Dive Brief:

• The 847-MW San Juan coal plant in New Mexico was slated for shutdown in 2022, but the city of Farmington announced Sunday that it has reached an "initial agreement" with Acme Equities to keep the plant operating.
• Public Service Company of New Mexico (PNM), which owns the plant along with Farmington and three other entities, had factored the shutdown into its most-recent Integrated Resource Plan (IRP) and said the city's announcement caught it by surprise.
• The agreement will save jobs and help maintain the local tax base, according to Farmington City Manager Rob Mayes.

Dive Insight:

The fate of the San Juan coal-fired plant appeared sealed last year when New Mexico regulators unanimously accepted PNM's Integrated Resource Plan (IRP), which called for closing the plant in 2022 and a complete exit from coal by 2031. But the city of Farmington says it has found a way to keep the plant operating — even as new analysis indicates there are cheaper options available.

In a statement issued Sunday, Mayes said the city and Acme "are finalizing the details of their agreement and will begin negotiations with other owners to transfer their interests in the station."

"By identifying and entering into an agreement with a capable new owner to continue operations of San Juan Generating Station and associated San Juan Mine well beyond 2022, we have potentially saved 1,600 jobs of real people and countless New Mexican families," Mayes said.

"Additionally, the prospect now exists to maintain the property tax base for the Navajo Nation, Central Consolidated Schools, San Juan County, San Juan College, Farmington and the State of New Mexico, and to avoid countless incalculable negative economic impacts to our businesses and community members."

The announcement caught PNM by surprise.

"After interacting with the City of Farmington for almost two years, including a meeting last week that included the City of Farmington and Acme Equities LLC, we were surprised to hear of an announcement to keep San Juan Generating station open," the utility said in an emailed statement.

PNM added that it understands the impacts that closing the plant would have on the affected communities, but said the plant's "current contract calls for the orderly shutdown of the plant."

"PNM will continue to work with the other four SJGS [San Juan Generating Station] owners in accordance with their agreements to plan for a shutdown of the coal plant in 2022, subject to necessary regulatory approvals," the utility said. "The anticipated shutdown is consistent with the current PNM Integrated Resource Plan (IRP) and the resource plans of the three other joint owners, with the exception of the city of Farmington."

At the same time, new research highlights the pressure that fossil-fuel plants are facing. On Monday, the Sierra Club released a study concluding a mix of renewable energy, battery storage and energy efficiency would be the lowest-cost option for PNM to replace the San Juan plant.

The new analysis, conducted by Synapse Energy Economics, found that an "all-clean-energy replacement" would be 1.5% less expensive through 2036, compared with replacing the coal power with new gas plants.

"In total, this combination of new clean energy can save PNM customers $94 million, and that doesn't even account for cost savings resulting from improved environmental and public health," the group said.

"Building new renewable energy and battery storage infrastructure is the most reliable and lowest-cost way to meet New Mexico's electricity needs," Sierra Club Beyond Coal Campaign Regional Director Evan Gillespie said in a statement.