When Tri-State Generation and Transmission Association, Inc. announced the closure of the Escalante Power Plant in 2020, McKinley and Cibola counties braced for the economic impacts of losing a major employer.
But a possible new owner is hoping to breathe life back into the closed coal-fired generating station through a first-of-its-kind makeover. This will not only restore the jobs to the area, but add additional jobs.
Newpoint Gas LLC partnered with Brooks Energy Company to form Escalante H2 Power. The partners are working to transform Escalante into a hydrogen facility rather than coal-fired generation. This project comes after Newpoint announced in 2019 that it was working to develop a technology that would separate hydrogen, water and carbon from natural gas.
On April 14, they announced a letter of intent to buy the power plant from Tri-State, which has already retired the Escalante plant.
Hydrogen saw a surge of interest in 2020 as a source of energy and has been touted as a way to decarbonize the electricity sector while also providing reliable, dispatchable power.
Wiley Rhodes, the CEO of Newpoint Companies, said, if successful, this project will be the first of its kind in the world and will pave the way for future hydrogen infrastructure. While the letter was just announced, Rhodes said Newpoint has been working on the Escalante project for about a year and has already completed a Front End Engineering and Design study. He said the project is currently in the permitting process.
After developing a boiler technology for hydrogen power production, Rhodes said “it just became logical to try to utilize these retired coal-fired power plants, repurpose those with hydrogen and then be able to retain the workforce there.”
He said there are several advantages to the Escalante plant. While it is 40 years old, the facility is in good condition and has access to abundant natural gas. This is important because the facility will initially use blue hydrogen, which is derived from natural gas. A three-mile pipeline will be built to transport the natural gas to the power plant.
Escalante will need almost 80 billion standard cubic feet of gas per day, Rhodes said.
“That’s a lot of gas,” he said. “Escalante has that.”
Another thing that made the Escalante location attractive was the ability to sequester the carbon that will be stripped from the natural gas once it arrives on site.
The natural gas will go into a methane reactor where the carbon will be removed pre-combustion.
“The hydrogen will be the only fuel that will go into the power plant to generate the power,” he said.
He said his company will utilize the federal 45Q tax credits for carbon capture and will sequester the carbon in the underground reservoir. The sequestration well will likely be built at the Escalante site, he said. This will prevent the need to transport the carbon off-site. Rhodes said the company is in discussions with the U.S. Environmental Protection Agency regarding the permits needed to drill the well.
There are not currently any carbon sequestration wells in New Mexico, however studies are underway to construct a well in San Juan County near the San Juan Generating Station. To get approval, a well must be able to safely store carbon for at least 990 years without it escaping into the atmosphere.
The 45Q tax credits provide companies with $50 per ton of carbon sequestered, or placed in permanent storage, in an underground reservoir. This requires a special type of well that will pump the carbon into a saline aquifer deep under the surface.
From an economic perspective, Rhodes said these tax credits are vital to make the project work.
The process of separating the carbon from the natural gas is water intensive, however Rhodes said the company is acquiring water rights from TriState and he does not anticipate it will use the same amount of water as the plant used when it burned coal.
The 45Q tax credits also provide the opportunity to sell carbon for enhanced oil recovery, however Rhodes said there is a stigma attached to that and Newpoint does not intend to sell the carbon for oil production.
“We want to align ourselves with the environmental organizations as much as we can to make the project feasible because if it’s not feasible to do it won’t happen,” he said.
The Brooks Energy team brings a background in carbon sequestration and geology to the partnership.
“The Escalante Hydrogen Project is thoroughly designed with the goals to provide clean reliable power and an additional focus on empowering local New Mexico communities,” said Robert Price, president of Brooks Energy, in a press release announcing the letter of intent. “With our experience in carbon sequestration and geology, we look forward to developing this project.”
Because of the use of natural gas, there will still be some secondary emissions related to the project. These will come from the production and transportation of natural gas, which Rhodes acknowledged will contribute to the environmental footprint of the Escalante Power Plant. However, he said these emissions will be lower than the past emissions from the plant when it was burning coal and will be lower than natural gas power plants.
Eventually, Rhodes said the hope is to transition to green hydrogen, which does not use fossil fuels and instead relies on water electrolysis.
“The world is really looking toward green hydrogen to solve the carbon emissions problem,” Rhodes said. “But you have to have the infrastructure that can support that green hydrogen. So utilizing blue hydrogen as phase one and creating an opportunity for feasible production of this hydrogen infrastructure is the right first step.”
Escalante H2 Power does not yet have any power purchase agreements signed to take the electricity it could generate in the future.
“We’re in discussions with different organizations to buy the power,” Rhodes said.
The project is expected to cost $250 million.