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Where's the beef? Enchant's San Juan generating station CCS retrofit remains behind schedule, financially unviable

May 27, 2021
David Schlissel
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Key Findings

It has become clear that the project by Enchant Energy and the City of Farmington to extend the life of the San Juan Generating Station is in serious trouble.

Construction has not started, Enchant is significantly behind schedule in securing the full $1.5 billion financing for the project, and project permitting is going to take far longer than Enchant either realizes or is willing to acknowledge.

Enchant will have to capture 90% or more of the plant’s CO2 for the project’s economics to pencil out. Enchant says that the technology it will use has been proven at the Petra Nova project, but that is simply untrue.

Executive Summary

Over the last two years, it has become clear that the project by Enchant Energy and the City of Farmington (Enchant) to extend the life of the San Juan Generating Station is in serious trouble. Limited progress has been made. But the project is already significantly behind schedule in securing the full $1.5 billion financing for the project, construction has not started, and project permitting is going to take far longer than Enchant either realizes or is willing to acknowledge.

Enchant has admitted that the project is six to 10 months behind schedule due to plant outages that prevented testing needed to develop the design for the carbon capture retrofit and a delay in obtaining funding. However, Enchant is now acknowledging that construction is unlikely to start before mid-2022, or a year and a half later than its initial projection. Also, after initially claiming the retrofitted plant would be capturing carbon dioxide at the end of 2023, Enchant now admits that only half of the carbon capture island is likely to be in service at the end of 2024, and the entire project won’t be complete until mid-2025. Even the project’s important Front End Engineering Design (FEED) study is behind schedule due to inadequate funding. Further delays can certainly be expected as the project continues.

It seems clear that unlike renewable and battery storage projects, Enchant has had trouble convincing potential investors that its plan to retrofit San Juan to capture CO2 is financially viable. In December 2019, Enchant claimed it would close on the full funding for the project by the end of 2020. That did not happen, and Enchant now seems to be changing its funding plan from depending solely on luring investors with federal 45Q tax credits to a mixed plan where roughly two-thirds of the project is funded with low-interest loans from the U.S. Department of Energy (DOE) and the Rural Utilities Service (RUS) of the U.S. Department of Agriculture. Where the remaining one-third of the funding will come from remains unanswered.

Enchant has projected that it will close on this new funding by late this year. But that simply isn’t realistic. It took almost three years for the DOE to make a final decision to fund $190 million of the cost of the Petra Nova carbon capture project. As such, it is highly unlikely the DOE and RUS will agree to lend five times as much to Enchant in one-third the time. This is particularly true given that such a large degree of federal funding will trigger a potentially time-consuming review under the National Environmental Policy Act (NEPA).

It is also increasingly unclear how interested the DOE will be in funding projects such as Enchant’s—that is, retrofits to older, expensive-to-run coal-fired power plants. In a recent interview, Jennifer Wilcox, the department’s principal deputy assistant secretary for fossil energy, said: “It’s clear that carbon capture may not make economic sense on the remaining existing fleet of coal-fired power plants in the United States.” Enchant also claims that permitting for the San Juan project will be completed later this year. But that is also unrealistic. Environmental reviews are likely to take years, not months.

One of the most famous advertising slogans ever was in a 1984 commercial from Wendy’s featuring a customer at a fast-food restaurant asking “Where’s the Beef?” as a complaint about how little meat there was in her hamburger. The same question can be asked about how much progress Enchant Energy is making in its effort to acquire and convert San Juan to capture CO2. So far, mounting delays in meeting benchmarks, changing plans and unanswered questions raise serious doubts about Enchant’s repeated and unsupported claims about the project and its purported benefits. It leaves us all asking, “Where’s the beef?”

David Schlissel

David Schlissel is IEEFA’s Director of Resource Planning Analysis. His work focuses primarily on the technical and economic viability of resources being used or being proposed for use in the electric power sector.

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