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Research & Commentary: Premature Closure of Navajo Generating Station Would Risk Regional Power Supply, Devastate Native Communities

January 25, 2018

Plant Closure Will Increase Electricity Costs, Do Incalculable Damage To Navajo And Hopi Tribes

In June 2017, the Salt River Project announced it would prematurely close the Navajo Generating Station in December 2019, decades earlier than anticipated, with no plans to replace the plant.

The Navajo Generating Station (NGS) is a 2,250-megawatt (MW) coal-fired power plant located on the Navajo Nation Reservation near Page, Arizona. NGS operates under a ground lease agreement with the Navajo, which periodically requires renegotiation. Electricity supplied by NGS goes to customers in Arizona, Nevada, and California. It also provides the power needed for pumping water from the Colorado River to Phoenix and Tucson through the Central Arizona Project, supplying 1.5 million acre feet annually for agriculture and municipal uses. It is the largest electricity generator in Arizona, even larger than the Hoover Dam.

The plant has multiple owners, with the Phoenix-based Salt River Project being the biggest, followed by the U.S. Bureau of Reclamation. Other owners include Arizona Public Service Co., NV Energy, and Tucson Electric Power. NGS employs more than 400 full-time staff, of which more than 90 percent are Navajo.

NGS uses coal from the Kayenta Mine, which is operated by Peabody Western Coal Company, under lease agreements with the Navajo Nation and the Hopi Tribe, whose reservation is surrounded by the Navajo Nation. The coal is delivered to NGS by a 75-mile electric railroad owned and operated by the plant. Ninety-nine percent of the mine’s 340 employees are Native American.

The premature closure of the Navajo coal-fired power plant will drive up electricity costs for families, businesses, and manufacturers. On average, existing coal-fired power plants generate electricity for approximately 40 percent less than new natural gas plants and 350 percent (3.5 times) less than solar installations.

A November 2017 report from Quanta Technology argues the premature closing of NGS in 2019 would result in “power deficiencies which could evolve into potential voltage collapse and outages, load shedding triggers, potential rotating brownouts, failing transformers or transmission lines and equipment damage,” causing severe electric power disruptions in Phoenix, Flagstaff, and other large Arizona cities. Quanta also notes its conclusions mirror those of the August 2014 Southwest Area Transmission (SWAT) Coal Reduction Assessment, which was performed “to evaluate the impact of a reduction in area coal capacity of approximately 25% (~2,500 MW) by 2019.”

Closing Navajo will not only raise consumer electricity prices, it will do so while providing few, if any, environmental benefits and while causing serious economic harm to the Navajo Nation, which receives nearly half of its revenue from NGS royalties and, according to the U.S. Census Bureau, has a 42 percent poverty rate and an unemployment rate greater than 20 percent. Nearly half of Navajo households have an income below $25,000, and only one in five Navajo adults hold a full-time job.

The decision by Salt River Project to close NGS will raise electricity prices and make Arizona manufacturers less competitive with both U.S. and foreign competitors — all while achieving zero measurable climate-change-related benefits. Further, the damage it would do to the Navajo and Hopi peoples, already beset by joblessness and poverty, is incalculable.

As one of the nation's largest public power utilities, the Salt River Project should strive to keep electricity prices as low as possible. Public utility commissioners should scrutinize any plans to shutter NGS before the end of its useful life and to replace the electricity generation capacity with more expensive forms of energy.

The following documents provide more information about NGS and premature coal power plant closures.

How the Premature Retirement of Coal-Fired Power Plants Affects Energy Reliability, Affordability
https://www.heartland.org/publications-resources/publications/how-the-premature-retirement-of-coal-fired-power-plants-affects-energy-reliability-affordability
In this Policy Study—the first in a series of four—Heartland Institute Research Fellow Isaac Orr and Senior Fellow Fred Palmer discuss Australia’s experience with policies that forced coal-fired power plants into premature retirement, making large parts of the country dependent on unreliable and high-priced renewable energy, particularly wind power, examine the parallels between the United States and Australia and discuss problems faced by states that have aggressively promoted renewable energy, examine the importance of “prudence” and diversified energy portfolios, and evaluate a U.S. Department of Energy study that correctly identifies natural gas-fired power generators as a reason for coal plant retirements but fails to describe accurately the role played by renewable energy subsidies in those retirement decisions.

 

Navajo Generating Station Southwest Regional Reliability Study Report
https://www.heartland.org/publications-resources/publications/navajo-generating-station-southwest-regional-reliability-study-report
This study from Quanta Technology shows the premature closure of the 2,250-megawatt Navajo Generating Station, a coal-fired power plant, could destabilize the grid in the Southwest. According to the study, shuttering the Navajo Generating Station would result in power deficiencies that could evolve into potential voltage collapse and outages, load shedding triggers, potential rotating brownouts, failing transformers, or transmission lines and equipment damage.

Video: Tenth International Conference on Climate Change, Panel 10, ‘The Impact of Coal Restrictions on the Navajo Nation,’ Featuring Carlyle Begay
http://climateconferences.heartland.org/carlyle-begay-iccc10-panel-10/
State Senator Carlyle Begay of Arizona presents “The Impact of Coal Restrictions on the Navajo Nation” at the Tenth International Conference on Climate Change in Washington, DC on July 12, 2015.

Podcast: Dr. Alan Moran: Australia, From Coal Power to Blackouts
https://www.heartland.org/multimedia/podcasts/dr-alan-moran-australia-from-coal-power-to-blackouts
In this edition of the Heartland Daily Podcast, Alan Moran of the Australian think tank Regulation Economics discusses how shuttering coal-fired power plants in Australia and attempting to replace them with wind has caused electricity prices to spike and has made the grid more vulnerable to blackouts. After a severe blackout plunged much of Australia into darkness, Elon Musk made headlines when he announced he would install a 100-megawatt battery system in Australia within 100 days, or the system would be free. Moran discusses the battery bet and more.

Podcast: Fred Palmer: Australia, a Cautionary Tale
https://www.heartland.org/multimedia/podcasts/fred-palmer-australia-a-cautionary-tale
Fred Palmer, senior fellow for energy and climate at The Heartland Institute, joins Jim Lakely, director of communications, to discuss his new paper Australia, A Cautionary Tale. Palmer co-wrote the paper with Heartland Research Fellow Isaac Orr. Palmer speaks about how Australia has caused electricity prices to rise by instituting a carbon tax and mandating a shift away from coal. In the summer of 2017, the City of Adelaide had a brownout because its renewable system failed to deliver enough energy to power its citizens’ needs.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

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Author
Tim Benson joined The Heartland Institute in September 2015 as a policy analyst in the Government Relations Department.
TBenson@heartland.org
Author
Isaac Orr is a research fellow for energy and environment policy at The Heartland Institute. Orr is a speaker, researcher, and writer specializing in hydraulic fracturing, frac sand mining, agricultural, and environmental policy issues.
iorr@heartland.org