Navajo Generating Station Powers Down, Nation Considers Future of Energy Economics on Reservation

The Navajo Generating Station (NGS), the largest coal-fired power plant in the West, in operation since 1974 near Page, Arizona, has shut down — ahead of its scheduled closure in December. Revenue from the plant helped to fund the Navajo and Hopi governments and provide critical jobs on Navajo lands strapped with a roughly 19 percent unemployment rate. 

Approximately 90% of employees at NGS and the neighboring Kayenta mine that supplied it were Navajo, and 99% of the approximately 345 Kayenta mine workers were Native American. 

The Navajo Nation’s decision to close the plant reflects how once thriving businesses are sensitive to the ever-changing landscape of the modern energy industry. 

When NGS was developed over 40 years ago, the Tribe and its partners could not have asked for a better site setup. The plant was located near Lake Powell, providing the facility with water for cooling and steam generation. Also, NGS was only a few miles from the Kayenta coal mine, which produces about 8 million tons of coal annually.

A long-term agreement with the Central Arizona Project (CAP), a canal and aqueduct system that supplies 1.5 million acre feet of water to central and southern Arizona, ensured that NGS had a stable market for its electricity output.

So how did such a powerful economic driver find itself suddenly unprofitable, placing hundreds of well-paying jobs on the reservation in jeopardy?

The simple answer is basic economics. The widespread introduction of fracking, horizontal drilling, and other technological advances to oil and gas extraction over the past decade have caused the price of natural gas to drop considerably. 

Coal plants, once the mainstay of baseline electricity generation in the United States, are now being supplanted by natural gas both in terms of reduced cost per kilowatt-hour generated and reduced greenhouse gas emissions.

This growing disparity in generation costs was making NGS expensive and obsolete. A study by the Institute for Energy Economics and Financial Analysis noted in April 2018 that CAP could have saved $38.5 million in 2016 simply by purchasing their electricity needs from the market, instead of from the Navajo plant. NGS’s owners were estimated to lose $2.2-$3.4 billion between 2020-2030 unless plant operations were subsidized through extensive hikes in price for ratepayers.

While the closure of NGS presents challenges, including revenue cuts for the Tribe and substantial job loss for hundreds of Navajo and Hopi citizens — the Navajo Nation is looking ahead to its renewable energy future. 

The current Navajo Administration is committed to following through on its “Navajo Háyoołkááł (Sunrise) Proclamation,” a commitment to pursue and prioritize renewable energy development for the long-term benefit of the Navajo people. 

The Nation is currently developing a 660-acre solar farm in New Mexico, the Paragon Bitsi Ranch solar project in the Navajo community of Huerfano. 

The Tribe additionally recently completed the second phase of construction of its Kayenta Solar generation facility in Arizona, a renewable energy plant that now produces enough emission-free energy to power approximately 36,000 homes. 

“We are moving ahead with long-term sustainable energy development that will provide more electricity for Navajo homes and make our communities and economy stronger,” said Navajo Nation President Jonathan Nez at a ceremony celebrating the completion of phase II of its Kayenta Solar farm.

For the original Kayenta Solar project, 236 of the 278 workers were of Navajo descent, and 91 percent of the 130 employees during the second phase of construction were of Navajo descent. Navajo workforce was paid $4.3 million and received over 4,700 hours of specialized training in solar utility construction for the Kayenta Solar Project. The construction also generated $2.2 million in taxes paid to the Navajo Nation. Overall, it is estimated that $13.1 million in economic activity occurred within the surrounding communities during the construction period.

While this pales in comparison to NGS and Kayenta mine in employment, economic impact, and electricity generated (the two combined Kayenta solar farms will only have a capacity of 54.6 MW v. 2,409 MW at NGS), renewable energy development is still in its infancy on the Navajo reservation.

And the Navajo Nation believes the future looks bright. 

Native Business writer Clifton Cottrell contributed to this story. Clifton Cottrell is an enrolled citizen of the Cherokee Nation. He is a PhD student at the University of Maryland focusing on Tribal Climate and Energy Policy.

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