Montana-Dakota Utilities has filed a July 1 copy of its 2015 Integrated Resource Plan (IRP) with the North Dakota Public Service Commission, with that IRP showing progress on air emissions control for conventional pollutants at coal-fired facilities, but a lot of uncertainty about the U.S. Environmental Protection Agency’s pending Clean Power Plan for greenhouse gas emissions.
Montana-Dakota, a unit of MDU Resources Group (NYSE: MDU), has an integrated electric system comprised of its service territories in the states of Montana, North Dakota and South Dakota.
The results of an integration analysis indicate that Montana-Dakota’s current base case resource plan includes the continued construction of the following to be in service by the end of 2015:
- the Big Stone coal plant’s air quality control system (AQCS) project;
- the addition of a Mercury and Air Toxics Standards (MATS)-compliance project at the coal-fired Lewis & Clark Station;
- the Thunder Spirit Wind project at 107.5 MW;
- 19 MW of reciprocating internal combustion engine (RICE) units at Lewis & Clark; and
- adding 200 MW of a combined cycle unit in 2020.
Based on the analysis of the resource expansion models and the consideration of customer impacts, market availability of capacity and energy, and other factors such as environmental regulations and the balance of its generation mix, Montana-Dakota’s recommended resource plan is to pursue the following resources to meet the requirements identified for the 2015-2019 period:
- Continue the implementation of the commercial demand response program and the interruptible rate to obtain a total of 31 MW by 2017,
- Implement the residential AC Cycling program by 2017 and obtain a total of 10 MW in the program by 2021,
- Plan for the installation and/or partnering of 200 MW of combined cycle generation to be online in 2020,
- Meet short-term capacity deficits via the Midcontinent ISO Capacity Auction or through bi-lateral capacity purchase agreements, and
- Monitor the development of final rules and implementation strategies for EPA Clean Power Plan for existing power plants.
The recommended resource plan is considered to be the best plan to economically and reliably meet customers’ requirements over the five-year planning horizon. Montana-Dakota also said it plans to issue a new request for proposal for capacity and energy resources in 2016 to start the process for the next planning cycle.
Montana-Dakota has 50 MW of installed wind capacity at two locations, providing approximately 7% of its customers’ electric energy requirements, and will be installing an additional 107.5 MW of wind at the Thunder Spirit Wind project near Hettinger, North Dakota, by the end of 2015.
In 2003, Montana-Dakota joined other utilities, through a memorandum of understanding from the Edison Electric Institute to the Department of Energy, to commit to reduce the utility industry’s carbon dioxide (CO2) emission intensity by 3% to 5% by 2010. Montana-Dakota has shown its commitment by reducing the company’s CO2 emissions intensity in 2008 by approximately 7% as compared to 2003. In 2010, Montana-Dakota updated its CO2 emissions intensity goal, committing to a 10% reduction of average CO2 emissions intensity from its electric generating facilities by 2012 compared to 2003 levels. As of Jan. 1, 2012, Montana-Dakota achieved greater than 10% reduction from its 2003 electric generating facility CO2 emissions intensity, surpassing its goal. The company met these goals through customer energy efficiency, renewable energy projects and through implementing heat rate improvement projects at its coal-fired generation facilities over time.
The air emissions regulations that have had the most immediate impact on operations at Montana-Dakota’s electric generating facilities are the federal Regional Haze (RH) Rule and the Mercury and Air Toxics Standards. The most significant projects that are being implemented to comply with these rules include a filterable particulate matter pollution control project for MATS Rule compliance at the Lewis & Clark Station being installed in 2015, as well as the AQCS project at the Big Stone Plant for the RH Rule compliance that is under construction and is to be completed in 2015. Montana-Dakota’s ownership share in Big Stone Plant is 22.7%.
Scrubber upgrade picked over gas co-firing at Lewis & Clark coal plant
With the exception of Lewis & Clark Station (L&C), the majority of MATS projects at Montana-Dakota’s generating facilities do not result in significant cost. In 2012, Montana-Dakota determined through stack emissions testing conducted at L&C that filterable particulate matter emissions reductions were required to comply with the MATS non-mercury emissions limit. Montana-Dakota contracted with Sargent & Lundy LLC (S&L) in November 2012 to develop an emission control strategy for reducing filterable particulate matter to control non-mercury metals per the MATS Rule, identifying a fabric filter bag house design combined with mist eliminator vessel modifications as the recommended compliance option. In the spring of 2014, Montana-Dakota was forced to re-evaluate its compliance plan due to the increasing cost of the bag house installation from roughly $27 million to $40 million and determined that the proposed bag house project was no longer an economically feasible compliance option and began exploring other compliance options.
Montana-Dakota began investigating a minimal natural gas co-fire at Lewis & Clark as a potential compliance option, as well as potential modifications to the existing scrubber. In March 2014, Montana-Dakota conducted initial co-fire testing at 50%, 30% and 10% natural gas blends with lignite. The test results indicated that co-firing, even at 50%, did not significantly alter particulate matter emissions at L&C. Based on these results, and further testing to determine optimum scrubber efficiencies, Montana-Dakota determined that co-firing was not an effective MATS compliance option.
During the summer of 2014, Montana-Dakota investigated whether sufficient reductions could be achieved through the optimization of the existing pollution control equipment and good combustion practices, as well as potential changes that could be made to the scrubber to achieve compliance with a minimal co-fire of natural gas. Montana-Dakota made changes to maximize the effectiveness of the existing scrubber at L&C. However, the changes did not produce a sufficient reduction in particulate emissions to achieve compliance.
Later in the summer of 2014, Montana-Dakota began work with URS Corp., now AECOM, to evaluate retrofitting the existing scrubber for improved particulate matter capture, since URS has extensive experience in making custom/niche improvements to existing wet scrubbers across the industry. After studying L&C’s scrubber, URS proposed installing enhanced mist elimination, a sieve tray and spray header, and forced oxidation within the confines of the existing scrubber vessel and mist eliminator section of the stack. URS guaranteed that these retrofits would meet the MATS limit and could be completed by December 2015 at a cost of approximately $16 million.
Due to the time needed for installation of the updated pollution control project, and as allowed under the MATS Rule, Montana-Dakota submitted a supplemental request for approval of a one-year compliance extension to the Montana Department of Environmental Quality in November 2014 for installation of the proposed controls. A one-year extension was granted on Jan. 30, requiring controls to be in place by April 16, 2016. Equipment design for the scrubber retrofit was completed in early 2015 and equipment is being procured for the installation to be completed during L&C’s fall 2015 outage.
Clean Power Plan compliance may force Big Stone retirement
Montana-Dakota does not expect to have certainty on the compliance obligations under the Clean Power Plan, which is not due to be issued by EPA in final form until late this summer, until possibly later in 2017 or 2018, after EPA begins approving or disapproving state implementation plans submitted under the Clean Power Plan.
“With compliance required starting in as early as 2020, there are concerns about impacts from stranded assets such as the Montana-Dakota’s co-owned Big Stone Plant (Big Stone),” the IRP said. “In its analysis, the EPA anticipated a significant re-dispatch of generation from Big Stone to Basin Electric Power Cooperative’s Deer Creek Station, which is the only natural gas combined cycle unit in South Dakota. Deer Creek and Big Stone are separately owned, serve different territories, and participate in different markets (Big Stone is in MISO, while Deer Creek will join the Southwest Power Pool in 2015). Because Deer Creek was under construction during most of 2012, it operated very little and was assigned a one percent annual capacity factor when EPA calculated the emission rate goal for South Dakota. Based in large part on this mis-application of Deer Creek’s 2012 capacity factor, the Proposed Rule inappropriately anticipates that 1,965,000 MWh of generation would shift from Big Stone to Deer Creek. If this shift occurred, Big Stone would operate at just 23 percent of its capacity. Because Big Stone’s minimum operating load is approximately 40 percent of maximum load, running the plant at 23 percent of its capacity would require the plant to be off-line for at least half of the year. Under these conditions, it is likely that the plant would be retired.
The IRP added: “Considering that Big Stone will complete the installation of the $384 million dollar Air Quality Control System (AQCS) in 2015 required by an EPA rule establishing Regional Haze Program requirements for South Dakota, of which Montana-Dakota’s share is approximately $87 million, there is a concern that a larger asset would be stranded if retirement of Big Stone was required to meet EPA’s interim targets in 2020. Montana-Dakota completed modeling of this scenario with the 2013 IRP model considering a four year life for the Big Stone AQCS project, and Big Stone AQCS was still chosen as a least cost supply-side resource even with a four year life.
“Montana-Dakota, as well as Big Stone Plant operator Otter Tail Power, the [South Dakota Public Utilities Commission] and others, have made numerous and forceful comments to EPA indicating that the SD target was calculated based on faulty assumptions and that these assumptions need to be corrected in the final rule. The EPA has indicated that it understands the nature of these comments. However, the level of correction that EPA would potentially make to the SD target is unknown.”
Montana-Dakota noted that the 8% parasitic load from the new AQCS equipment at Big Stone will make it technically infeasible for the plant to achieve a 6% heat rate improvement mandated under the draft version of the Clean Power Plan.
Montana-Dakota’s existing generation is comprised of baseload coal-fired generation at the Heskett Station (Units 1 and 2), the Lewis & Clark Station, Montana-Dakota’s shares of the Coyote and Big Stone stations, and natural gas-fired peaking generation at Glendive (Units 1 and 2), Miles City and Heskett Unit 3. Montana-Dakota also owns and operates the Diamond Willow and Cedar Hills wind farms, three 2-MW portable diesel units, and the Glen Ullin Station 6 waste heat generating unit.
Coal-fired Heskett Unit 1 also a retirement option
Montana-Dakota is modeling the retirement of Heskett 1 at the end of 2019 and Lewis & Clark at the end of 2025. The retirements are modeled with the assumption that additional EPA rules, including greenhouse gas (GHG) rules, may be finalized in the future that would require the Heskett 1 and Lewis & Clark plants to install new emission controls or shut down. However, at this time there is no actual plan to retire either of the units.
The Base Case least-cost plan consists of the following resource additions for 2015-2020:
- Purchase 10 MW of capacity in 2015;
- Install 107.5 MW of Thunder Spirit Wind in 2015;
- Install 37.3 MW Simple Cycle Combustion Turbine in 2017;
- Continue the commercial demand response program to achieve 15 MW by 2017 and achieve 16 MW from Montana-Dakota’s interruptible rate;
- Install 20 MW of self-built wind and purchase 10 MW of capacity in 2019; and
- Assuming the retirement of Heskett 1 at the end of 2019 and Lewis & Clark at the end of 2025 due to environmental rule requirements such as the EPA’s GHG rules, be capable of partnering to take 200 MW from a large Combined Cycle unit in 2020.
The coal units are:
- Coyote, 25% Montana-Dakota ownership represents 106.8 MW;
- Big Stone, 22.7% ownership represents 107.8 MW;
- Heskett Unit 1 (29.2 MW) and Heskett Unit 2 (74.6 MW); and
- Lewis & Clark, 52.3 MW.