San Juan Generating Station

Aerial view of the San Juan Generating Station. Photo: Doc Searls/Flickr

Public Service Company of New Mexico filed with state regulators on July 1 an application for abandonment of the 847-MW, coal-fired San Juan Generating Station in June of 2022 [19-00195-UT]. The filing, expected as part of PNM’s compliance with the state’s Energy Transition Act passed in March, includes four different scenarios for replacement of the San Juan capacity.

Ron Darnell, PNM’s senior vice president of public policy, said in a virtual press conference that the filing reflects the “many ways to get there.” The filing also includes provisions for the securitization of unrecovered investments in the plant as authorized by the ETA (see CEM No. 1526 [20] and [20.1]). PNM, the state’s largest investor-owned utility, requested a decision on the application from the New Mexico Public Regulation Commission by the end of 2019.

The utility’s recommended hybrid scenario for replacement resources, which has a $4.7-billion price tag, consists of 280 MW of natural gas peaking capacity near the site of the current plant, 350 MW of solar, and 130 MW of battery storage capacity. All plans include 140 MW of wind generation through a power-purchase agreement included in PNM’s application for approval of its 2020 renewables procurement plan already pending before the NMPRC [19-00159-UT].

The hybrid plan would result in the lowest cost to customers; achieve a 62-percent reduction in carbon emissions over 2005 levels; and meet the reliability standards of the Federal Energy Regulatory Commission and the North American Electric Reliability Corporation, according to statements from the company. It would also result in average customer savings of $7.11 per month in 2023 compared with the continued operation of SJGS.

“The San Juan replacement plan we put forth will not only save customers money but will have one of the largest solar facilities in the U.S. and one of the highest percentages of battery storage anywhere in the country,”, PNM Chairman, President and CEO Pat Vincent-Collawn said in a news release.

“Inclusion of new natural gas generation is an unfortunate decision on PNM’s part and not in the best future interests of the Four Corners,” Zach Pavlik, energy campaign organizer for San Juan Citizens Alliance, said in an email. “The gas market is volatile and new gas generation is becoming increasingly set aside by utilities in favor of cheaper renewable generation.”

The hybrid scenario offers “a reliable and affordable path” to meet the state’s incremental renewables portfolio standard while awaiting the price drops it expects for battery storage technologies, Tom Fallgren, PNM’s vice president of generation, said during the conference. PNM conducted extensive modeling in formulating the four scenarios.

A second, $4.7-billion scenario includes a plan for 476 MW of new natural gas generation with no battery storage or additional renewables beyond the 140 MW of wind. Such a plan would reduce carbon emissions by 59 percent through closure of SJGS, but would result in a 58-cent average monthly increase to customer bills in the first year. Both plans would retire the new natural gas resources by 2040 in keeping with PNM’s goal to become carbon-free by that date. The Energy Transition Act mandates 100 percent carbon-free generation for investor-owned utilities by 2045.

A third scenario has no new fossil fuels, 500 MW of new solar, 410 MW of battery storage and the 140 MW of wind. It would cost $4.8 billion and result in a 46-cent average monthly savings on customer bills in 2023. The fourth scenario would replace the SJGS resources with 975 MW of solar, 1,199 MW of wind and no battery storage. It would decrease carbon emissions by 67 percent but would not meet reliability requirements and, at a cost of $5.5 billion, would increase customer bills by a monthly average of $5.46 in the first year.

Opposition to the plant’s closure remains strong in the local community. The City of Farmington, which has a 5-percent ownership stake in SJGS, has partnered with Acme Equities of New York, now doing business as Enchant Energy, to convert the plant to a carbon capture and sequestration facility (see CEM No. 1529 [17]). Jason Selch, CEO of Enchant Energy, on June 27 presented findings from a scoping study by the Chicago-based engineering firm Sargent & Lundy to the United States Energy Association showing that preliminary capital cost estimates for the CCS conversion could be as high as $1.3 billion.

Estimates of $2.6 billion for the total amount of 45Q tax credits generated from 12 years of carbon dioxide capture would repay the estimated capital cost by a factor of two, Selch said. Enchant seeks to use tax equity financing for the project, but such a strategy has never been used for projects above $1 billion. Moreover, Enchant does not have an investment-grade credit rating, Selch said.

Selch made a case that a market for captured CO2 exists for use in enhanced oil recovery, and said the plant’s proximity to Kinder Morgan’s Cortez pipeline, which currently delivers mined CO2 from the McElmo Dome to the Permian Basin, makes SJGS a good candidate for CCS conversion.

Pavlik, of San Juan Citizens Alliance, said CCS “has zero feasibility in the technical and financial context of SJGS, being a 46-year-old coal plant of substantial size.”

“The pursuit of CCS by our local leaders and plans by PNM to site replacement generation in the form of gas are both cause for concern in our community,” he said, adding that renewable alternatives are “more economically sound.”