IEEFA analyst says San Juan Generating Station proposal based on faulty assumptions

FARMINGTON — A new report released by Institute for Energy Economics and Financial Analysis criticizes a proposal to retrofit the San Juan Generating Station with carbon capture technology.

Energy analysts David Schlissel and Dennis Wamsted authored the report, which was released Feb. 12. Both Schlissel and Wamsted work for IEEFA, which is a nonprofit promoting renewable energy development. 

More:Looking forward: PNM employees are preparing for the closure of San Juan Generating Station

Both co-authors participated in a webinar following the publication of the report criticizing Enchant Energy’s proposal to retrofit the San Juan Generating Station with carbon capture technology.

Report states Enchant Energy has three faulty assumptions

The report released on Feb. 12 builds on previous assessments by IEEFA staff, and many of its points were identical to the previous assessments.

"Rational investors and regulators will dismiss all these assumptions and projections out of hand because the simple reality is that the proposed carbon capture retrofit at the San Juan Generating Station is not financially viable," Wamsted said in a press release. 

The report states that Enchant Energy has three faulty assumptions that will make the plant uneconomical. 

These assumptions are:

• The retrofitted units will operate with an average capacity factor of at least 85% for 12 years
• The carbon capture units at the San Juan Generating Station will capture 90% of the carbon dioxide emissions
• The carbon capture units will produce six million metric tons of carbon dioxide annually that can be sold for enhanced oil recovery in the Permian Basin

In addition, Schlissel said he estimates the project will cost closer to $3 billion rather than the $1.23 billion estimate in the Sargent & Lundy pre-feasibility report completed last year.

More:Enchant Energy CEO says San Juan Generating Station carbon capture may cost $1.23 billion

If the plant does not operate enough or cannot capture enough carbon dioxide, it will not be profitable. Enchant Energy will rely on federal tax credits as well as sale of the carbon dioxide. Current plans call for selling the produced electricity on the market, with the exception of the electricity used to run the carbon capture units and the 47 megawatts of power provided to Farmington Electric Utility System.

When one person on the call asked if he had consulted carbon capture experts, Schlissel said that he had not. He said experts like Mitsubishi Heavy Industries, which manufactures the carbon capture units used at Petra Nova in Texas, have not publicly released data and have a financial interest in the success of carbon capture.

"They're not going to give us any numbers, so no, we haven't reached out to them," Schlissel said. 

However, Schlissel said he used publicly-available data and information to complete the analysis.

Use of public data has been criticized as creating misleading inferences

This use of only publicly-available data was addressed in the Los Alamos National Laboratories independent preliminary assessment released in December.

The Los Alamos assessment specifically called out Schlissel's earlier report and said his methods of using publicly-available data, including total carbon dioxide emissions, to infer carbon capture rates can lead to misleading inferences.

More:Los Alamos preliminary assessment finds promise in Enchant Energy's carbon capture project

Schlissel said he did adjust his analysis following the Los Alamos report and is now confident that the Petra Nova plant captured between 80 and 82% of the carbon dioxide emissions between Jan. 1, 2017 and Sept. 30, 2019 during times that the equipment was operating. Previously, he had claimed it only captured 71% of the carbon dioxide.

NRG Energy, which owns Petra Nova, has stated in public presentations that it has achieved 90% or greater carbon capture. Neither NRG nor its co-owner, JX Nippon, have released public data on carbon capture performance, nor has the technology manufacturer, Mitsubishi Heavy Industries.

Enchant Energy's Chief Operating Officer Peter Mandelstam, who previously worked for NRG, said that is not unusual. 

“They are not a company that gives out a lot of data,” he said.

More:Environmentalist joins Enchant Energy's efforts to keep San Juan Generating Station open

Mandelstam said Enchant Energy will insist on a performance guarantee for the technology. Enchant Energy plans to purchase three units from Mitsubishi Heavy Industries that are essentially the same as the Petra Nova unit.

Mandelstam also criticized Schlissel's methods of relying solely on publicly-available data.

“A little knowledge can be a misleading thing,” he said.

He said Enchant Energy hired engineers and experts to evaluate many of the topics Schlissel highlighted in the IEEFA report. 

“I appreciate that various stakeholders are trying to understand this new technology,” Mandelstam said.

However, he said people are struggling with the very little information that is available in the public sphere.

Mandelstam acknowledged that Enchant Energy will have to put in tens of millions of dollars in renovations at San Juan Generating Station. However, he said once the power plant renovations are complete and the carbon capture units are installed, he is confident that it will achieve an 85% capacity factor, which is a measurement of actual electrical energy output over a set period of time.

More:Looking forward: PNM official talks next steps as utility looks to end SJGS operations

Mandelstam also addressed the claim that Enchant Energy assumes that PNM will enter a power purchase agreement for some of the electricity. He said Enchant Energy is not looking for a power purchase agreement with Public Service Company of New Mexico and has not approached PNM with a proposed contract.

PNM officials have stated the utility won't pursue a power purchase contract with Enchant Energy because the coal-fired power plant can't provide the flexibility it needs to pair with new renewable energy generation.

More:Looking forward: PNM official talks next steps as utility looks to end SJGS operations

Schlissel encourages renewable energy investment rather than carbon capture

Schlissel described the renewable energy coming onto the electric grid as a big wave.

"The options are you either try to ride that wave by developing the resources or else you get inundated if you try to keep uneconomic coal plants running, and that's what the community's facing," Schlissel said. "It's not facing it because I want the community to be disrupted. The energy market is undergoing a revolution and will continue to undergo the revolution and I would hope that Farmington would get the support to enable it to ride that transition rather than be inundated by it."

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

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