August 7, 2017 Read More →

Coal-Gasification Proposal Seen as Unlikely to Save Navajo Generating Station

Bloomberg BNA:

The biggest coal-fired generating station west of the Mississippi could be replaced by a coal gasification plant, raising concerns among environmentalists as well as questions from financial analysts about the economic costs and risks.

The tribe “has considered the development of potential energy industries, including [a] gasification plant,” Navajo Nation presidential spokesman Mihio Manus told Bloomberg BNA Aug. 3. He added that the tribe hasn’t committed to the technology, which chemically transforms the fossil fuel into synthetic natural gas.

Manus’ remarks echo those of Navajo Nation President Russell Begaye, who indicated to local reporters in early July that the tribe wants to build a coal-to-gas generating station.

The Navajo Generating Station, on tribal land near Page, Ariz., provides power to customers in Arizona and Nevada. The plant’s owners—which include the Salt River Project, one of Arizona’s largest utilities, and the Interior Department’s Bureau of Reclamation—have a lease with the Navajo Nation that expires in 2019. That plant will shut down at the end of 2019 unless a new buyer steps forward to keep it running beyond then, a possibility that energy analysts say seems increasingly remote.

Should the gasification plans come to fruition, one beneficiary could be Peabody Energy, which operates the large Kayenta coal mine 78 miles to the southeast that employs many tribal members. Analysts, however, say they’re skeptical a coal gasification plant will be realized because of a range of economic and technological challenges.

Two recent stumbles in the coal gasification industry serve to illustrate the economic risk the Navajo Nation would be courting by embracing the technology, said David Schlissel, director of resource planning analysis at the Institute for Energy Economics and Financial Analysis.

Duke Energy’s Edwardsport coal gasification plant in Indiana has cost $1.5 billion more than originally planned and still doesn’t run reliably, Schlissel said. More recently, Mississippi regulators concerned about the rising costs of Southern Co.’s Kemper plant ordered the company last month to transition the plant to natural gas.

“If Duke and Southern Co. couldn’t do it, who is the Navajo Nation going to find who can do it?” Schlissel said. “There’s no evidence that this can be done economically or reliably.”

A coal gasification plant would generate power at roughly $100 per megawatt hour, but the Navajo Nation would only be able to sell it into the grid in Arizona or Nevada at $30 a megawatt hour, according to Schlissel.

“It doesn’t make sense,” he said. “You’re quickly going to go down.”

More: ($) Peabody Mine Survival May Rest on Navajo Coal Gasification Plan

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