Monday’s announcement that the giant Big Stone II plant won’t be built as planned near Minnesota’s western border makes it unlikely that another coal-fired power plant will be built in the Upper Midwest anytime soon, if ever.
Major changes in the economics of producing electricity together with concern over carbon’s role in climate change have relegated coal, the fuel that powered the industrial revolution and helped modernize Western civilization, to undesirable status.
The new fuel of choice for large base-load plants is natural gas, which less than three years ago was considered in serious decline but has gained important attention with announcements that new technology will free gas trapped in over thousands of square miles of shale rock in the south, Midwest, and northeastern United States.
But after nearly five years of expensive wrangling over the wisdom of erecting a $1.8 billion, 550-megawatt coal burner near Milbank, S.D., Big Stone II was clicked off by the very utilities that pushed it hard in three states and Washington, D.C.
Financial claims evaporated
In the end, claims by a five-utility consortium backing Big Stone II that coal was the least-cost alternative evaporated just as the Minnesota Center for Environmental Advocacy (MCEA) said all along that they would.
“This project didn’t make financial sense,” said Beth Goodpaster, MCEA’s lead intervening attorney. She said anticipated construction costs and forecasts for future cost of carbon taxes were both too low, adding up to a high financial risk for shareholders.
According to the utilities themselves, the risk has grown with a decline in demand resulting from the economic recession coupled with uncertainty over climate change legislation in Congress.
In an outstanding article in today’s St. Paul Pioneer Press by Leslie Brooks Susukamo, Bob Schulte of the Central Minnesota Municipal Power Agency, a partner in Big Stone II, is quoted as saying: “When you’re asking the bank for $2 billion, they want to make sure about the costs of the project; there’s a lot of uncertainty out there for long-term energy projects.”
Signs of trouble two years ago
First signs of trouble for Big Stone II came two years ago when Great River Energy of Maple Grove abruptly withdrew as a partner in the project, citing lowering energy demand.
However, Big Stone II backers, led by Otter Tail Power of Fergus Falls, Minn., and Montana-Dakota Power of Bismark, N.D., pushed ahead and won approvals from the North Dakota Public Service Commission, the South Dakota Board of Minerals and Environment, and earlier this year from the Minnesota Public Utilities Commission (PUC) for transmission lines to carry nearly half the power into Minnesota.
The PUC’s action was curious, with all five commissioners voting to approve the lines even though two administrative law judges and the Minnesota Department of Energy Security recommended against. Even a consultant hired by the PUC raised major doubts about cost assumptions for Big Stone II advanced by the utilities.
Big Stone II was further crippled earlier this year when the U.S. Environmental Protection Agency announced that it was revoking air quality permits issued by South Dakota.
Otter Tail’s withdrawal
But a stake was driven into the project’s heart in September when Otter Tail Power surprisingly withdrew from the project, citing lowered electrical demand and the uncertainty of climate and energy legislation in Congress. Otter Tail was to take a third or more of the power from Big Stone II, but it was also the project’s lead backer and it even owned the land where the new plant would be built — next to Otter Tail’s existing plant, Big Stone I.
Without doubt, the uncertainties of soft electrical demand and the prospect of some kind of carbon tax on coal together with the forever-rising construction costs left the utilities with banks and shareholders chary about financial risk of big coal projects.
But the utilities insist that demand for power hasn’t gone away.
Mark Hanson of Montana-Dakota Power in Bismarck said his company is looking into options; Cris Kling of Otter Tail Power said the same thing.
The options? Here’s where the utilities are beginning to sound like environmental and energy advocates who’ve long warned about the folly of relying on coal for power generation.
Looking to natural gas
For reliable base-load power to serve the broad power demand by consumers, utilities are looking to natural gas. At least for the near term, supplies are expected to be plentiful due to a new technology to free gas from tight bubbles in shale rock.
But it would be a mistake to over-rely on natural gas, said Michael Nobel of St. Paul-based Fresh Energy.
(The challenges of natural gas production, along with a splendid overview of energy production, appeared last August in TIME magazine.)
Noble said the wise course would be to turn to natural gas, which is significantly cleaner than coal or oil, for perhaps 20 or 30 percent of future demand, and address the remainder with renewables like wind and solar, and also with energy conservation and improved efficiency.
And that is exactly what utilities are doing. All are looking to wind power (North Dakota is rated one of the nation’s highest sources for wind generation), and energy efficiency is being pushed through national and state regulation, and even by developers of new buildings or retrofitting older buildings to reduce energy consumption.
What it adds up to is that the days of King Coal to fuel power plants are over for now, at least until technology is developed to capture carbon and keep it from the atmosphere, where it promotes climate change.