IEEFA update: High-risk carbon capture deal not in New Mexico city’s best interest

Policy reversal in Farmington, N.M., overlooks market shortcomings, long-term liabilities and credit rating impact

San Juan Navajo mapAug. 13, 2019 (IEEFA U.S.) — The municipality of Farmington, New Mexico is courting needless risk in its consideration of a long-shot plan to turn the aging San Juan Generating Station into a carbon-capture experiment, concludes a new report from the Institute for Energy Economics and Financial Analysis (IEEFA).

The report — High-Risk Carbon-Capture Deal Is Not in New Mexico City’s Best Interest — notes that the Farmington City Council is scheduled to meet in closed session today to consider a pitch from a little-known company called Enchant Energy Corp.

ENCHANT IS PROMOTING A DEAL TO PARTNER WITH THE CITY in a makeover of the San Juan Generating Station that purports to turn the power station into a carbon-capture project IEEFA has concluded has little chance of succeeding.

The Farmington City Council is scheduled to meet in closed session today “to discuss disposition of the San Juan Generating Station, which could signal changing ownership for the power plant.”

The IEEFA report, which follows on the heels of one published last month, highlights three of the many issues the proposal raises. The deal would:

  • Be a complete reversal of established city policy that calls for modernizing how Farmington’s utility produces electricity;
  • Depend on sales of C02 via pipeline that lack market support and that are freighted with regulatory hurdles; and
  • Leave Farmington exposed to long-term plant ownership liabilities, risks to its credit ratings, as well as status as an outlier going against electricity generation trends locally, regionally, and nationally.

Farmington would do better to follow the examples of others who have refused high-risk projects

THE REPORT STATES: “IEEFA BELIEVES THE CITY OF FARMINGTON WOULD DO WELL INSTEAD TO ACKNOWLEDGE AND FOLLOW MORE SENSIBLE REGIONAL BUSINESS TRANSITION EXAMPLES as seen in the Navajo Nation’s refusal to take on high-risk ownership of Navajo Generating Station; Public Service Company of New Mexico’s stated aims to modernize generally state-wide and specifically in northwestern Arizona; and Kit Carson Electric Cooperative’s success at transitioning from coal to solar while keeping costs under control.”

The report concludes that the Farmington City Council “should in the public interest reject the high-risk partnership being offered by Enchant Energy.”

“Instead, the city would do well to focus on the economic benefits afforded the community by the state’s new Energy Transition Act and consider the benefits of broader adoption of solar power generation and storage options, including utility-scale facilities, residential rooftop installations and community-wide programs for apartment units and commercial operations.”

Full report here: High-Risk Carbon-Capture Deal Is Not in New Mexico City’s Best Interest

Author Contact

Karl Cates [email protected] 917 439 8225

Media Contact

Vivienne Heston (New York) [email protected] 914 439 8921

About IEEFA

The Institute for Energy Economics and Financial Analysis (IEEFA) conducts global research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

 

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