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The "War on Coal" is Over

Utilities say market forces and new technology, not politics, have dethroned “King Coal.”

When U.S. Environmental Protection Agency chief Scott Pruitt announced in October that the Trump administration was moving to repeal former President Barack Obama’s landmark Clean Power Plan, he declared that the “war against coal” was over.

But if the actions of Minnesota’s three biggest electric utilities in recent years are any indicator, that “war” has long since been decided: “King Coal” has been dethroned—and not because of overzealous, politically motivated government regulators bent on promoting dubious climate-change science, as Pruitt has claimed.

Rather, the local utilities say it’s been market forces, independent of government policies, and evolving technology favoring coal’s competitors—natural gas, wind and solar power—which have set them firmly on their paths to reduce coal-fired power generation as much as possible.

Each of them—Xcel Energy, Minnesota Power and Great River Energy—say that while they may have initially been spurred by the state’s regulatory requirements that 25 percent of their power come from renewables by 2025, they’re now doing so because it makes economic sense and because their customers want it.

Their mantra has become the pursuit of “flexibility”—the ability to tap technological advances to quickly switch between intermittent wind and solar generation and baseload power sources, which are now dominated by cleaner, more efficient next-generation natural gas-fired turbines. (Baseload is the minimum level of demand on an electric grid over a period of time.)

Given this reality, the utilities say coal is at a big disadvantage as a baseload fuel source in Minnesota for several reasons, regardless of environmental concerns about carbon dioxide emissions and climate change.

First, coal no longer is cheaper than natural gas in Minnesota, thanks to an abundant supply of the latter from North Dakota’s Bakken shale fields, a supply made possible by hydraulic fracturing (“fracking”) and horizontal drilling techniques. Second, aging coal-fired plants are inefficient compared with modern natural gas generators; they can’t be turned off and then quickly fired up when a lack of wind or sunshine puts a damper on renewable sources. In other words, they’re not “flexible.”

Meanwhile, the boom in development of new wind power and solar capacity in Minnesota, Iowa and elsewhere in the Upper Midwest is continuing due not just to investor tax credits, but also demand from utilities seeking to take advantage of plunging generation costs, especially for wind. The latest example is the upcoming Nobles 2 project in northern Nobles County, which will add 250 megawatts of wind power to the region’s electric grid. (A megawatt is 1 million watts, roughly enough to power 750 homes.)

Thus, should the Obama-era Clean Power Plan ultimately be scrapped, it will likely have zero impact in Minnesota since state laws, market forces and technological advances have already prompted the biggest electricity providers to move on from coal. In that respect, the “war against coal” is indeed over.

Minnesota Power commits to natural gas

Perhaps the most telling recent indicator of coal’s likely irreversible relegation to a niche player in the state is a plan submitted to regulators this summer by Duluth-based Minnesota Power, a division of ALLETE Corp., the state’s second-largest investor-owned utility behind Xcel Energy in terms of megawatt-hours of electricity sold.

Minnesota Power (MP) serves a concentration of power-hungry taconite industry customers on the Iron Range. Demand peaks in the dead of winter rather than in summer as with most other utilities, so the utility’s biggest concern has historically been baseload reliability. That, in turn, has meant a big emphasis on coal-fired generation. In fact, the utility was 95 percent dependent on coal as recently as 2005 (see image).

The utility has invested $1.5 billion in its Energy Forward plan, under which it established a long-term goal of providing an energy mix of two-thirds renewable energy and “flexible renewable-enabling” natural gas, and one-third “environmentally compliant” baseload coal.

The latest step came this summer, when MP sought approvals from the Minnesota Public Utilities Commission for a move which, if approved, would result in renewable resources providing 44 percent of the company’s energy supply by 2025 (see “Power Supply Capability,”). The plan would expand its current wind portfolio of 620 megawatts with a 250-megawatt, 20-year purchase power agreement with the owners of the Nobles 2 wind farm, and would double Minnesota Power’s solar capacity to 20 megawatts, “further reducing carbon emissions while keeping rates affordable,” according to the utility.

The centerpiece in its latest Energy Forward filing, however, is a bid to partner with Wisconsin-based Dairyland Power Cooperative to build a $350 million 250-megawatt natural gas-fired power plant in Superior, Wis. Called the Nemadji Trail Energy Center, the proposed plant would be a super-efficient combined-cycle plant. Such plants use both a gas and a steam turbine together to produce up to 50 percent more electricity from the same fuel than a traditional plant (waste heat from the gas turbine is routed to the steam turbine, which generates more power).

As the company phases out 700 megawatts of baseload coal-fired generation, its main challenge is to find a “balance between reliability, affordability and cleanness” in its replacement, says Minnesota Power vice president of strategy and planning Julie Pierce.

“The delicate economies up here in northeastern Minnesota really need the most affordable electricity sources,” she says, citing natural gas prices, which have dropped 25 percent for industrial customers in the state since 2011 (see “Natural Gas Prices,”). “We determined over a decade ago that being dependent on coal for 95 percent of our baseload power wasn’t going to serve our customers well going forward.”

Minnesota Power views natural gas as a cleaner, cheaper fossil fuel resource than coal. Gas also can be used as an “enabler” for the development of more renewables, in effect flipping the pecking order of the coal era; now fossil fuels are relegated to a role of stopgap for when wind and solar sources are down, according to Pierce.

Great River Energy’s coal role-reversal

That subservient role for coal is also reflected in recent decisions at Great River Energy, the Maple Grove-based coalition of 28 local power cooperatives serving 685,000 members, ranked as Minnesota’s second-largest electric utility measured by generating capacity.

Like Minnesota Power, it has historically been quite reliant on coal-fired baseload power, in large part because its massive 1,100-megawatt Coal Creek Station power plant was built on top of a major lignite coal deposit 50 miles north of Bismarck, N.D. That location made it very cost-effective, and the utility spent $200 million over the years to develop a proprietary emissions-reduction method of drying the lignite before burning it.

But the renewables revolution has changed the market equation even for an ideally situated fossil fuel plant like Coal Creek Station, according to vice president John Brekke. “Whether there’s federal regulation in place or not, we think we’re going to see the same amount of carbon reductions by 2030” due to market forces, he says.

In this region, he explains, wind power in southwestern Minnesota and elsewhere is so abundant that it has completely flipped the coal’s role into that of a stopgap. Because of that, Great River has decided to ramp down operations at Coal Creek Station. Instead of operating it continually at full power, as has been the norm for coal-fired plants, engineering changes will now allow it to function at a much lower level of 300 megawatts on a continual basis. At that level it’s barely warmed up, but is still able to fire up to full power quickly to respond to changing conditions.

“The next wave of carbon emission reductions as we move forward will be from greater flexibility at existing coal-fired plants,” he says. “We can ramp Coal Creek way down now and run it at those lower levels for as long as market conditions warrant it. That’s 800 megawatts of production that can be made up by wind power.” It’s a win-win for Great River: It can lower costs for its member-consumers when cheap wind power is abundant, and quickly ramp the fossil fuel plant back up when baseload demand spikes.

Where Xcel leads, others follow

As the state’s largest electric utility, Xcel Energy has long set the tone for the move away from coal-fired generation—not just in Minnesota, but also in its other major market of Colorado. Xcel announced in late August it will shutter two of its three coal-fired plants at the Comanche Generating Station in Pueblo by 2025, while adding substantially more wind, solar and natural gas generation.

The Minneapolis-based utility long ago firmly established its credentials as one of the most renewable-friendly electric utilities in the country, recognizing the potential of generating power from the windswept northern prairies early on. In March, it announced a $2.5 billion plan to grow its wind power portfolio by establishing 11 new wind farms in seven states. The move will add 3,380 megawatts of new wind generation, increase the amount of wind in its energy mix to nearly 35 percent by 2021 and eventually help it save up to $4 billion in fuel and other costs.

In the announcement, Xcel CEO Ben Fowke cited the “tremendous economic value” and “low cost” of wind power, delivering on “both economic and environmental fronts.” The plan taps federal production tax credits scheduled to phase out after 2019 to launch the utility’s largest-ever wind expansion in the Upper Midwest with seven new wind farms in Minnesota, North Dakota, South Dakota and Iowa. They will add 1,550 megawatts of new wind energy to Xcel’s Upper Midwest system (see “Blown Away,”).

But in Minnesota, probably nothing symbolizes the demise of King Coal at the hands of competing technologies more than Xcel’s move to eliminate some 1,362 megawatts of coal-fired capacity at its huge Sherburne County generating station in Becker, Minn., by 2026—a high-profile end to coal’s era of dominance in the state.

In its place, Xcel plans to build a 786-megawatt combined-cycle natural gas generator at Becker; in February it was approved by the Minnesota Legislature and Gov. Mark Dayton, bypassing the approval process of the Minnesota Public Utilities Commission. Opponents denounced that move as a troubling, precedent-setting end-run around the PUC, contending regulators could have ended up calling for a scaled-down version of the gas-fired plant or more renewables as they considered the action’s impact on ratepayers.

Political ramifications aside, the move again highlighted the winning streak of natural gas and renewables over coal as a market force. Taken together, these moves have set a seemingly irreversible course away from coal well into the foreseeable future, no matter the level of industry support forthcoming from the current U.S. administration.

Tracking Minnesota’s growth in renewable energy

There’s been no slowing down the growth of renewable energy resources in Minnesota. The state generated more than 22 percent of its electricity from renewable energy sources in 2016, tripling the amount recorded 10 years earlier, according to figures compiled by the Minnesota Dept. of Commerce and the U.S. Energy Information Administration (see “How Minnesota’s Electricity is Generated,” above).

Some 4,445 megawatts of electric power were coming from renewables as of last year, and so Minnesota’s utilities are on target to not only meet but exceed the legally mandated goal of 25 percent of electric power coming from renewable sources by 2025, state officials say.

More than 291 megawatts of new wind power were added to Minnesota’s total in 2016, courtesy of a project headed by Odell Wind and owned by Algonquin Power and Utilities Corp. of Canada and Edina-based Geronimo Energy for energy sales to Xcel Energy.

Meanwhile, more than 900 megawatts of wind generation are in development, including Blazing Star I and II projects from Edina-based Geronimo Energy. The Blazing Star wind farms, located in Lincoln County’s windswept Buffalo Ridge, are planned to provide a total of 400 megawatts to be delivered via the new Brookings County-Hampton 345-kilovolt transmission line for use by Xcel Energy. – DJ

Low natural gas prices, abundant supplies change power markets

All around the United States, plentiful domestic natural gas supplies, comparatively low gas prices and state environmental regulations encouraging moves away from high-emission coal have changed the economics of electric power markets, prompting a big jump to natural gas-fired generation by utilities.

The U.S. Energy Information Agency (EIA) reported earlier this year that a significant expansion of natural gas-fired electricity generating capacity is underway this year, with even more on the way in 2018.

Based on information reported to the federal government, the nation’s electricity industry is on track to increase U.S. natural gas-fired generating capacity by 11.2 gigawatts in 2017 and 25.4 gigawatts in 2018. If these plants all come online as planned, the new additions will result in natural gas usage reaching its highest levels since 2005.

On a combined basis, the EIA says these additions would increase natural gas capacity by 8 percent over 2016 levels, helping natural gas maintain its status as the primary energy source for power generation over coal, even if gas prices rise (see “How the Nation’s Electiricty is Generated”). – DJ

Don Jacobson is a St. Paul-based freelance writer and regular contributor to TCB and its weekly healthcare e-newsletter, “Pulse.”