Energy Transfer’s (ET) Desert Southwest pipeline will enable utilities in Arizona to convert several coal plants to run on natural gas, continuing a long-term transition away from coal in the Southwest.
Tucson Electric Power plans to convert Units 1 and 2 at the Springerville Generating Station in Apache County, AZ to natural gas by 2030. The Salt River Project, which serves over two million customers in central Arizona, has a similar strategy for its coal-fired Coronado Generating Station. The utility will modify the plant near St. John, AZ to burn gas, with completion expected by YE29. The two power plants have 1,600 MW of combined capacity.
The conversions are made possible by the Desert Southwest expansion of the Transwestern Pipeline. The project includes 520 miles of 48-inch pipeline from Winkler County, TX through southern New Mexico to Pinal County, AZ, effectively creating a southern leg to the Transwestern system (see pipeline map below, available in East Daley Analytics’ Energy Data Studio). Desert Southwest will be sized to flow up to 2.3 Bcf/d from the Permian Basin.
Tucson Electric and Salt River have both signed up for firm capacity on Desert Southwest, according to Transwestern’s project application filed with the Federal Energy Regulatory Commission (FERC). Moreover, the expected startup of the pipeline in 4Q29 closely aligns with the timeline when the converted coal plants would begin using gas.
The power plant projects continue a long-term trend away from coal by Southwest utilities. Electricity generated from coal in Arizona and New Mexico has declined 71% since 2014, according to data from the Energy Information Administration (EIA). Gas-fired power generation is up 84% over the same period in those states (see figure). This is part of a broader national trend to refurbish older coal plants to run on gas.
The Springerville and Coronado plant conversions likely wouldn’t be possible without the new Energy Transfer pipeline. Transwestern, which delivers Permian volumes to the Southwest and Southern California, typically runs at 80-90% capacity through eastern Arizona during periods of peak usage, according to East Daley’s West Coast Supply & Demand report. This leaves little room for increased demand without additional infrastructure.
Desert Southwest creates new flexibility on the Transwestern system by bringing supply into southern Arizona and adding compression through the Phoenix corridor. The upgrades will allow bidirectional flows on the Phoenix lateral, enabling Transwestern to push gas through the western part of the system where demand is highest and capacity is most limited.
Kinder Morgan’s (KMI) El Paso system pipeline also plays an important role in the region. Compared to Transwestern, El Paso’s North Mainline runs at more variable levels, suggesting it has room to take on additional gas flows. As volumes increase on Transwestern, some gas may shift across systems, allowing El Paso to help meet growing demand in eastern Arizona. This includes new load from data centers. East Daley tracks data centers nationwide in Energy Data Studio, and we estimate proposed projects could add ~500 MMcf/d of incremental gas demand across Arizona by 2030.
Bottom line: The transition from coal to gas requires new pipelines like Desert Southwest. We expect Permian supply growth, compression upgrades and inter-pipeline competition to maintain system reliability while meeting new gas-fired power demand in the Southwest. The ET project highlights how infrastructure flexibility is crucial for the coal-to-gas transition in the region. – Kritika Gaikwad Tickers: ET, KMI.
Join East Daley’s May Production Stream Webinar
East Daley Analytics will host our monthly Production Stream webinar on Wednesday, May 27. Midstream infrastructure is becoming the defining bottleneck in North American energy markets — and the value of infrastructure is poised to rise significantly in the years ahead:
- US natural gas pipelines are operating at high utilization rates, making firm transportation increasingly strategic and valuable.
- Emerging demand like data centers and LNG export facilities require reliable baseload supply.
- Combined, we expect these sectors to drive more than 20 Bcf/d of long-term natural gas demand by 2030.
- Crude pipeline systems are facing similar constraints as producers push utilization limits to move oil to the coast.
- Fractionation bottlenecks in the Permian continue to tighten NGL logistics, raising critical questions about how the industry will respond.
Our analysts will break down emerging infrastructure constraints, and their implications for the future of midstream energy and new investment opportunities. Join our Production Stream webinar on Wednesday, May 27.
Download Part II of East Daley’s Permian Basin White Paper Series
The Permian Basin’s next big buildout is already taking shape, but this time the driver isn’t crude oil. In The Permian Basin at a Crossroads: Why This Pipeline Boom is Different, East Daley Analytics’ latest white paper reveals how gas demand from AI data centers, utilities and LNG exports is rewriting the midstream playbook in the leading US basin. Over 10 Bcf/d of new capacity and $12 billion in investments are reshaping flows, turning the Permian into a gas powerhouse even as rigs decline. Read Part II: Why This Pipeline Boom is Different
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