Guest cheer-leading by David Middleton
H/T to Gary Grubbs
City Backs Deal for CCS Technology to Save New Mexico Coal Plant
08/19/2019 | Darrell Proctor
The Farmington, New Mexico, city council on Aug. 15 unanimously approved a deal to transfer 95% of the ownership interest of the coal-fired San Juan Generating Station (SJGS) to Enchant Energy, a company run by executives of a New York-based hedge fund that wants to utilize what it calls “state-of-the-art environmental technology” to capture carbon dioxide (CO2) from the plant and keep the facility in operation.
The contract agreement dated Aug. 16 is the latest chapter in the city of Farmington’s effort to keep the SJGS in operation. Farmington officials have worked to find a new operator for the 847-MW San Juan plant after local utility PNM, which operates the facility, in 2017 said it would close the plant’s two remaining units in 2022, 30 years ahead of schedule. The city is part owner of the plant.
The SJGS and its adjacent San Juan coal mine are major employers in northwestern New Mexico, and many of the workers at the mine are from the Navajo Nation. The San Juan Mine, the sole provider of coal to the SJGS, will operate under new ownership after the bankruptcy of former owner Westmoreland Coal Company, with creditors expected to take ownership. The mine’s current supply contract with the mine expires in 2022.
At first glance, this story didn’t look that interesting… But when I found out that the Rockefeller Family Fund was vigorously opposing it, I decided that it was worth digging into. After reading this, I’m now an unofficial Enchant Energy cheer-leader…
World’s largest CCS plant in N.M. — plan or pipe dream?
Edward Klump, E&E News reporter Energywire: Friday, July 19, 2019
It’s been 14 years since Jason Selch, an energy analyst and investor, mooned his bosses at Bank of America.
His latest bold move: trying to save a threatened coal plant.
“It can’t all be shut down at once,” Heller said. “And the solution has to start somewhere.”
While claiming a lengthy career in energy investment, Selch, 58, has gained more attention in the press for walking into a Bank of America conference room in Chicago in 2005 and mooning higher-ups for firing his friend. Selch would be fired and denied about $2 million in deferred compensation despite a lawsuit. Selch told MarketWatch in 2012 the incident was “significantly damaging to my career and it was very damaging to my pocketbook.”
Now, Selch and Heller are pitching what they cast as a carbon capture venture unlike anything in the industry — something on a larger scale than the Petra Nova carbon capture project in Texas, the world’s largest CCS retrofit of a coal plant. And having Selch and Heller interested is generating attention — even as considerable questions remain.
Opponents say the proposal gives hope to workers at the plant and a nearby mine that’s unlikely to be fulfilled. The Public Service Company of New Mexico, or PNM, is seeking to take two coal-fired generating units offline at San Juan in mid-2022.
The utility, which is part of PNM Resources Inc., has said it won’t buy power from San Juan after it exits. PNM has argued the retirement would have environmental and economic benefits for customers.
“While Enchant Energy has an alluring name and while it purports to have compassionate community intent — its business model is not workable and its San Juan Generating Station retrofit pitch appears to be largely self-serving,” the Institute for Energy Economics and Financial Analysis said in a recent report.
The institute says it conducts research and analyses on financial and economic issues tied to energy and the environment and receives funding from philanthropic organizations, including the Rockefeller Family Fund and the William and Flora Hewlett Foundation. The group, whose website says it promotes a shift to “a diverse, sustainable and profitable energy economy,” said using carbon capture around coal-fired generation is “a mostly academic, unaffordable exercise.” It said Selch and Heller’s pitch is offering false hope and fiscal risk to Farmington.
Show of hands… Who here has ever, at least once, wanted to moon their boss?
The fact that the Rockefeller Family Fund and the William and Flora Hewlett Foundation are opposing this, tells me that it’s a good idea.
Critics have said Enchant’s plan is not realistic. The Institute for Energy Economics and Financial Analysis (IEEFA), a pro-renewable energy organization…Power Magazine
The IEEFA “report” is nothing but a bunch of babble about solar power and lies…
Enchant Energy’s entire proposal rests on the supposition that carbon capture from coal-fired electricity generation is simultaneously technologically and economically feasible. Neither is the case.Institute for Energy Economics and Financial Analysis
Hello? Petra Nova? Oh, wait, they mentioned it later on…
Regulatory proceedings aside, construction and implementation efforts would add years to the timetable. Given the scale of the San Juan proposal—at roughly 850 MW it would be more than three times the size of the largest power plant CCS project in the U.S.—Enchant Energy’s $1.2 billion cost estimate should be taken for what it is, little more than a back-of-the-napkin calculation. By comparison, the existing 240 MW Petra Nova CCS project in Texas cost $1 billion to bring online.Institute for Energy Economics and Financial Analysis
Billion Dollar Petra Nova Coal Carbon Capture Project a Financial Success But Unclear If It Can Be Replicated
NRG Energy and JX Nippon’s joint venture Petra Nova project, the world’s largest operating post-combustion carbon dioxide (CO2) capture system, is set to receive another big boost from ongoing bipartisan enthusiasm for “clean coal.” The U.S. budget bill passed by Congress in early February included the FUTURE Act (S.1535) that extends tax credits for carbon capture, utilization, and storage (CCUS) projects and raises the credit from $10 to $35 per ton used for enhanced oil recovery. This certainly raises the prospects for further investment in an expensive and nascent technology.
The Petra Nova system has been operating since January 2017 on the retrofitted coal-fired Unit #8 at W.A. Parish Generating Station southwest of Houston, Texas. The 610 MW unit produces about 25% of the plant’s total output and CO2 emissions. A portion of the emissions, equivalent to that of a 240 MW unit, are routed to the carbon capture system that cools the gas, binds the CO2 with a solvent, vents the remaining nitrogen gas, and then reheats the mixture to break the CO2 bonds. The CO2 is cooled and compressed to a supercritical liquid that then enters an 81-mile pipeline to the West Ranch Oil Field where it is pumped 5,000 feet underground into the Frio Formation and combines with the oil, lowering its density. Extracted oil is processed through a CO2 separator that returns the gas back to the formation. An industry rule of thumb estimates an extra two barrels of oil is extracted for every ton of CO2 injected, which has so far increased production from 300 barrels to more than 4,000 barrels per day and may reach as high as 15,000.
[…]Scott Madden Management Consultants
NRG isn’t selling the CO2 to Hilcorp, the operator of West Ranch Oil Field. NRG Energy and JX Nippon paid for the Petra Nova system, which includes an 80-mile pipeline, in exchange for a working interest in the field. They also added a natural gas-fired generator to power the CCUS facility.
While I haven’t seen a detailed cost breakdown, a pretty good chunk of that $1 billion also went to injection infrastructure and their share of drilling injection wells.
Selch says proximity to pipeline attracted Enchant Energy
Selch presented carbon capture as a way to transition to renewables without having as much of an economic impact on communities where coal-fired power plants are located.
Selch first learned about the opportunity to acquire the San Juan Generating Station after being approached by a Washington, D.C.-based lawyer hired by the City of Farmington.
Selch said he initially had doubts about investing in a coal-fired power plant.
“My initial reaction was that coal-fired power doesn’t have much of a future and I have better things I could be involved in,” Selch said.
Then he saw a map of the Cortez pipeline on the Kinder Morgan website. He said that was his “eureka moment.” The pipeline runs near the power plant and transports carbon dioxide to Texas. That makes the San Juan Generating Station an ideal location for carbon capture.
[…]Farmington Daily Times
The Cortez Pipeline currently supplies much of the Permian Basin’s CO2. It is “capable of transporting 1.5 billion cubic feet of CO2 per day” and probably has excess capacity. Kinder Morgan had planned 216-mile pipeline from a CO2 field in Arizona to tie into the Cortez Pipeline in New Mexico. This would have delivered an additional 300 million cubic feet of CO2 per day. The collapse in oil prices put this nearly $1 billion project on hold.
This project will have much lower external costs that Petra Nova and they won’t have to spend money on an auxiliary natural gas fired generator to power the CCSU.
Electricity customers remain an unknown
One question hanging over the project is who will buy the power. Selch expressed confidence in the ability to market the captured carbon dioxide, but he said it may be harder to sell the electricity. He described it as a new type of electricity — low-emission fossil fuel generation.
The power plant will produce about 250 pounds of carbon dioxide per megawatt hour after the carbon capture technology is installed. The California Greenhouse Gas Emissions Performance Standard requires facilities to produce less than 1,100 pounds per megawatt hour, and California is considering reducing that to 850 pounds per megawatt hour. New Mexico’s Energy Transition Act requires generating stations to produce less than 1,100 pounds per megawatt hour starting in January 2023.
A third of the power the San Juan Generating Station produces already has customers. It will either be used to power the carbon capture or to provide electricity to Farmington Electric Utility System customers.
About 29 percent of the electricity the power plant currently generates will be used to power the carbon capture system, including compressing the carbon dioxide.
One audience member highlighted opportunities to sell power to federal government agencies or to export it to Mexico.Farmington Daily Times
The 45Q Tax Credit
In a $50-$60/bbl oil price environment, projects like this would be totally uneconomic without the 45Q tax credit. This is from Enchant Energy’s PowerPoint presentation:
They are essentially planning to finance this in a similar fashion as solar power developers, but there are obstacles.
“Environmental community is highly invested in shutting down SJGS.”
There are benefits to a community that needs benefits.
Farmington is on the eastern border of the Navajo Nation. Anyone who has driven through there knows that these people do not need more unemployment.
Enchant has said its deal to operate SJGS is “intentionally designed to further New Mexico’s dual goals of substantially reducing its statewide CO2output, and supporting New Mexico’s economy by employing hundreds of people in San Juan County and on the Navajo Nation by providing reliable, low-cost and extremely low-emission wholesale electricity.” The group said its agreement with the city of Farmington means the city will not take on additional liabilities related to the plant, and will pay less for its power purchases from the SJGS after 2022. The deal also includes some reimbursement of legal fees.Power Magazine
The Farmington Daily News quoted the governor recently as saying she is committed to making sure $40 million of assistance goes to San Juan County, the Navajo Nation and displaced workers if San Juan closes in 2022.E&E News
Can Selch and Heller pull this off? Time will tell… But I’m rooting for them. Right or wrong, the U.S. government is committed to subsidizing low-carbon energy. And some States are legislating it. Carbon Capture Sequestration and Utilization (CCSU) is the only economically viable way keep our resilient, big, beautiful, clean coal-fired power plants operating in this carbon-crazy environment. In a $50-$60 oil price environment, CCSU is rarely economic. The 45Q tax credit may be just the ticket to cheap coal-fired electricity, relatively low oil prices and American Energy Dominance. The truly unusual thing is that the 45Q tax credit has broad bipartisan support.
Like it or not, our government is going to continue to subsidize low-carbon energy. I’d prefer that they subsidize energy that works (coal, nuclear) than Unicorn dust (wind, solar).