It doesn’t take a solar industry wonk to know that New Mexico gets a lot of sunshine. In addition to this bountiful solar resource, the state also has a renewable energy standard on the books mandating that, by 2020, all investor-owned utilities must generate at least 20 percent of their electricity from renewable resources. Of that amount, four percent must come from solar.

Despite these advantages, New Mexico is far from living up to its solar potential. According to the Interstate Renewable Energy Council (IREC), the state in 2008 counted a total of one megawatt of grid-tied PV capacity — on par with Minnesota and just lagging Vermont. [You can see the full IREC report here (PDF).]

One of the challenges — recently outlined by Staci Matlock of the Santa Fe New Mexican — has been a disagreement over the role of third-party developers. As she reports,

[a] bipartisan group of legislators has filed a brief with state regulators on an issue that will affect who provides renewable energy in New Mexico.

The state legislators support allowing third parties — entities besides Public Service Company of New Mexico — to own and operate solar plants and other renewable energy systems under contract with the utility’s customers.

PNM, the state’s largest utility, contends such third-party arrangements within its exclusive service area are illegal.

Not to be overly dramatic, but this is, in effect, a turf battle. Presumably, third-party energy developers — like SunEdison, who is working on a 20-year solar power purchase agreement with the city of Santa Fe (a PNM customer) — have more experience owning and operating solar facilities than your typical electric utility. Utilities, for their part, probably don’t want a third party edging into the market and, in effect, selling power to their customers. In this case, PNM has already made clear its aim to own outright a significant chunk of solar energy capacity within its service territory. As the third party with lots of experience, SunEdison is a potential threat to PNM stated objective.

Proponents of allowing third parties into the mix — including 26 legislators and Gov. Bill Richardson –  argue that the move is necessary to enable public entities, like municipalities and schools, to finance the purchase of renewable energy systems. (Such entities are not eligible for the 30-percent federal tax credit. Third parties, however, are.) Adding third parties also promotes competition, which is good for customers. Here’s more from Matlock:

Santa Fe’s City Council approved a 20-year power agreement June 24 with SunEdison to place solar photovoltaic systems on eight city-owned properties that will be tied into the electric grid serviced by PNM.

SunEdison will sell the generated solar power at a fixed rate to the city and can benefit from state and federal tax credits. SunEdison applied to PNM for a 15-cent per kilowatt hour renewable energy credit. PNM is required to provide a certain amount of renewable power.

Egolf said the third-party question is critical to helping hospitals, churches, schools, cities and nonprofits benefit from renewable energy. “They don’t qualify for the tax rebates and credits,” Egolf said. “When you lose the third party, you lose one of the most successful financing mechanisms.”

But Don Brown, a PNM spokesman, said, “We think the deal Santa Fe is trying to do is actually not legal under state law. When you have a third party producing power and selling it to a PNM customer, that represents deregulation.”

Oh snap! The state’s Public Regulation Commission is holding a hearing on the matter. Stay tuned.