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ENERGY & ECONOMIC ALTERNATIVES
to the Desert Rock Energy Project
Courtesy of Diné Citizens Against Ruining Our Environment

The Desert Rock Power Plant represents a proposed major new addition of coal-fired generation to the American Southwest, a region that is already home to 33 existent coal-fired power plants. Desert Rock would be a 1,500 MW coal plant on the Navajo Nation, in San Juan County, NM. Another 19 power plants, all of them conventional coal plants, have been proposed for the region.

The Bureau of Indian Affairs is the federal agency responsible for evaluating plans for the $3 billion plant, including drafting its Environmental Impact Statement (EIS). An EIS is required to determine if the proposed project meets environmental protection standards and to analyze whether there are viable alternatives.

The agency’s Draft EIS for the Desert Rock devotes approximately two of its 1,500 pages to analyzing alternative sources of energy, concluding that:

“…the use of alternative energy sources would not meet the purpose and need for the project [i.e. Economic development through sale of Navajo Nation coal resources] or were otherwise unfeasible. Therefore, the BIA determined this was not a reasonable alternative and it was eliminated from detailed evaluation.”

The BIA asserted that any relevant economic development project must use Navajo Nation coal resources, and as a result the Draft Environmental Impact Statement (EIS) contains no further assessment of the availability, cost, or economic development aspects of solar, wind and energy-efficiency technologies.

However, the costs for renewable energy alternatives have dropped sharply since early research efforts in the 1980s. Today’s costs are equivalent or lower than coal for many of the renewable resource options, particularly when any sort of accounting is made for carbon risk.

An analysis by the National Energy Technology Laboratory (NETL) reveals that supercritical pulverized coal plants such as Desert Rock shift from being the least expensive to the most expensive of the fossil-fueled generating options once the cost of carbon capture is included. Plant costs rise by 82 percent to $2,870 per kilowatt of nameplate capacity. Electricity production costs also rise by 81 percent to 11.48 cents per kilowatt-hour.

With both state and federal efforts to regulate and reduce carbon emissions gathering momentum, it is quite possible, given a range of costs for carbon controls and clean energy’s ability to produce largely carbon-free electricity, that Desert Rock could be priced out of the regional power market.

Sithe Global, the Houston-based energy corporation owned by Blackstone Group of New York, which is proposed Desert Rock, has stated that because there currently is not a federal framework for regulating greenhouse gases as a pollutant—even though some policies are in the early stages of development or implementation and the U.S. Supreme Court has ruled the EPA has the authority to regulate CO2—Desert Rock is unlikely to be affected.

Proponents of the Desert Rock project also have been openly optimistic in their characterization of market interest in Desert Rock’s electricity. Sithe Global, Dine Power Authority, and BHP Navajo Coal Co., all have portrayed the power plant as an economic development project for the Navajo Nation, dismissing other forms of energy as “uneconomic.”

This Energy and Economic Alternatives analysis more fully examines the economic and environmental dimensions of assumptions made by Desert Rock proponents and included in the BIA’s Draft EIS. It broadly considers the economics of developing renewable energy sources that were not analyzed in the Draft EIS, including those of increasing publicly-funded or utility-funded efforts to reduce demand for electricity, which can deliver energy savings at 30 percent to 50 percent of the cost of Desert Rock’s power.

It provides a preliminary assessment of what a reasonable portfolio of such clean energy altneratives might look like. Although not an exhaustive treatment on how to meet regional energy needs without building another major coal-fired power plant, this report points the way to how such an analysis might be done.

The Navajo Nation, situated in the Four Corners region of New Mexico, Arizone, and Utah, contains world-class concentrating solar resources and an abundance of moderately to highly valuable solar and wind resources, all largely untapped to date.

The full Alternatives report by Ecos Consulting found that an equivalent amount of energy services as those proposed from Desert Rock could be delivered by a combination of wind, concentrating solar power, and natural gas facilities constructed on the Navajo Nation. When combined with continued growth in utility-funded energy-efficiency programs in the target power markets of Nevada and Arizona., the overall cost of that delivered energy (as shown below) would be less than that of Desert Rock, even before consideration of future carbon charges.

EQUIVALENT ENERGY SCENARIO
WEIGHT	TECHNOLOGY	CAPACITY (MW)	CAPACITY	GWH/YR FACTOR	COST/KWH
100%	Coal	1,500	0.819	10,769	$ 0.0690
49%	Wind	1,828	0.334	5,348	$ 0.0661
14%	CSP	753	0.200	1,320	$ 0.1350
21%	Utility Efficiency			2,310	$ 0.0300
16%	Natural Gas	753	0.300	1,980	$ 0.0684
100%	Total Alternatives	3,334		10,958
Average Cost/kWh Alternatives					$ 0.0669

When estimated economic benefits and costs of the Desert Rock project are compared to such an alternative scenario, the net results demonstrate that developing clean energy sources rather than coal provides a net economic advantage. The alternative scenario creates 80 percent more construction jobs and five times as many long-term operations and maintenance jobs. It also provides greater indirect job creation and economic multipliers within the regional economy.

Even though revenue to the Navajo Nation from coal taxes, coal royalties, and water fees from coal would be higher than they would from clean energy, the net economic benefits for clean energy remain much higher due to a combination of factors, including financial premiums for clean electricity, and the lower risk of carbon mitigation costs.

The net economic benefits of the alternative scenario are approximately four times those of Desert Rock, without accounting for health care cost differences, which would further reduce the net economic benefits of Desert Rock.

DESERT ROCK & ALTERNATIVE SCENARIO ECONOMIC FACTORS
ECONOMIC FACTOR	DESERT ROCK	ALTERNATIVE SCENARIO
Short Term Construction Jobs	1,000	2,016
Long Term Operations & Maintenance Jobs (O&M Phase)	200	534
Cool Taxes & Cool Royalties	$29,000,000/yr	$0
Water Fees	$5,200,000/yr	$5,649,172/yr
Negotiated Taxes	$16,200,000/yr	$19,346,363/yr
Sales Taxes During Construction Phase	$832,000/yr	$1,677,549/yr
Sales Taxes During O&M Phase	$166,400/yr	$444,285/yr
Total Tax Revenue Generated (Construction Phase)	$832,000/yr	$1,677,549/yr
Total Tax Revenue Generated (O&M Phase)	$51,466,400/yr	$25,439,821/yr
Green Power Premium	$0	$67 to $133 million/yr
Carbon Capture or Offset Costs	-$63 million to -$292 million/yr	-$11 million to -$50 million/yr
Fuel Price Volatility	Moderate	Low
NET ECONOMIC BENEFIT Construction Phase	$832,000/yr	$1,677,549/yr
NET ECONOMIC BENEFIT O&M Phase	-$12 million to -$240 million/yr	$81 million to $108 million/yr

Wind, solar and energy-efficiency technologies, which are cost-effective, reliable and available, would provide greater Navajo economic development and lower cost electricity than Desert Rock, with few negative consequences and more sustainable benefits. Burning coal to produce electricity is not even the best, let alone the only form of economic development for the Navajo Nation.

FOR MORE INFORMATION Dine CARE: Dailan Jake: (505) 801-0713, dailan.jake@gmail.com Lori Goodman: kiyaani@frontier.net Ecos Consulting: Paul Sheldon, (970) 259-6801