PNM filed its rebuttal testimony in the case related to the San Juan abandonment and financing before the New Mexico Public Regulation Commission.
To respond to the PRC Staff’s concern that PNM had not presented an alternative case for carbon capture, PNM modeled a carbon capture scenario for the coal plant. PNM used recent sequestration data developed in July 2019 and shared those model results with the stakeholders as part of PNM’s rebuttal testimony.
The current modeling confirmed the conclusions of a technical study done for PNM in 2010 -that a carbon sequestration alternative for the San Juan Generation Station (SJGS) does not make sense for customers. The same independent engineering company performed the studies that PNM looked at in both 2010 and 2019.
We welcomed the opportunity to reconsider whether this carbon-capture based technology could result in the continued operation of the San Juan coal plant due to the far-ranging economic impacts to the Four Corners region.
Our current modeling shows that a carbon sequestration alternative comes with significantly greater technology and reliability risks along with a wide range of possible costs as compared to the PNM recommended hybrid scenario one. PNM continues to stand behind its recommended hybrid scenario, which is a balanced portfolio of renewable energy and storage backed up by flexible natural gas units at the lowest cost to customers.
We understand that as part of New Mexico’s energy transition, it is important to get the right energy resources in place while taking into account the economic impact of closing the San Juan coal plant on the Four Corners’ region. Unfortunately, Carbon capture technology is not the answer for our customers. Our plan is to transition away from coal and support the Energy Transition Act’s requirement to provide significant funding for severance and job training as well as economic development support to the four corners region, all while cutting carbon emissions significantly.
We have updated the attached Infographic with our replacement scenarios with the carbon sequestration alternative. The alternative reflects the uncertainties surrounding the amount of energy that can be relied on by customers, carbon and other emissions reductions, and costs to install a technology that has faced significant cost overruns in the few much smaller facilities that have tried carbon capture technology.
We ran the model to give us a range of costs for the carbon capture alternative in two ways. First, taking the most favorable cost analysis, coal tax benefits, and sale price for captured carbon, customers could see a 46 cents savings on their monthly bill (as opposed to a $6.87 savings from our recommended scenario). Second, we ran the model with what we thought were more realistic costs, expiration or change in coal tax benefits, and a more realistic price for captured carbon. Considering those numbers, the more likely outcome is that the carbon sequestration alternative could cost more than $1.3 billion and could lead to an increase of at least $10.37 monthly on the average residential bill.
In addition to burning more coal, carbon capture would greatly increase water usage by the coal plant and relies on the production of more carbon emissions downstream to offset the sequestration project costs.
We understand the City of Farmington wants to save the plant from the economic effects of its closure. PNM will continue to work with the other plant owners to give Farmington that opportunity.
However, to meet our obligations of affordable, reliable, and environmentally friendly energy to our customers, we believe the Energy Transition Act provides the means to transition away from coal-fired energy without leaving our workers and communities behind.