TODAY’S STUDY: ALTERNATIVES TO COAL IN ARIZONA

Navajo Generating Station and Clean-Energy Alternatives: Options for Renewables

Hurlbut, Haase, Turchi, and Burman, June 2012 (National Renewable Energy Laboratory)

Introduction

In January 2012, the National Renewable Energy Laboratory delivered to the Department of the Interior the first part of a study on Navajo Generating Station (Navajo GS) and the likely impacts of best available retrofit technology (BART) compliance options under the Clean Air Act’s regional haze provisions. That document establishes a comprehensive baseline for the analysis of clean energy alternatives, and their ability to achieve benefits similar to those that Navajo GS currently provides.

This analysis is a supplement to NREL's January 2012 study. It provides a high level examination of several clean energy alternatives, using background established by the previous analysis. To be clear, this analysis is not intended to justify any particular BART outcome, nor is its purpose to support arguments for or against retiring Navajo GS. The factors addressed here are not likely to drive those threshold decisions in any case. However, if the ultimate outcome is retirement, then the task would be to identify a portfolio of generation resources that could provide the benefits Navajo GS is providing today. This analysis is an initial characterization of renewable energy options that would be available for a replacement portfolio, under a conceptual scenario in which the decision to retire the coal plant has already been made based on factors outside the ones addressed here.

None of the alternatives discussed in this analysis can happen quickly. It is assumed here that, if there were a decision to replace Navajo GS, the development of any alternative resource (or portfolio of resources) would occur at the end of a staged transition plan designed to reduce economic disruption. This glide path necessarily would most likely take several years and would need to take into account changes to the Navajo GS site lease, tribal development plans, coal supply contracts, the value of utility partners’ investments in the coal plant that are not yet depreciated, and the outcomes of EPA rulemakings relating to air emissions. We assume that replacing the federal government’s 24.3% ownership share of Navajo GS would be a cooperative responsibility of both the U.S. Bureau of Reclamation (USBR) and the Central Arizona Water Conservation District (CAWCD), and that at a minimum the replacement strategy must be sufficient to ensure that the Central Arizona Project (CAP) can economically meet all of its water delivery obligations.

click to enlarge

Benefits

The January 2012 study described a wide and complex array of benefits provided by Navajo GS. Figure 1 provides a visual summary of those benefits. The aim of this supplement is to provide an initial assessment of alternative generating technologies, and to describe how each alternative’s benefits are likely to qualitatively map to the array of benefits currently provided by Navajo GS.

Two types of benefits are unaffected by the choice of generating alternative, because they relate directly to retiring Navajo GS and not to the choice of alternatives. The first benefit involves health and other environmental factors that may be associated with shutting down the mine that supplies coal to Navajo GS. As discussed in the January 2012 study, there has been no detailed epidemiological study of the health impacts on the nearby Navajo and Hopi communities. Nevertheless, the potential health and environmental improvements that may result from closing Navajo GS and the coal mine would not depend on whether the replacement power came from wind, solar, or any other non-coal resource.

Another type of benefit not shown in Figure 1 relates to the cost of power. No alternative—renewable or conventional—would cost less than Navajo GS as it currently operates. As detailed in the January 2012 report, most of the plant’s capital costs have been depreciated, and its operating costs are among the lowest in the region. Therefore, the decision to seek alternatives would be driven by BART compliance, not by lower generating costs alone.

The task of screening alternatives on the basis of cost is reserved for Phase 2. Reliable cost estimates would require more specific guidance from the Department of the Interior with respect to siting constraints, timing, and other policy objectives. Independent determinations on such factors are beyond the scope of this analysis.

click to enlarge

Figure 1 is a qualitative depiction of the types of benefits currently provided by Navajo GS. They are grouped by beneficiary type, as described in the January 2012 report: USBR and CAWCD, the power plant’s five utility partners, and tribes and localities who enjoy the development benefits of having the plant as part of their local economies. Note that the figure is not intended to imply any quantitative comparison of the benefits; that detailed analysis is reserved for Phase 2. The intent here is to identify the types of benefits provided by Navajo GS, and how alternatives would most likely map to that array of benefits.

• For USBR and CAWCD, the primary benefit is providing power for the Central Arizona Project; related is the sale of surplus power to others as a source of revenue for the Lower Colorado River Basin Development Fund. We include in this type of benefit any tribal infrastructure project that is financed through the fund.

• For the utilities, the primary benefit is a supply of electricity to serve their retail customers. An added benefit to these utilities is the fact that Navajo GS is one of several sources of baseload power.

• Tribal and local development benefits primarily accrue to the Navajo and Hopi tribes, as well as to the city of Page, AZ. Some of the alternatives described here are found on other reservations. However, for this analysis we distinguish between benefits that historically have been limited to the Navajo and Hopi tribes, and future benefits that may extend to other Arizona tribes.

click to enlarge

Cost

While a more precise analysis of cost is reserved for Phase 2, some elements affecting cost can be compared generally based on current data. Three primary factors shape an alternative’s all-in cost: the fixed cost of the capital equipment and its installation (sometimes referred to as overnight costs), the variable cost of operating the plant (mostly the cost of fuel), and plant’s productivity (commonly represented as the plant’s capacity factor).1 The perfect resource would have low capital costs, low variable costs, and a high capacity factor. Practically, any alternative involves a tradeoff with respect to at least one of these primary cost factors.

• Coal and nuclear plants have high capital and other fixed costs, but they also generate relatively more electricity over which those fixed costs can be spread. Per unit of electricity generated, the cost of coal is normally lower than the cost of natural gas.

• Natural gas plants have relatively low fixed costs, but their operating costs are affected by the price of natural gas, which can be volatile. Currently natural gas fuel costs are low—as of this writing, near $3 per mmBtu—but as recently as 2008 they were four times that level.

• Solar and wind power have negligible variable costs, but their capacity factors are low due to the variability of sunshine and wind. Capital costs for wind are relatively low. Capital costs for solar are higher, but have declined significantly in recent years due to technological improvements and excess supply in the world market.

click to enlarge

Figure 2 provides a generic comparison of capital costs for various types of new generating units—renewable as well as nuclear and fossil fuels. The data are based on information as of 2010, and represent the plausible range of costs for each technology (adjusted for inflation to 2012 equivalent values). Since the time the numbers in this table were compiled, solar photovoltaic (PV) plant costs have continued to decline.

Capacity factors can significantly affect how the all-in cost of one alternative compares to another. Figure 3 compares the capacity factors of the technologies shown in Figure 2. Note, however, that capacity factors for renewable technologies are very site-specific even within Arizona, which is why a full comparative analysis of the all-in cost of alternatives is reserved for Phase 2.

Alternatives Other Than Renewables…Framework and Analytical Assumptions… Size of the Puzzle…Separating the Puzzles…Assessment of Resource Options… Renewable Energy Credits…Solar…Solar Energy Capability on Tribal Land…State Potential…

click to enlarge

Summary [Solar]

Solar power is Arizona’s most abundant renewable energy alternative to Navajo GS. Most types of benefits currently provided by the coal plant can be met to some extent by solar power, specifically:

• Tribal economic development benefits related to siting projects on Indian reservations, possibly including but not limited to the Navajo Nation and Hopi Tribe

• Electricity to power CAP pumping stations

• Peak-period energy for the Navajo GS utility partners (although most of them can and are pursuing similar options independently).

A benefit solar cannot easily provide is baseload capacity. While it is technically possible for CSP to provide some baseload energy with the addition of on-site thermal storage, doing so would entail significant additional cost. Solar Reserve’s Crescent Dune project, for example, which is under construction near Tonopah, NV, will be the first commercial application of CSP with molten salt in the United States. Developers anticipate that this plant will be able to store energy for 10 to 15 hours and significantly reduce generation intermittency.15

Surplus power sales to others might also be difficult, unless project costs continue to decline significantly. At current costs, the purchase price that would be needed to recover a solar project’s capital costs might be too high to attract buyers. Unbundling RECs and selling them separately from the power generated could potentially provide a revenue stream for the Development Fund.

Wind…Wind Energy Potential on Tribal Land…State Potential…

click to enlarge

Summary [wind]

Arizona wind power can provide a low-cost alternative to some power currently provided by Navajo GS. Because most of the state’s best resources are in the northern part of the state, it is unlikely that wind could be developed economically near CAP pumping stations. Wind projects near the current site of Navajo GS could move power to CAP via transmission currently used to carry power from the coal plant.

Therefore, the type of benefits wind power could provide include:

• Economic development benefits to Navajo Nation (and possibly the Hopi Tribe) related to siting projects on tribal lands near Navajo GS, and some benefits for the Hualapi Tribe, but very little potential for similar benefits by other tribes

• Electricity to power CAP pumping stations via lines currently serving Navajo GS

• Low-cost renewable energy for sale to others

• Low-cost renewable energy for the Navajo GS utility partners (although most of them can and are pursuing similar options independently).

Geothermal…Geothermal Energy Potential in Arizona…

click to enlarge

Summary [geothermal]

Geothermal power could provide some of the baseload energy benefits that Navajo GS currently provides (Figure 12). NV Energy has sufficient geothermal resources in its own service territory to make up for the loss of its share of the coal plant. Knowing whether Nevada’s geothermal resources could also serve load in Arizona, however, would require more detailed studies of network power flows that take into account the major transmission lines due to be completed in 2013.

Aside from NV Energy, other Navajo GS utility partners are independently pursuing deals to secure baseload geothermal power. For any partner, completely replacing its share of the coal plant with geothermal would require deals with many geothermal plants. Because geothermal within the borders of Arizona is limited, it would not be able to provide the economic development benefits for Arizona tribes that Navajo GS currently provides.

Biomass and Small Hydro…

Summary [biomass and small hydro]

Biopower and small hydroelectric power cannot provide the same benefits as Navajo GS. They provide different types of benefits that are local rather than regional in nature.

The Renewable Portfolio…Special Cases for Solar Alternatives…

click to enlarge

Summary and Next Steps

Based on this preliminary screening, the following options should be evaluated in additional detail in Phase 2:

• Distributed wind and solar generation potential located across the Navajo and Hopi reservations, as well as the reservations of CAP water-using tribes

• Distributed wind and solar on non-tribal lands located throughout Arizona, Nevada, and California, including on lands owned by USBR, BLM, the Department of Defense, and private landowners

• Solar-augment at NGS, with possible tribal ownership or partial ownership of the CSP plant

• Geothermal from northern Nevada and from California’s Imperial Valley

• Additional analysis of PV integration at CAP’s pumping plants located east of Hassayampa, with an analysis of the potential to optimize PV use during summer peak hours, thereby freeing up additional NGS excess power for sale on the open market during peak hours

• Clean coal and CCS located on the Navajo/Hopi reservation

• Small, modular nuclear

• Natural gas generation.

click to enlarge

The Phase 2 analysis should evaluate and compare the costs, benefits, and impacts of the various alternative generation scenarios against several alternative scenarios for Navajo GS, including:

• Baseline (business as usual) conditions

• Resulting plant operating and production costs from potential additional required control technologies from BART and MATS

• Shutdown scenario

• Intermediate solutions such as scaling back generation in one unit and/or shutting down one unit.

For each of the scenario comparisons, the Phase 2 analysis should compare impacts on jobs, emissions, CAP water costs, tribal benefits, visibility, public health, and other impacts and benefits associated with Navajo GS.

Tweet