Minnesota Power to take a hard look at coal-fired retirements

The Minnesota Public Utilities Commission on Sept. 13 accepted Minnesota Power’s baseload diversification study and directed the utility to file its next resource plan, with more specifics on possible retirement of coal-fired capacity, by March 1, 2013.

The commission directed Minnesota Power, as part of the resource plan, to:

  • Address the continuing viability of some of Minnesota Power’s oldest coal-fueled generators and the consequences of retiring them.
  • Analyze the options of adding new wind or natural gas generation.
  • Analyze the consequences of each alternative for each of Minnesota Power’s customer classes.

Minnesota Power supplies retail electric service to 144,000 retail customers and wholesale electric service to 16 municipalities. Coal fuels 80%-90% of its energy need. Its coal units and net capacity levels are: Boswell Units 1-2, 138 MW total; Boswell Unit 3, 351 MW; Boswell Unit 4, 535 MW; Laskin Units 1-2, 110 MW total; Taconite Harbor Units 1-2, 150 MW total; and Taconite Harbor Unit 3, 75 MW.

The baseload diversification study was filed by the utility in February. In it, Minnesota Power analyzed more than 90 alternative plans under a range of circumstances using the Strategist Proview computer program. Based on its study, Minnesota Power drew several conclusions.

  • First, under many scenarios the U.S. Environmental Protection Agency’s new environmental controls could render some small, older coal generators too expensive to operate. Even assuming no new regulation of carbon emissions, 50% of the scenarios explored by Minnesota Power recommended retiring Laskin Units 1-2, and Taconite Harbor 3. Plus, 70% of the scenarios recommend retiring Laskin 1-2, and Taconite Harbor 3, under Minnesota Power’s baseline assumptions about the cost of mitigating carbon emissions, the commission noted in its Sept. 13 order.
  • Second, if Minnesota Power were to build a new generator to replace older ones, the company would likely select one fueled by natural gas. Under most scenarios, the least-cost means to meet customer demand does not include acquiring any more electricity from wind power beyond what is required by Minnesota’s Renewable Energy Standard, the commission said.

In sum, the baseload diversification study indicated that Minnesota Power’s least-cost alternative probably involves discontinuing reliance on Laskin and Taconite Harbor 3 by 2020. Retirement of Boswell 1-2 before 2020 was also cost-effective in some of the scenarios. But, the study showed that Laskin and Taconite Harbor Unit 3 could remain economically viable if the EPA were to adopt less stringent environmental regulations and Minnesota Power could rely more heavily on purchasing backup electricity from the Midwest ISO wholesale markets.

Intervenors offer varying takes on coal shutdown possibilities

Based on Minnesota Power’s study, as well as its own, the Minnesota Department of Commerce, an intervenor in this case, said the commission has a sufficient record to justify ordering Minnesota Power to discontinue relying on Laskin 1-2, and Taconite Harbor 3, as currently operated. The department said that Minnesota Power could minimize its probable costs if, before 2017, it stopped relying on Laskin 1-2, and Taconite Harbor 3, as currently operated. It proposed that Minnesota Power retire these generators, sell them, or switch them to gas.

The Commerce department’s analysis supported the addition of two to four new intermediate-sized combustion turbines fueled by natural gas, as well as new wind turbines. This strategy would give Minnesota Power greater diversity in its fuel sources and reduce its exposure to future costs associated with burning coal. The department recommended that over the next five years Minnesota Power acquire 400-600 MW of gas-powered capacity and 100-200 MW of wind.

Several environmental groups, including the Sierra Club, shared the department’s view that the record of this case is sufficient to justify commission action regarding Laskin and Taconite Harbor 3. But, under their assumptions, the Strategist model supported the retirement of these generators before 2015.

Minnesota Power argued that the record isn’t detailed enough to make these decisions. It said the baseload diversification study was not designed with enough detail to justify any specific course of action – except identifying alternatives for more detailed analysis. In particular, Minnesota Power argued that any decision on the future of the Laskin and Taconite Harbor units should look at consequences for individual customer classes and system reliability, and also the socioeconomic effects of the decisions. In the interest of reaching a decision on these issues by the end of 2013, Minnesota Power proposed to file its more detailed analysis, by next April.

The Large Power Intervenors, a group of industrial power customers that includes several iron ore companies (the utility serves a heavy iron ore production and processing region), offered a range of arguments opposing the retirement of Laskin Units 1-2, and Taconite Harbor 3. They challenged the idea that the commission has authority to order a utility to retire a generator. They argued that keeping these units in operation would provide greater flexibility and reliability for Minnesota Power customers. And they agreed with the utility that the commission lacks a sufficient record to make a final decision.

The Minnesota Chamber of Commerce joined Minnesota Power and the Large Power Intervenors in recommending that the commission defer any action pending further analysis of how a plant retirement would affect system reliability and the price of electric service for each customer class.

Commission agrees coal cuts may be needed, but wants more data

“Minnesota Power’s baseload diversification study and the studies conducted by the other parties help illuminate the challenges and opportunities available to the Company in developing a plan to provide reliable service at least cost,” the commission wrote. “Most noteworthy, the current record of this proceeding indicates that after 2016 it may be appropriate for Minnesota Power, and not its ratepayers, to bear the cost of Laskin Units 1 and 2, and Taconite Harbor Unit 3, if those units are still operating. Analysis by the Department and the Environmental Organizations indicate that, beyond the 2016 time frame, the least-cost alternative for the Company likely will not involve reliance on these generators as they are currently operated.”

But, the commission deferred decisions about the future of any specific units pending further information and analysis from Minnesota Power, and the opportunity for further comment from the parties. The commission directed Minnesota Power to address issues and alternatives in the next resource case, including:

  • A proposal to address the viability of Laskin Units 1-2, and Taconite Harbor Unit 3.
  • An evaluation of the impacts – including relevant costs and the consequences for transmission adequacy – of retiring Boswell Units 1-2 by 2020.
  • Scenarios that add 100 MW-200 MW of wind capacity in the 2014-2016 period.
  • Scenarios that add 400 MW-600 MW of gas-fired capacity in the 2014-2016 time frame.
  • A comprehensive socioeconomic impact analysis by customer class.

Regarding the need to accelerate the schedule, the commission established: March 1, 2013, as the deadline for Minnesota Power to file its next resource plan; May 1, 2013, as the deadline for comments; and June 3, 2013, as the deadline for responses. To postpone the filing of the next resource plan until July 1, 2013, which would be the timeline under normal commission procedure, and then following the usual procedural schedule for that case, would conflict with the goal of resolving questions about the future of Laskin Units 1-2, and Taconite Harbor Unit 3, by the end of 2013, the commission said.

Incidentally, Minnesota Power wants to install a Circulating Dry Scrubber (CDS) on Unit 4 of Boswell in order to control mercury and other emissions and keep this unit in its generating portfolio. The utility, part of Allete (NYSE: ALE), filed its application Aug. 31.

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.