SRP, Navajo Nation near lease agreement to extend coal plant's life

Dive Brief:

  • Navajo Nation President Russell Begaye announced this week that a new lease agreement had been reached to keep a 2,250 MW coal plant in Arizona online, according to The Arizona Republic.
  • Officials at Salt River Project say a replacement lease could be ready by the end of the week, to allow the Navajo Generating Station to continue operating through the end of 2019.
  • If a new lease is not approved by the end of next month, SRP has indicated the plant could close this year. The plant's owners, led by SRP, decided to shut it down due to competition from cheaper gas-fired plants.

Dive Insight:

Absent a new lease, SRP had planned to shut down the Navajo coal station later this year in order to be off the property when the lease ended. But now officials say they may have reached a solution, at least temporarily.

SRP Spokesperson Scott Harelson told Utility Dive via email that "we have made significant progress toward an agreement," adding that "it is possible a proposed replacement lease will be in the hands of the Nation by Thursday or possibly Friday."

But he also noted that final approval will still be required from the Navajo Nation Council and owners of the plant, who need a final decision by July 1.

Peabody Energy, which supplies coal to the plant, offered a lower fixed price for coal through 2025 to keep the station open. 

Signing a new lease is key to keeping the plant open. In 2016, the National Renewable Energy Laboratory issued analysis that pegged the cost of power generated at Navajo at $38/MWh, compared with $32 in 2015. After 2019, that cost will rise to $41/MWh, reflecting terms of a new lease, and then potentially to $51/MWh in 2030 due to emissions standards now on the books.

The U.S. Bureau of Reclamation owns about a quarter of the NGS plant, while SRP claims 43%. Arizona Public Service, NV Energy, and Tucson Electric Power own the remaining shares.

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Filed Under: Generation Regulation & Policy
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