry offers rebates to vehicle owners who convert their vehicles to cleaner burning alternative fuels or for the purchase of an alternative fuel vehicle. Eligible fuels include propane, compressed natural gas, methanol, ethanol, and electricity. The base rebate is 15% of the cost of the vehicle which may be increased up to a total of 50% depending on the type of vehicle and its use. For example, the rebate is increased by 10% for a new factory vehicle or engine installed by the Original Equipment Manufacturer (OEM). The maximum rebate amount is $1,500 for passenger vehicles, $2,500 for light-duty trucks (8,500 lbs. or less), $3,500 for medium-duty trucks (between 8,500 and 14,000 lbs.), and $6,000 for heavy-duty trucks (greater than 14,000 lbs.).

 

Texas: The Austin Home Energy Air Conditioning and Appliance Rebate program offers customers a rebate on solar water heaters and energy-efficient equipment, such as heat pump water heaters, heat recovery water heaters, and package air conditioners and heat pumps. Funding for the rebates comes from Austin Energy’s revenues.  

For solar water heaters, there are three rebate options available to customers:  
- 16 square foot collector area or less: $150;  
- 16 to 35 square foot collector area: $250; and  
- 36 square foot collector area or more: $350.  


Austin Energy also offers a Home Energy Loan program. Customers choose one of two loan options to finance energy efficiency projects.:  
- a 5.99%interest Home Improvement Loan: 3, 5, 7, or 10 year repayment periods,  
and $6,000 maximum loan amount ($9,000 for duplexes); or  
- a 7.99% interest Major Home Improvement Loan: 3, 5, 7, or 10 year repayment periods, and $9,000 maximum loan amount.  

Austin Energy promotes both the Home Energy Loan and the Home Energy Air Conditioning and Appliance Rebates programs to the public through bill inserts, on billboards, and in advertisements for TV, newspapers, and magazines. The utility also publicizes the loans and rebates at presentations to neighborhood associations and businesses, and in literature distributed at home improvement shows and the Austin City Chamber of Commerce. Participating customers must choose to accept either the loan or the rebate, but not both.

8.    Tax Credit Incentives

 

9.    Loan Programs

 

Arizona: The Revolving Energy Loans for Arizona (RELA) Program is offered by the Department of Commerce for companies that either manufacture renewable energy, alternative energy, or energy conserving equipment or acquire such equipment for use in their own processes. Manufacturers can qualify for the loan only if they have at least two years operating experience in Arizona. Loan requests may range from $10,000 to $500,000, up to a maximum of 75% of total project costs. Fixed interest rates are 5% for conservation or retrofit projects and manufacturing. Projects must have seven years simple payback or less.

10.     New Mexico’s Wind Resource

 

New Mexico ranks in the big leagues with respect to wind power, having the twelve largest resource in the USA (much greater than California's resource - see the table below).  The resource is estimated to be capable of providing roughly 435 billion kwh annually, enough to power 40 million households.  Comparing this to New Mexico's total electricity use of about 17 billion kwh/yr, we find that New Mexico’s wind resource potential is about 25 times larger than her usage.

 

THE TOP TWENTY U.S. STATES for wind energy potential
as measured by annual energy potential in the billions of kWh,
factoring in environmental and land use exclusions for wind class of 3 and higher.

Rank

State

B kWh

Rank

State

B kWh

1

North Dakota

1,210

11

Colorado

481

2

Texas

1,190

12

New Mexico

435

3

Kansas

1,070

13

Idaho

73

4

South Dakota

1,030

14

Michigan

65

5

Montana

1,020

15

New York

62

6

Nebraska

868

16

Illinois

61

7

Wyoming

747

17

California

59

8

Oklahoma

725

18

Wisconsin

58

9

Minnesota

657

19

Maine

56

10

Iowa

551

20

Missouri

52


Note that New Mexico has approximately one third the wind resource of the state with the largest resource, North Dakota. Also note that there is a dramatic decrease in wind power resource after New Mexico: Idado, the next state after New Mexico, has less than one quarter of New Mexico’s resource! That is not to say that wind power is cannot be a significant contributor in these states as well, however – not that California is also ranked lower than New Mexico.

11.        New Mexico’s Solar Resource potential

 

New Mexico’s solar resource potential is essentially off the charts. Assuming 15% efficient solar (photovoltaic) collectors and factoring in the fact that the sun shines strongly roughly eight hours a day, one square kilometer of solar collectors can produce electricity equivalent to a continuous 50 megawatt generator (the actual total sunlight falling on a square kilometer on a clear day in New Mexico delivers 1 Gigawatt!). Given New Mexico’s average electricity power consumption of 1.9 Gigawatts (average), then an area equal to 1.9 / .05 = 38 square kilometers, or a square equal to 6 kilometers on a side, could provide all of New Mexico’s electricity needs with current technology.

12.          Some Renewable Energy Policy Organizations in New Mexico

 

Many of these groups are directly involved in renewable energy policy work, outside of the coalition. CCAE lobbies the legislature, files comments at the PRC, participates on press releases on energy issues. Broad scope: concerned with all consumer and environmental issues related to energy. CCAE played a role in crafting New Mexico’s deregulation legislation, and in several of the rules promulgated by the PRC based on that legislation.