PNM: Carbon capture at San Juan Generating Station won't provide reliable, affordable electricity
Public Service Company of New Mexico says continued operation of the San Juan Generating Station with carbon capture technology could cost $5 to $6 billion.
FARMINGTON — Public Service Company of New Mexico says installing carbon capture technology on San Juan Generating Station would not provide reliable, affordable electricity for its customers.
However, in a press release, the utility said it is willing to work with the other power plant owners to give Farmington the opportunity to keep the San Juan Generating Station.
The company stated it will cost $5 to $6 billion to continue operations at San Juan Generating Station and install carbon capture technology. This includes the $1.3 billion price tag to install the carbon capture technology.
The proposal for carbon capture at the San Juan Generating Station began to gain attention this spring when Farmington entered into an agreement with Enchant Energy to keep the power plant open by installing carbon capture technology. Since the project was announced, the city and Enchant Energy have received federal funding for an engineering study.
The discussion surrounding carbon capture and the power plant caught the attention of the New Mexico Public Regulation Commission.
On Oct. 18, the PRC staff filed testimony by Dhiraj Solomon, the acting engineering bureau chief for the PRC’s utility division. Solomon recommended denying PNM’s application to abandon the San Juan Generating Station, highlighting that the utility had not evaluated carbon capture technology.
"PNM has failed to adequately analyze the continued operation of SJGS with (carbon capture) technology, the 45Q tax credits and sale of CO2 for (enhanced oil recovery) projects, which could delay the economic impact of the complete shutdown of SJGS and the coal mine by an additional 12 years," Solomon said in his testimony.
Solomon included two studies by engineering firm Sargent & Lundy evaluating carbon capture at San Juan Generating Station, as well as a study released last year by the National Association of Regulatory Utility Commissions that looked at carbon capture technology, policy and opportunities. He also highlighted the fiscal impact reported drafted for the Energy Transition Act.
This criticism from the PRC led PNM to reevaluate carbon capture technology, which it had previously studied in 2010.
Two sets of assumptions
PNM spokesperson Raymond Sandoval said the utility looked at two sets of assumptions. One set was based on the Sargent & Lundy pre-feasibility report that was completed for Enchant Energy this summer. The other was based on PNM's predictions.
"This technology has never been proven at a facility that is as large as San Juan," Sandoval said.
Based on the Sargent & Lundy assumptions, customers would see a slight decrease in utility bills. If PNM's assumptions are correct, however, it would result in an increase of $10.37 a month in bills.
Some of the differing assumptions included how often the two units at San Juan Generating Station would be online, how much carbon would be captured and how future government policies will impact coal.
Sandoval said the pre-feasibility study assumed the San Juan Generating Station would run 85% of the time and the carbon capture units would capture 90% of the carbon. He said San Juan Generating Station does not achieve a 85% run rate — PNM's model looked at a 70% run rate — and Sandoval questioned if the plant could capture 90 percent of the carbon.
"You would need to be able to capture that much carbon so that you can sell it to offset some of the costs," Sandoval said.
In addition, PNM's second scenario assumed the tax credits for carbon capture would end in 12 years. This was based on the assumption that the tax credits would be extended. Sandoval said if a Democratic candidate wins the 2020 election those policies could change much sooner.
Questions remain about ownership if PNM installed carbon capture
Sandoval said the modeling did not include the possibility of Enchant Energy owning part of the plant.
All the owners of the San Juan Generating Station, except for Farmington, have said they plan to exit in 2022. If the PRC requires PNM to install carbon capture and continue operating the power plant, Farmington could still acquire ownership shares belonging to Tucson Electric Power, Los Alamos County and Utah Associated Municipal Power Systems. The city could then transfer that ownership to Enchant Energy.
When asked in October about what would happen if PNM remained an owner of the San Juan Generating Station, Enchant Energy CEO Jason Selch expressed interest in working with PNM on carbon capture and potentially having Enchant Energy own the carbon capture unit.
PNM's evaluation contrasts with Enchant Energy's evaluation. Enchant Energy states the 45Q tax credits could generate $2.5 billion, nearly twice the $1.3 billion estimated price tag of installing the technology. The company plans to use tax-equity financing to fund the retrofit and, after it is installed, Enchant Energy says the sales of carbon dioxide will fully cover annual operating expenses at the power plant.
While PNM says it could increase utility bills if it installed the technology, Enchant Energy maintains that the cost of generating electricity will not increase.
Enchant Energy responds
Selch said the press release PNM issued on Nov. 25 appears to be an attempt to summarize testimony the utility previously filed with the PRC, which Enchant Energy has reviewed.
"We drew just the opposite conclusion," Selch said.
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He said it appears PNM could break even if carbon capture technology was installed, and the result would be different for Enchant Energy because PNM is working as a regulated utility while Enchant Energy would be selling electricity on the merchant market.
He said the testimony PNM filed with the PRC demonstrates that the carbon capture technology is viable, especially for a merchant plant. Selch highlighted testimony PNM filed by Nicholas Phillips, PNM's director of integrated resource planning.
"PNM is a regulated utility acting on behalf of its retail customers, not a merchant operator as is the case for Petra Nova (and potentially Enchant Energy)," Phillips said in his testimony. "Consequently, PNM’s ability to utilize CCUS and the risks associated with it are not the same as the case for Enchant Energy and for the Petra Nova facility."
Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at email@example.com.
An earlier version of this story included inaccurate numbers provided by PNM about the run rate and the tax credits. This story has been updated with the correct information.