Is carbon capture the solution for San Juan Generating Station?

FARMINGTON — With the potential closure of San Juan Generating Station looming over the county, the city of Farmington and a New York-based investor are developing a plan to not only save the existing jobs but also create new jobs at the coal-fired power plant.

The idea is to install carbon capture technology on units 1 and 4 of the power plant, which will remove 90 percent of carbon dioxide from emissions.

Farmington got national attention when it signed a non-binding letter of intent with Acme Equities LLC. This letter of intent signaled plans to make Acme the owner and operator of the power plant, thus keeping it open after Farmington’s co-owners Public Service Company of New Mexico, Los Alamos County, Utah Associated Municipal Power Systems and Tucson Electric Power leave the partnership in summer 2022.

A partnership agreement between the various co-owners of the power plant allows Farmington to acquire the remaining 95 percent of the generating station for free. The city then plans to sell the plant to Acme for $1.

In addition to keeping the power plant open, officials say the plan would make the San Juan Generating Station cleaner than alternative sources like wind power with natural gas backup. But skeptics have plenty of questions, including who will buy the power from the San Juan Generating Station and how much will it cost to retrofit the power plant.

“In a certain sense, it is a fairy tale technology,” said Karl Cates, research editor for the Institute for Energy Economics and Financial Analysis.

He said there are economic and technological hurdles that Acme will have to overcome. Cates said the market forces that make renewable sources like wind and solar attractive will make it harder for carbon capture to succeed.

Study planned to answer questions

Farmington and Acme hope to learn more about the possibilities for carbon captures as well as the hurdles through a feasibility study. This study will determine if carbon capture technology can be installed on units 1 and 4 of the San Juan Generating Station for a reasonable cost.

Previous commercial coal power plant carbon capture projects have cost at least $1 billion. The International Energy Agency predicts the next carbon capture project will cost 25 to 30 percent less.

Farmington is optimistic about the possibilities after Acme provided the city with a copy of a U.S. Department of Energy letter describing the San Juan Generating Station as in the top 10 percent of power plants for a carbon capture retrofit project.

Acme’s plans are to sell the electricity from the power plant on the market, however it is still unclear which utilities would buy power from the San Juan Generating Station, and a new coal supply agreement would be needed to keep operating the plant.

On top of those uncertainties, the carbon capture technology will reduce the amount of electricity the San Juan Generating Station produces because some of the energy will be used to power the equipment.

At the Petra Nova plant in Texas, 22 percent of the energy produced is parasitized to run the carbon capture technology, according to a report prepared for the National Association of Regulatory Utility Commissioners last year.

In addition to reducing the net generating capacity by 20 percent, a report compiled for the Congressional Research Service last year states carbon capture could increase the cost of electricity by up to 80 percent.

Sales of carbon dioxide, tax credits could help offset costs

The revenue stream would not be solely dependent on power sales. In addition to electricity from the power plant, Acme would sell carbon dioxide. This carbon dioxide would be pumped through a pipeline to the Permian Basin, where it would be sold for enhanced oil recovery. That means the carbon dioxide would be pumped into the ground to push oil up.

The federal government also has incentives to offset the cost of carbon capture technology. For every ton of carbon Acme captures, it could receive $35 of tax credits. This could add up to about $200 million of tax credits annually for 12 years if 90 percent of current carbon dioxide emissions are captured. The requirement for getting those tax credits is that construction must begin by Jan. 1, 2024.

Plan could create jobs in San Juan County

From an economic perspective, carbon capture offers the potential of saving jobs at the power plant and San Juan Mine as well as adding new jobs.

Acme estimates 800 to 1,200 employees will be needed to install the carbon capture technology and retrofit the San Juan Generating Station. After the equipment is in place, it anticipates needing between 30 and 40 employees to operate and maintain it.

The proximity to the Cortez pipeline is one of the things that makes Farmington and Acme optimistic about the carbon capture possibility. A 20-mile connector pipeline would be needed to get the carbon dioxide from the generating station to the Cortez pipeline. Officials estimate the connector pipeline could cost $1 million per mile.

Public utility commissioner expresses concerns

During a meeting on March 13, Farmington Public Utility Commissioner Gordon Glass described carbon capture as a highly risky venture that has never been done at the proposed scale. In addition, Glass had concerns with the technology. He highlighted heat destroying the equipment.

“There’s not a lot of positive history for this process,” Glass said.

At the same time, Glass acknowledged carbon capture could have positive impacts both for the county and globally.

“The possibility is, would be, wonderful given that not every coal plant in the world is going to shut down,” Glass said.

Farmington Electric Utility System Director Hank Adair said the study poses no risk for the city.

“The engineering says that it could be possible, so why not do this study, why not do the business model?” Adair said.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at hgrover@daily-times.com.