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IEEFA: ‘End of an era’ for Navajo Generating Station

Published by , Digital Assistant Editor
World Coal,

The Institute for Energy Economics and Financial Analysis published a report detailing how the failing coal-fired Navajo Generating Station in northern Arizona will require huge investment to remain online.

The report—“End of an Era: Navajo Generating Station Is No Longer Economic”—concludes that the power plant can no longer compete with power produced by other means.


“Declining energy market prices and rising production costs have made the power produced by the plant more expensive than power sold in the larger energy market,” wrote David Schlissel, the author of the report and IEEFA’s director of resource planning analysis. “These factors are not likely to change, leaving the plant’s financial viability in doubt— regardless of who owns it.”


The study puts the subsidised cost of propping the plant up from mid-2017 through the end of 2019 at US$414 million. Keeping it running until 2030 would require a total bailout of US$1.4 billion to US$2.4 billion. A five-year bailout plan, from mid-2017 through mid-2022, as has been suggested by a member of the Arizona Corp. Commission, would cost US$740 million to US$1 billion.

“In short, keeping the Navajo Generating Station online would require at least hundreds of millions of dollars in subsidies over the short term and billions over the longer term.”

The study notes also that the viability of the plant in recent years has been dealt a circular one-two punch:

“First, the price of the power being sold at the plant has not covered the full cost of producing that power—in other words, it is operating, on average, at a net loss for each of the megawatt hours of power it sells.”

“Second, as the cost of producing power at the plant has risen, and NGS has become less competitive with the cost of producing power at other generators in the market, the plant has begun to produce significantly less power in recent years than it had previously generated.”

Schlissel said it is likely that higher generation from increasingly affordable renewable resources will put even further pressures on the plant.

"These changing circumstances have made NGS less competitive with market power a trend that will very likely continue in the coming years,” Schlissel said.

“Enormous subsidies would be required for Navajo Generating Station to continue operating under any owner,” the report concluded. “Rather than spend such sums of money on a failing and aging coal-fired power plant, we recommend the plant’s owners begin planning immediately for retirement of the plant and toward an orderly transition to a profitable and sustainable energy economy.”

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