Minnesota Power weighs impacts of coal shutdowns in resource planning

Minnesota Power is moving forward with an integrated resource plan (IRP) process that will see, over the next few years, continued shrinkage in the amount of coal-fired generation on its system.

The utility on June 18 filed additional comments with the Minnesota Public Utilities Commission (MPUC) on its Baseload Diversification Study (BDS) that was conducted as part of its long range planning process, a process that will culminate with the filing of the company’s 2013 IRP. The study, filed in February, was the first of its kind in the state and is one of multiple planning considerations the company said it is using to determine what its generation mix will be in the coming decades. The BDS provided a broad overview of cost and reliability impacts of potential retirement, replacement or retrofit of Minnesota Power’s smaller coal units to meet changing environmental standards.

“We value the comments and input received from various stakeholders on the Study,” said Al Rudeck, vice president of strategy and planning. “Community input is a critical part of our integrated and dynamic planning process.”

A significant portion of stakeholder comments were about the future of Minnesota Power’s coal plants, including Laskin Energy Center in Hoyt Lakes, Minn., and Taconite Harbor Energy Center in Schroeder, Minn. The company said in its comments filed June 18 that to shut down units without a thorough and systematic analysis could put customers at unnecessary risk of higher rates and potential service reliability impacts and have a negative socio-economic effect on host communities.

Minnesota Power said that while the baseload study provided an advance look at a small part of the company’s 2013 resource plan, it also points to issues that require a deeper analysis to fully understand impacts. It involves weighing the decisions of installing further environmental controls against closing down units while factoring in the costs of replacing generation, future fuel prices and increased industrial energy loads.

“We’ve already decided that wind, water and wood renewables and natural gas will play a greater role in our energy mix and already have reduced some coal resources, but before we decide exactly what further changes may look like, we need more insight than what was provided by this study,” Rudeck said.

Coal already represents a smaller percentage of generation mix

Minnesota Power said it has taken significant action to improve the environmental performance of its fleet. The company’s generation fleet was 95% coal-based in 2005, but by 2013 the ratio will drop to 74% coal and 26% non-coal, with a greater non-coal percentage projected to come. Transitioning from fossil-fuel based energy to renewable energy is capital intensive. In recent years Minnesota Power said it has invested about $500m in wind energy, biomass and hydropower improvements.

The company also noted its cost-competitive actions to reduce carbon and other emissions, including the purchase of a 465-mile direct current transmission line to move about 400 MW of wind energy to its customers, and projects that have reduced emissions of SO2, NOx and particulates at all of its coal stations. These environmental investments have resulted in a 70% reduction in fleet emissions since 2005. Another major retrofit at the company’s Boswell Unit 4 – a project unveiled since the completion of the BDS – will bring the system-wide emission reductions to an estimated 85%.

“Meeting the energy needs of our customers now and in the future is far more complex than simply closing a facility and walking away,” Rudeck said. “For decades coal has provided the most reliable, safe and affordable electric power to our customers and it will continue to be an important part of our energy mix, just as electric power will continue to be one of the most important services for our residential customers, for businesses and industry, and for the quality of life of this region. There are no shortcuts in making the best decisions in the best interest of our customers.”

Minnesota Power plans to file its next IRP in 2013. The plan will address Minnesota Power’s entire energy supply picture as well as build on what was learned in the BDS, including a cost analysis of environmental controls to meet evolving U.S. Environmental Protection Agency air regulations, including those just finalized last December, and potential unit “re-missioning” or closure impacts to communities where the coal-fired units are located. Decisions will have to be made against a backdrop of projected increased energy demand in the region, fluid fuel prices, and pending environmental regulations, the company noted.

Minnesota Power, a division of ALLETE Inc. (NYSE: ALE), supplies electric service to 144,000 residents, 16 municipalities and some of the largest industrial customers in the U.S.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.