Copyright © 2021 Albuquerque Journal
Enchant Energy Corp.’s plan to turn the coal-fired San Juan Generating Station into the world’s largest carbon-capture power plant is facing yearslong delays.
When Public Service Company of New Mexico abandons the facility in June 2022, Enchant says it now plans to simply continue running the site as a carbon-emitting coal plant for up to three years until it can fully install the carbon-capture technology, company officials told the Journal this week.
Enchant announced in 2019 that it would convert San Juan into a massive carbon-capture facility, in partnership with the city of Farmington, after PNM and other plant co-owners depart from the site next year. Until recently, Enchant said it would begin construction on plant conversion by 2021 and start operating it with carbon capture in place by January 2023.
But its plans are now more than two years behind schedule because of difficulties in raising funds to finance the $1.4 billion project, plus delays in completing an engineering and design study it needs to sign a construction contract with industry partners. As a result, the company is now targeting year-end 2024 to have carbon capture partially operational at San Juan, and mid-2025 for it to be fully functioning.
How it will work
Farmington’s city-owned utility currently holds a 5% stake in San Juan, allowing the Farmington Electric Utility to take over full ownership for free when the other co-owners depart on June 30, 2022. And under Enchant’s agreement with Farmington, the city will then turn the facility over to Enchant to be operated as a merchant power plant.
“On June 30, plant ownership will be turned over to Farmington, and the next day, we’ll start construction on carbon capture while we still keep the plant operating,” Enchant Chief Operating Officer Peter Mandelstam told the Journal. “… It’s a 27-month construction schedule for the first train of carbon capture to be operating by the end of 2024, and then 100% operational by mid-2025.”
The company says it’s already lining up utility customers to buy San Juan electricity starting in July 2022 through its new “pre-decarbonization” and “post-decarbonization” strategy. That means first selling its coal-fired generation wholesale to buyers without carbon capture, and then converting to “post-decarbonization” sales after installing CO2-capture technology, said Enchant CEO Cindy Crane.
“We now have a term sheet executed with one (customer), and another term sheet being finalized with another party,” Crane told the Journal. “We’re also in discussion with two other parties.”
Crane declined to identify Enchant’s potential commercial customers. But the company did submit bids this week to supply electricity to PNM in response to a request for proposals that PNM posted in May for power to replace San Juan generation, Crane said.
Enchant’s new plans will face stiff pushback from environmental groups, and possibly state regulators.
Environmental organizations have opposed the carbon-capture project from the start for perpetuating coal generation with technology that must still be proven successful on a commercial scale. Environmentalists says San Juan’s conversion is likely to cost far more than the $1.4 billion projected by Enchant, and the company has yet to secure financing for the project.
In fact, although Enchant executives previously said they would use private investment to convert San Juan, the company is now seeking nearly $1 billion in low-interest loans from the U.S. Department of Energy and other federal entities to help fund the project.
Erik Schlenker-Goodrich, executive director of the Western Environmental Law Center, called the project a “boondoggle” that’s promoting false hope for saving coal-related jobs in the Four Corners. The company’s latest pre- and post-decarbonization strategy is just prolonging “dirty coal-fired power,” he said.
“(Enchant) continues to do a grave disservice to the region’s communities by perpetuating the myth that coal has a future in the region,” Schlenker-Goodrich told the Journal. “You can expect Enchant’s efforts to run into a gantlet of deep skepticism and opposition.”
Steve Michel, an attorney with Western Resource Advocates, said Enchant’s new plan may simply mean running San Juan indefinitely without carbon capture.
“I’m skeptical the plant will ever get the (conversion) funding it needs,” Michel told the Journal. “I think there’s cause for real concern that the plant will run with no opportunity to capture carbon now or in the future.”
The state’s Energy Transition Act could also impede Enchant’s plans. The Act requires public utilities to replace fossil fuels with 80% renewable electricity by 2040 and 100% non-carbon generation by 2045.
Enchant will operate San Juan as a merchant power plant, not a public utility. But the ETA still requires all coal plants in New Mexico to reduce their carbon emissions to a maximum of 1,100 pounds per megawatt-hour of electricity produced starting in January 2023. That means Enchant must cut emissions by 50% from the 2,200 pounds per MWh that San Juan emits today.
But Enchant executives say the state Environment Department must still publish rules and requirements for meeting those mandates, possibly allowing the company to show compliance using a three-year rolling average on its carbon emissions, rather than simply cutting carbon output all at once.
“A three-year rolling average calculation is pretty standard in states and across the federal government,” Crane said. “It gives time to put the needed equipment in and work through it to reach operating efficiency.”
That may be wishful thinking, said Environmental Protection Division Director Sandra Ely.
“The whole notion of averaging emissions over three years makes no sense,” Ely told the Journal. “The statute is pretty clear – 1,100 pounds per MWh starting January 2023. That’s the plain language of it.”
The state Environmental Improvement Board will have to review the final rules, likely next year, Ely said.
Depending on the outcome, Enchant could potentially seek a variance under the Air Quality Control Act, but that will likely face public opposition, Ely said.
“A hearing will have to be held in front of the EIB,” she said. “That’s a public process where the community will be able to weigh in.”