Nacero(Not Zero)
Tonight(November 14, 2023) the Ector County School Board of Trustees will have a meeting to consider amending an a 313 tax abatement agreement with Nacero TX 1 LLC a natural gas to Sustainable Aviation Fuel(SAF). Chapter 313 property tax abatement reduce property taxes for up to 10 years paid to school districts for maintenance and operations that funds the day-to-day operations of a district. In August of 2022 Energy Crisis wrote about a similar abatement for the county on a project involving Direct Air Capture(DAC) with 1PointFive and Occidental Resources(OXY). For many of these projects the property value is set to be worth less than half of the original installs property value, meaning these school districts will receive very little once the agreements expire.
Unlike the 1PointFive Carbon Capture plant which must be built in an area were OXY has a plentiful number of wells to sequester the carbon captured or to use in Enhanced Oil Recovery(EOR) to expand operations of production, the Nacero Plant essentially could have been built in any county in the Permian Basin. This gave a reason for the taxing entities to give a break to the company to entice them to build in Ector County and create new jobs. The placement in Ector County of the 1PointFive plant was strategically viable due to OXY Oil and Gas assets in the area and the best return for a mixture of storage and production enhancements making the incentive of a multi billion dollar tax gift that strains the local development of public schools and their operations an unnecessary burden. The 65-acre site will initially capture up to 500,000 metric tons of carbon dioxide a year with the capability of scaling up to one million metric tons per year with current start date of 2025.
The Nacero plant is a completely different animal compared to the DAC technology which has yet to be determined to be a net positive on global warming due to the high power consumption needed to operate these facilities. According to the IEA, capturing CO2 from the air is more energy intensive and therefore more expensive than capturing it from a point source such as OXY’s Closed-Loop Gas Capture. This is because CO2 in the atmosphere is much more dilute than, for example, in the flue gas of a power station or a cement plant. Sequestering 1 billion tons of carbon using DAC would require more energy than the entire renewable sector generates in a year making it impossible to operate with only renewables as a power source.
Nacero awarded a long-term renewable wind power agreement to NextEra Energy in February of 2022 which states that NextEra Energy Resources’ Texas wind power operations will provide Nacero with nearly 20 billion kilowatt-hours(kWh) of green electricity over 20 years starting in 2025. The wind power will complement Nacero’s planned 200-megawatt on-site solar photovoltaic power plant and ensure that the facility is powered by 100% renewable electricity. It is hard to ignore the fact that the press release decided to use a unit of measurement of kWh while stating it in billions instead of using GWh which is 1M kWh per GWh or 1k GWh/year(2.72 GWh/day) for this project. Much like the reporting of oil spills where the units are defined in a way that makes the volume seem larger than it actually is such as the Huntington Beach spill on Oct. 6, 2022 where the reporting was done in gallons instead of barrels, the internationally used unit of measurement for all oil. That particular story showed a volume of 25,000-gallons which sounds much more daunting than sub 600 barrels.
NextEra name is littered throughout the Texas 313 abatements through other entity names such as Shamrock Wind, LLC building a 223.9 MW wind facility in Crockett County. These projects taxable value once exiting the grace period are often valued at 75% less than the initial build making it almost impossible to recoup all the highly valuable property tax dollars for the county. With both Nacero and NextEra receiving these huge tax benefits it’s hard to not feel as if they are catching you both ways with incentives coming and going. Oil and Gas industry has been plagued with abandoned wells once no longer profitable and have forced unnecessary strain on Texas for plug and abandonment issues. It is hopeful that these projects still have sustainability once the tax incentives run dry and they can operate on their own accord. The decommissioning of a single wind turbine comes at the cost of up to $500k and has a continued decreasing life span from the original claimed 20 years. The potential for the issue of abandoned renewable projects to become a similar burden on Texas taxpayers with the defaulting of entities due to having to endure real costs of operations should be widely researched and accounted for before expansion continues.
Nacero’s original project plan was to develop clean burning gasoline fuel from natural gas feedstock but has shifted its plans to produce sustainable aviation fuels(SAF) while still in pre construction planning for the facility. According to the Ector County ISD agenda the board is reconsidering the agreement in relation to job creation in the county where the original 258 new qualified jobs and 78 non-qualified jobs are modified to 25 new qualified jobs and 0 non-qualified jobs or a reduction in 311 promised jobs in the original agreement with an average salary of $81k/year.
Though the reduction in employment in the area for higher paying jobs is a huge negative, there are many benefits to the change in products developed and sold to market by the Nacero plant addition to Ector County. Nacero partners with TOPSOE to utilize their MTJet™ which is a methanol-to-jet solution that can deliver eJet fuel from renewable electricity, water, and CO2 or advanced biofuel from solid biomass feedstocks.
According to their website Nacero's Penwell facility will convert billions of British thermal units (Btus) of renewable natural gas and associated gas from the Permian into over 1 billion gallons of SAF (sustainable aviation fuel), LCAF (Lower Carbon Aviation Fuel) and other light products annually. Using captured biogas feedstock, integrated carbon capture, and 100% renewable power will result in millions of tons of CO2 savings annually while creating thousands of clean energy jobs and adding a forecast $20 billion to the regional economy. With the employment amendment it is hard to see those thousands of jobs created in Ector County but the consumption of natural gas is definitely a net positive for the surrounding counties that have an extra outlet for an abundance of overly gassy fields in the Permian. In turn this is also a positive for some of Energy Crisis favorite Royalty Trusts such as Permian Basin Royalty Trust(PBT) located in Crane County that produces nearly 1M Mcf per month net to trust.
Nacero now claims to be a “Clean Energy Project” which allows it to add to its qualifying time period which is applied in amendment No. 2 for the delayed start period of the projects allowing for a three year gap. The project plans to have a 200 MWh solar plant tied into the facility in addition to the 2.72 GWh/day power transmission from NextEra contract. A typical solar build of this size can power more than 40k homes but because of the variability in solar radiation throughout the day the actual power output is different from rated power capacity where a plant of this nature would operate 24 hours a day but the sun doesn’t shine all the time nor does the wind always blow.
With the combined capacity to feed renewable energy into the Nacero plant, it is safe to assume that this project will have many of the same insanely high power needs as the DAC projects described previously. However the company states that Topsoe’s methanol synthesis process of MTJet™ eFuels can operate at just 10% of its design capacity and handle temporary electrolyzer shutdown, allowing operations to run directly off methanol storage tanks. The result is a methanol-to-jet solution that can deliver eJet fuel from renewable electricity, water, and CO2; creating a truly end-to-end feedstock-to-fuel process pathway. The process grants the flexibility to handle feedstock fluctuations while providing around-the-clock operational stability. Putting lab techniques into practice at large scale industrial production doesn’t always translate with these calculations and the past shift of focus on what the end products will be from this plant during pre construction doesn’t instill a ton of confidence in the overall knowledge of those planning the projects. With the safety net of tax mitigation and subsidies there is a large incentive to move fast and break things to see what works in practice at the expense of the tax payers.
The project relies on these renewable builds of solar and wind to offset the carbon impact of their facilities versus burning regular jet fuel. Much like the full electrification of vehicles versus the hybrid approach, moving the generation of power onto the grid to fuel transportation instead of utilizing point of source combustion through an engine in the mode of transportation could result in defaulting back to coal power which according to the EIA still accounts for 19.7% of electrification. About 60% of U.S. 2022 electricity generation was from fossil fuels(coal, natural gas, petroleum, and other gases).
Solar construction costs averaged $1,796/kW in 2019, a 2.8% decrease from 2018 according to the EIA.
Natural gas received the least U.S. investment in 2019, accounting for 26% of total electric-generating capacity investment across all energy sources. Most natural gas electric-generating capacity installed in 2019 was in combined-cycle facilities. Average combined-cycle construction costs increased from $858/kW in 2018 to $948/kW in 2019, a 10% increase.
The United States has more than 2,500 utility-scale solar photovoltaic (PV) electricity generating facilities. Most of these power plants are relatively small and collectively account for 2.5% of utility-scale electric generating capacity and 1.7% of annual electricity generation, based on data through November 2018. The 200 MWh build is considerably large compared to most projects that power a large area of residential and commercial needs.
It is nearly impossible to factor in replace costs of wind/solar, intermittent issues, true power consumption at scale, quality of product output, and many other factors within the Nacero project plan without having long-term facility operations data to get a final true impact on the goals of net-zero. Once the project is fully complete at scale and allowed to operate outside of the 10 year abatement tax incentives there will hopefully be no need for more breaks and these projects will be required to operate profitably on their own. The new designation as a ‘Clean Project’ expands the qualifying period by three years for the company to make their initial $100M investment and avoid the agreement terminating by the end of the year. I’m old enough to remember when this was the site for the 400MW ‘Clean Coal Plant’ scheduled to be completed in 2018 that would also use the captured CO2 to be used for Enhanced Oil Recovery(EOR) in the Permian Basin.