Carbon capture plan for San Juan Generating Station is uneconomic pipe dream

The business template behind a proposal to turn the San Juan Generating Station into a model carbon-capture project doesn’t hold up under much scrutiny.

On paper, it’s an elegant, almost magical idea. It would retrofit an aging and increasingly uncompetitive coal-fired power plant with whiz-bang technology that would trap its carbon dioxide emissions and sell them to producers in the oil industry. The project, which would cost north of $1 billion, supposedly would be paid for by investors who would recover their capital through federal tax credits.

Under the plan, San Juan would remain open, while longtime and good-paying jobs in San Juan County would be preserved and the tax base it supports would be spared the hit it otherwise will suffer under existing plans to close the plant by 2022.

The pitch, however, is built on false assumptions, as we’ve described in research we’ve published over the past several months. The promoter, a novice and untried energy company called Enchant Energy, appears so far to be enriching only itself with federal money it has been given to study the idea. In the meantime, it is creating false hope through a partnership with Farmington Electric Utility System by sustaining the myth that coal-fired power generation can survive in this day and age.

Electricity-generation modernization is sweeping the country as cheap fracked gas and zero-fuel-cost renewables like utility-scale wind and solar continue to gain market share. The trend has gained irreversible momentum and it leaves plants like San Juan in an impossible position. 

SAN JUAN ISN’T ALONE. COAL-FIRED PLANTS ALL ACROSS AMERICA ARE CLOSING as utilities shift to more economic forms of power production. Regionally the shift is starkly evident. The only other two coal-fired plants in New Mexico are headed for decommissioning too. Four Corners Power Plant, just across the San Juan River, will close by 2031, seven years ahead of its original retirement date, if not sooner. Escalante Station, near Grants, will close this year, as part of an abrupt reversal in business strategy announced just last month by Tri-State Generation and Transmission Association, which is also accelerating the closure of its coal plants in Colorado. 

The same thing is happening across the state line in Arizona, where Navajo Generating Station, once the biggest electricity plant west of the Mississippi, closed in November, and where Arizona’s remaining coal-fired plants—Cholla, Coronado, Springerville, and Apache—are now either scheduled for early retirement or are underperforming at a level that suggests they won’t be able to make a go of it as long as originally envisioned when they were built.

Enchant claims its proposal for San Juan would reverse this tide, but the plan is riddled with so many holes that in truth it is more a work of aspiration than anything resembling reality.

Our most recent report on it highlights three wildly optimistic assumptions made by Enchant that call the entire project into question:

• First, that the retrofitted units will operate at an average capacity factor of at least 85% for the first 12 years it is operational—a performance level not achieved at the plant in the past 10 years and one highly unlikely to be reached in the future;
• Second, that the plant will capture 90% of its carbon dioxide, while operating at least 85% of the time for 12 consecutive years—another long-shot outcome; and
• Third, that the plant will be able to sell six million metric tons of CO2 annually for use in enhanced oil recovery activities in the Permian Basin in order to pay for the project—an equally iffy proposition.

All of this is technically possibly, as researchers at Los Alamos National Laboratory have pointed out. But there is a huge gap between what is technically possible in a paper assessment and what is likely during actual commercial operations. It is technically possible that your lottery ticket will win the jackpot, too. The likelihood of that outcome, however, is, to understate the obvious, unlikely.

It is perfectly understandable for any community going through what Farmington is experiencing to reach for solutions that are within reason. But Enchant’s proposal does not fall into that category. Rather, its plan cobbles together projections that defy common sense and conventional commercial practices.

ENCHANT’S QUIXOTIC ENDEAVOR ALSO RAISES SERIOUS RISKS FOR THE CITIZENS OF FARMINGTON and the surrounding area. There is little tying Enchant’s backers to the region; if the plant founders they can wash their hands and move on—leaving the local community holding the bag.

The people of Farmington and San Juan County would be far better served investing in the new energy economy, which is revolving more and more around proven, clean and increasingly low-cost technologies that are practical and saleable.

The future of power generation is not in coal-fired power of any kind, but in the development of readily available resources like the sun, which northwestern New Mexico has in abundance.

Dennis Wamsted and Karl Cates are analysts at the Institute for Energy Economics and Financial Analysis.

This commentary appeared in the Farmington Daily Times on February 26, 2020 under the title: Retrofitting San Juan Generation Station for carbon capture is an uneconomic pipe dream

Related items:

IEEFA webinar: Carbon capture project for San Juan NM coal plant is financially unviable

IEEFA report: Proposed carbon capture retrofit of San Juan Generating Station does not add up

Enchant’s Proposed CCS Project at the San Juan Generating Station: False Promises and Major Risks