$600M project puts NM town at center of hydrogen debate - Albuquerque Journal

$600M project puts NM town at center of hydrogen debate

The retired coal handling and transportation area at Escalante Power Plant in Prewitt. (Courtesy Newpoint Gas)

Copyright © 2022 Albuquerque Journal

A parade of state officials, including Gov. Michelle Lujan Grisham, have toured the coal-fired Escalante Generating Station near Grants since last summer to learn first-hand about industry plans to convert the facility into a hydrogen-based power plant.

The $600 million effort could make Escalante the nation’s first successful coal-to-hydrogen conversion project, elevating New Mexico – and the tiny town of Prewitt where the plant is located – into a leadership role in hydrogen development in the U.S. and beyond.

Texas-based Newpoint Gas LLC and natural gas pipeline operator Tallgrass Energy plan to buy Escalante this year from the Tri-State Generation and Transmission Association, which shut the plant down in 2020. The project is well funded through the Blackstone Group, a global investment firm with $731 billion in assets under management.

Blackstone owns Tallgrass Energy, and it’s now looking to invest in hydrogen projects to gain a dominant role in the rapidly-emerging “clean hydrogen” industry, which the U.S. and other countries are aggressively pursuing to help decarbonize the global economy, said Newpoint Gas CEO Wiley Rhodes.

“Blackstone has enormous resources to commit to developing hydrogen, including Escalante, and they have big plans for New Mexico,” Rhodes said. “… This is a great opportunity for Prewitt and the state of New Mexico to be first at something entirely new.”

That, in turn, has generated enthusiastic support from Lujan Grisham and her Cabinet, which is promoting a slate of new tax incentives in the legislative session that begins Tuesday to help jumpstart hydrogen development.

Rep. Patricia Lundstrom, a Gallup Democrat who chairs the Legislative Finance Committee, is also pursuing new legislation to create “hydrogen hubs” in strategic areas around New Mexico that can offer good-paying jobs, especially in communities impacted by the transition from fossil fuels to clean energy, such as McKinley and Cibola counties.

Hydrogen development can help “turn things around” in those places, Lundstrom said.

“I come from an area that’s been deeply impacted by the clean-energy transition,” Lundstrom said. “My role is to help build the economy out here, and it seems like this (Escalante) is a perfect fit.”

Project would bring jobs

More than 100 plant employees lost their jobs when Escalante shut down, plus about 50 more at a nearby coal mine. All told, Escalante operations supported about 226 direct and indirect jobs, with a nearly $100 million annual economic impact on local communities, according to Tri-State.

If successful, the conversion project – dubbed Escalante H2 Power, or eH2Power – would create some 500 construction jobs, plus 110 permanent positions when the new facility opens in 2025, Rhodes said.

Concerns raised

But hydrogen development at Escalante and elsewhere faces significant opposition from environmental groups, who say hydrogen production is not clean, at least not with today’s technology, which extracts hydrogen molecules from methane using natural gas as the feedstock, emitting substantial amounts of carbon in the process.

Escalante will construct a carbon-capture system to sequester the CO2 and then pipe it to deep underground geological formations for permanent storage. But that technology must still be proven effective on a commercial scale. And with natural gas from the San Juan Basin feeding the system, environmentalists fear significant amounts of methane will continue escaping into the atmosphere as more natural gas is mined, processed and transported to the Escalante plant.

Tom Solomon of the environmental group 350 New Mexico called it “deceptive” to label gas-based hydrogen a “clean” process, even with carbon capture.

“They’re telling an incomplete story about hydrogen production,” Solomon said. “You have to count all the upstream emissions.”

Plant details

Newpoint is working with government officials to establish CO2 standards and adequate measurement systems to effectively demonstrate emission reduction, Rhodes said.

“We believe we can produce hydrogen with tremendous reductions in carbon intensity to address environmental concerns while also pursuing a huge opportunity to create jobs,” Rhodes said. “Balancing it all out is the challenge, and we’re all working on it.”

The benefits go beyond hydrogen-based electric generation, including potential to set up “green” cement production onsite, and sell hydrogen to natural gas utilities and long-haul trucks to lower carbon emissions in transportation and in residential and commercial energy use, Rhodes said.

Hydrogen-based generation, however, remains the primary focus, providing 24/7 backup power for utilities to replace coal and natural gas-fired electricity. eH2Power will install a steam methane reform, or SMR, system to extract hydrogen from methane, an air-purification system to provide purified oxygen for the SMR process, and carbon capture technology to sequester the CO2.

SMR and carbon capture are big investments. But converting the boiler system from coal to hydrogen is fairly simple.

“Few modifications are actually needed,” Rhodes said. “The conversion itself will only account for about 10% of investments.”

The modified plant will use waste heat from operations to help run all the newly-installed subsystems, reducing “parasitic drain” on the plant’s electric output that would otherwise be used to operate those systems. That will increase the electricity available for sale – potentially up to the plant’s full 270 megawatts of nameplate capacity, Rhodes said.

eH2Power partners originally estimated about $400 million to fully modify the plant. But the price tag climbed to $600 million, in part because they now plan to do more things there, including low-carbon-emission cement production.

That means installing a hydrogen kiln, and upgrading the facility’s coal pulverizer to mash up alternative materials. In fact, they’ll add environmental bang to the buck by recycling retired wind turbine blades, pulverizing them for cement production, Rhodes said.

“We discovered that the aggregate material from the blades is great feedstock, so we’ll bring them in by rail or truck and turn them into cement,” he said. “Even if we can’t sell it in NM, there’s a market for that in California.”

Escalante’s close proximity to the Southern Transcontinental railway and Interstate-40 will help facilitate material shipments into the plant, and distribution of hydrogen products to market.

eEH2Power won’t break ground until it receives an air permit from the state Environment Department, which will take at least a year, Rhodes said. It must also acquire a Class VI permit from the U.S. Environmental Protection Agency to allow it to store captured carbon underground.

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