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New Mexico regulator approves state utility plan to add 310MW of battery storage by summer 2026

By Matthew Biss
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The New Mexico Public Regulation Commission (NMPRC) has approved an application from Public Service Company of New Mexico (PNM) to add 309.5MW of energy storage to the investor-owned utility’s portfolio by summer 2026.

The application includes energy storage agreements (ESAs) relating to three different projects totalling 249.5MW of battery capacity, a certificate of public convenience and necessity (CCN) for the construction of a 60MW utility-owned battery energy storage system (BESS) and a power purchase agreement (PPA) covering solar capacity.

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PNM submitted the application with the state regulator on 25 October last year, following a summer which saw the utility twice surpass its record peak electricity demand consecutively on 17 July and 18 July 2023. The NMPRC published an order on its online electronic docketing system approving the application on 31 May.

Clenera solar and storage project

The approved application includes a 20-year ESA with Boise, Idaho-headquartered Clenera, covering 100MW/400MWh of energy storage output and capacity from the developer’s Quail Ranch Solar and Storage facility located in the city of Rio Rancho, Bernalillo County, New Mexico. The facility has an expected commercial operation date (COD) of November 2nd 2025.

PNM will also pay Clenera for the capacity and associated energy from the 100MW solar portion of the facility to be co-located with the BESS through a separate 20-year PPA.

NextEra hybrid facilities

The application also includes separate 20-year ESAs covering storage capacity from two facilities being developed by NextEra Energy Resources (NextEra). The first covers 100MW/400MWh of energy storage capacity from the developer’s Sky Ranch II Energy Storage facility located in Valencia County, New Mexico.

NextEra recently commissioned the first portion of the Sky Ranch complex which comprises a 190MW solar facility co-located with a 50MW/200MWh BESS.

In collaboration with Meta (then still called Facebook), PNM signed an ESA and PPA with NextEra back in 2021 for the entire output from the first portion of the Sky Ranch facility. PNM and NextEra originally agreed upon a US$6.60/MWh payment rate for energy storage capacity but this was later renegotiated to US$7.86/MWh following major disruptions to the global supply chain.

The second ESA covers 49.5MW/198MWh of energy storage capacity from the Route 66 Energy Storage Project which NextEra is adding to its operational 49.5MW Route 66 Solar facility in New Mexico’s Cibola County. NextEra and PNM have an existing PPA for the solar capacity from the project.

CODs for the Sky Ranch II Energy Storage and Route 66 Energy Storage facilities are both 1 February 2026.

Energy storage capacity pricing

During the project selection process, the Financial Accounting Standard Board (FASB) made changes to lease accounting rules meaning a regular fixed-price energy storage agreement (ESA) would be treated as a “lease liability” introducing associated imputed debt on power offtaker’s balance sheets.

Instead of considering fixed price ESAs, PNM decided that for the first time it would move forward with volumetric ESAs that tie the price for storage capacity on the output of the co-located solar production facility. Under generally accepted accounting principles (GAAP), this would avoid any recognition of lease liability and the associated imputed debt.

On a long-term basis, PNM calculated that the three volumetric ESAs would save customers US$13 million on a net present value (NPV) basis compared to three fixed term ESAs if the impact of imputed debt was also included.

PNM will pay a volumetric rate of US$49.2/MWh to Clenera for storage capacity from the Quail Ranch facility. The utility will pay NextEra a volumetric rate of US$28.04/MWh and US$48.95/MWh for capacity from the Sky Ranch and Route 66 facilities, respectively.

Utility-owned storage plant also approved

PNM also received approval to construct a 60MW/240MWh standalone BESS called the Sandia Storage Project to be located near the utility’s existing Sandia Substation in southeast Albuquerque. PNM has already entered into an engineering, procurement and construction (EPC) agreement with Depcom Power to develop the facility.

The utility-owned facility is expected to cost US$131 million and have a COD of 1 May 2026. PNM will recover the costs of the project in a general rate review where the utility will seek to adjust its base rates.

New Mexico portfolio mandates

The projects were selected by PNM following the utility’s 2026-2028 Generation Resources RFP released back in 2022. The procurement sought to acquire bulk transmission and distribution level capacity as well as demand side management resources to serve PNM’s forecasted needs.

PNM has committed to having a 100% carbon-free resource portfolio by 2045 which is five years ahead of the date mandated by the New Mexico Energy Transition Act (ETA).

The New Mexico ETA (Senate Bill 489) was enacted in March 2019 and established a net zero carbon resource goal for investor-owned utilities within the state. It also created funds for those affected by the closure of the coal-fired San Juan Generating Station, which was retired at the end of 2022.

In March 2023 the state Senate of New Mexico passed a bill that would have required investor-owned utility (IOU) companies to procure or deploy 2GW/7GWh of energy storage, to be online by 2034. Senate Bill 456 then headed to the House of Representatives’ House Energy, Environment and Natural Resources Committee (HENRC), but on 16 March the action was postponed indefinitely, according to state legislative records.

Utility acquisition by Iberdrola terminated

Multinational energy company Iberdrola announced at the beginning of the year that it had terminated an agreement to acquire PNM’s parent holding company PNM Resources (as reported by our sister site PV Tech) after the two parties failed to obtain approval of the acquisition from the NMPRC.

Under the terms of the agreement, either party had the contractual right to terminate the deal if all regulatory approvals weren’t granted by the end of 2023. Iberdrola intended to acquire PNM Resources through its US subsidiary Avangrid.

PNM Resources also owns another utility called Texas New Mexico Power (TNMP) which serves North Central Texas, parts of West Texas, and the areas near the Gulf Coast.

Additional reporting by Andy Colthorpe.

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