PNM’s renewable energy needs would jump under Facebook deal

Public Service Co. of New Mexico applied July 8 at the New Mexico Public Regulation Commission for an approval related to a potential contract to supply power to a planned Facebook Inc. data center. 

PNM is seeking expedited approval in order to attract this new customer with unique service requirements to its service territory in New Mexico. The customer is also considering locating its new facility in Utah and has informed PNM that the state which is best able to meet its requirements will be the state chosen by the customer for building its new data center. Therefore, PNM asked for commission approval by Aug. 31, 2016.

PNM noted that Rocky Mountain Power has filed an application with the Utah Public Service Commission seeking the necessary regulatory approvals under Utah law to serve this same customer and has requested final approval by no later than Aug. 31, 2016. 

The initial phase of the Facebook facility is projected to reach approximately 60 MW of demand. Depending on future expansions of its data center facilities, the customer projects that its data center load could reach over 100 MW in the future.

Facebook requires that the electric service for the data center be provided, to the greatest extent practicable, by new renewable energy resources, i.e., in addition to whatever renewable energy resources that are used to serve other customers, such that the production of additional renewable energy over the course of a year will equal the data center’s energy demand and consumption. To satisfy this last service requirement, it is willing to pay the full cost of procuring the new renewable energy resources needed to serve its data center.

In order to meet these requirements, PNM proposes to procure the capacity and energy necessary to match customer’s peak demand and its energy requirements from additional renewable energy sources. The initial procurement will be Solar Facilities developed and owned by PNMR Development and Management Co. (PNMR-D), a non-regulated affiliate of PNM. The procurement will be accomplished by entering into 25-year power purchase agreements (PPAs) with PNMR-D.

The Initial Solar Facilities PPAs are subject to commission approval. PNM will be required to file written notification to the commission within five days of entering into the Initial Solar Facilities PPAs. PNM and the customer will work collaboratively, expeditiously and in good faith to: determine when it makes the most sense to bring new renewable resources into service to match the data center’s projected load; identify and evaluate the costs and benefits of new renewable energy resources available to satisfy that growth; and determine the site(s) of those Additional Renewable Energy Procurements at locations that will avoid constraints on PNM’s transmission system.

PNM noted: "It is important to the Customer that these new renewable energy resources be above and beyond the state’s Renewable Portfolio Standard (‘RPS’) requirements. Given that operating a data center is very energy-intensive, price is a significant consideration. Related to this, the Customer needs a degree of price stability for a pre-determined period of time. On the other hand, the Customer does not wish to be subsidized by other customers. Accordingly, the Customer will pay for its allocated share of transmission costs, even though its load, at least initially, would not require connection to the transmission system. The Customer would also pay a fixed amount for ten years for an allocation of production costs for the time it is served from PNM’s traditional supply portfolio. Thus, the Customer will pay a contribution for fixed costs over and above the incremental costs of serving the Customer. The Customer expects to have its data center in commercial operation in the second half of 2017, so expedited regulatory review is also a critical consideration.

"Finally, while PNM and the Customer have agreed to terms of service for the data center, subject to regulatory approval, the Customer has not yet made a final decision on the location of the new data center, although the Customer has narrowed the competition for the data center down to two states, New Mexico being one of them. Rocky Mountain Power Company has filed in the state of Utah to provide service to this Customer if the Customer locates its data center in that state. Prompt regulatory review and approval of the proposed service will keep New Mexico in contention for this significant new investment in our state."

Said the header on a proposed contract filed with the commission: "This Special Service Contract (‘Contract’), is effective this 9th day of July, 2016 (‘Effective Date’), by and between Public Service Company of New Mexico, a New Mexico corporation (‘PNM’) and Facebook, Inc., a Delaware corporation (‘Customer’)."

Rocky Mountain Power says bigger projects needed to meet new demand

Rocky Mountain Power, a division of PacifiCorp, said in its application to the Public Service Commission of Utah that it needs approval of a Renewable Energy Service Contract with Facebook.

Gary W. Hoogeveen, the Senior Vice President and Chief Commercial Officer of Rocky Mountain Power, said in supporting testimony that traditional renewable energy programs, which focus on small power projects, aren’t meeting the new needs of possible major power customers.

"The primary components that are missing are scale, price, and flexibility," Hoogeveen wrote. "Many of the customer requests received by the Company include a desire to meet 100 percent of the customer’s energy needs (measured on an annual kWh basis) with renewable energy, on a scale that well exceeds the capacity of the existing programs. Most are unable to meet their renewable energy targets with renewable resources behind their meter (such as solar on the roof of their facility). Most want the renewable energy to represent “additionality” which means the energy must come from designated renewable projects that would not be built but for the customer’s load and their desire to purchase renewable energy. And many seek to minimize the cost impact to their business by acquiring cost-effective renewable resources. Large, utility-scale renewable projects offer better economics for the customer due to higher capacity factors and economies of scale and help customers better meet this objective. Lastly, most customers want flexibility in the contract structure to facilitate the timing and process for acquisition of the required renewables and customization in the rate determination and design."

Hoogeveen added: "Many large customers are making decisions on where to expand existing facilities or locate new facilities based in part on their ability to achieve their renewable energy mandates or goals. The number of retail electricity contracts that include a specific renewable energy component has increased in recent years. The Rocky Mountain Institute recently published a chart summarizing the corporate renewable deals completed between 2012 and 2016. The chart shows that 3.23 GW of renewable deals were completed in 2015. If the Company is not responsive to the needs of its customers, businesses may choose to expand or locate new facilities in states other than Utah if those states offer retail electric products that meet their renewable energy needs. This lost opportunity would adversely affect the state of Utah, its citizens, and our customers."

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.