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Power Play: Desert Rock’s foes remain stubborn as public hearings loom |
In reviewing the draft environmental impact statement (DEIS) for the proposed Desert Rock coal-fired power plant, I was struck by what was left out of those 1,600 pages. This is not unusual — you can’t think of everything when evaluating a proposed project. But it makes me wonder, is this project viable at this scale or will it be a carbon dinosaur gone extinct in a climate-changed world?
Of course, it is difficult to comment on what’s been left out. Even if I dutifully send in my comment – “Hey, you left out the obvious alternative, a smaller version of the proposed power plant – how about 500 MW of super-critical coal power instead of 1,500 MW?” there is usually a standard reply: “The BIA considered every reasonable alternative in preparing the DEIS.” Not very satisfying. You need either a sympathetic judge that can see the bigger picture or sane investors who can see that Desert Rock is not a solid bet. Fifty years (the estimated life of Desert Rock) is a long time to wait for a return on your investment. And a lot of things can change in that time. Remember, the plant won’t even start operating until 2015 or later.
Shifting economic foundation
Desert Rock is somewhat unusual as a power project because it does not have a firm power-purchase agreement. Nobody has signed up to buy Desert Rock’s electricity. Instead, the developers propose to sell the power into the greater Western power market, which, they are happy to point out, needs hundreds and hundreds of new megawatts to meet the Southwest’s fast-growing electricity demand.
However, this year California delivered a new message to electric power suppliers: If you cannot produce power with the lowest possible emissions of carbon dioxide, we are not interested.
“When your biggest customer says, ‘I ain’t buying,’ you rethink,” Hal Harvey, environment-program director at the William and Flora Hewlett Foundation, in California, told the New York Times. “When you have 38 million customers you don’t have access to, you rethink.”
New electric power contracts selling to California must meet a benchmark of 1,100 pounds of carbon dioxide (CO2) per megawatt hour. The reported CO2 emissions for Desert Rock are going to be double that rate. Even without a contract in California, Desert Rock could face a “dirty discount” because its power would not meet California’s standards. And who’s to say that Arizona and Nevada won’t enact a similar standard? Both states already have aggressive renewable-energy requirements that utilities must meet in the next 10 years. To say nothing of a carbon tax. At 10.5 million tons or more per year of CO2, even a modest carbon tax would cost Desert Rock investors dearly.
Getting off the rez
The other big hurdle facing Desert Rock is delivering its 1,500 MW to customers in Phoenix and Las Vegas. The existing transmission infrastructure in the Southwest is already overloaded. This proposed plant is going to connect to a proposed transmission line: the Navajo Transmission Project, which is also in the EIS and planning phase. This $3 billion project has many regulatory and right-of-way hurdles.
Even if both projects move through the alphabet soup of EIS, FERC and other regulations, questions remain. How is the Navajo Nation going to finance these two huge projects? Certainly the investment is necessary to realize the benefits of the tribe’s coal and water reserves. But how much return is the nation going to realize? Normally, developers must have a power-purchase agreement to raise financing to plan, construct, and start up a project. Somehow the Navajo Nation has found partners willing to waive this requirement. But who is really going to invest in this proposed power play?
A critical change
The other big hole in the DEIS is the lack of reasonable alternatives. The DEIS considers only three alternatives. Alternative A: No Action (no power plant); Alternative B: Preferred Alternative (1,500-MW power plant) and Alternative C: (500-MW plant). The obvious alternative that is not evaluated in the DEIS is a scaled-down version of Desert Rock. Yes, Alternative C is a 500- MW power plant, but there is one subtle but critical change. Alternative C is a less efficient “sub-critical” steam plant, whereas Alternative B is a 1,500-MW “super-critical” steam plant. It is unlikely that anybody would build a relatively inefficient sub-critical power plant when carbon emissions are looming as such a large liability for future plant operations and electricity sales. In the end, Desert Rock may be scaled back to the original 500 MW proposed for the Cottonwood Power Station, but not because of emission constraints or global warming. Instead it will be because that’s all the electric power that investors are willing to pay for and customers in Arizona and Nevada are willing to buy.
Additionally, there are several clean coal technologies that were eliminated from consideration in the DEIS because of high costs and unproven technologies. Some of these technologies have such nifty features as carbon recovery that would allow the plant to meet California’s CO2 benchmark and negligible toxic emissions. With “clean coal” technologies being touted and subsidized by the U.S. Department of Energy, I would expect at least one of these technologies would be feasible for Desert Rock. Especially with such a critically located coal resource.
The toughest questions are those faced by the Navajo Nation. What is the tribe willing to invest to develop its coal and water resources? And what return on that investment is acceptable? Desert Rock looks like an awfully big gamble, especially when the major power customer in the Southwest, California, ain’t buyin’ coal power no more.
Carolyn Dunmire has been analyzing the intersection between energy and the environment for over 25 years. She has created, reviewed, or commented on dozens of NEPA documents including EIS’s and EAs related to power plants and oil/gas development throughout the West.
