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Phasing out: Utilities, cities prepare for the end of coal-fired energy in Minnesota

The state’s largest utilities are planning to phase out most of their coal-fired plants by the end of the decade.

Minnesota Power’s Boswell Energy Center
Minnesota Power’s Boswell Energy Center provides nearly 70 percent of Cohasset’s tax revenue and about 20 percent of the school district’s take, according to the utility.

In May, when Great River Energy announced plans to close a North Dakota coal-burning plant that powers parts of Minnesota, it served as a reminder that the days of coal-powered energy will eventually end.

It’s hard to say when that last piece of coal will get burned in Minnesota, exactly, though the state’s largest utilities are planning to phase out most of their coal-fired plants by the end of the decade.

Xcel Energy has four coal-burning units that are still operating. Two units at its Sherco Power Plant near Becker are slated to close in 2023 and 2026 while the last one there could close in 2030, pending regulatory approval. The company is also proposing to close its coal-fired Oak Park Heights plant in 2028.

Meanwhile, Otter Tail Power plans to shutter its Fergus Falls plant in 2021 while Minnesota Power is preparing a proposal for state regulators that would close its two remaining units in Cohasset, on the Iron Range.

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A half-dozen other operations also burn some coal, according to the Minnesota Pollution Control Agency, such as a steam plant in Duluth and utilities in a few rural cities. But the lion’s share of coal-produced power in Minnesota comes from the major utilities that are planning for a future without it.

Lost tax revenue

Audrey Partridge, the regulatory policy manager at the Center for Energy and Environment, a nonprofit organization that promotes green energy policies, has been studying the economic impact of coal-plant closures. One probable change: higher taxes in communities where coal-fired electricity plants have been producing significant revenue for cities and school districts.

“Many of these communities are probably not taxing their residents or businesses quite as high as other communities of their size, so they have some room to raise revenue,” she told MinnPost.

Indeed, in Cohasset, Minnesota Power’s Boswell Energy Center provides nearly 70 percent of the city’s tax revenue and about 20 percent of the school district’s take, according to the utility. Mayor Greg Hagy said that revenue stream was crucial in the recent construction of a senior center and in the renovation of a day care center.

Hagy is holding out faint hope that the coal units, which power this city of 2,800 people as well as the region’s mining and paper industries, might remain open indefinitely, arguing that they burn coal more efficiently than other plants. “You’re talking about a devastating economic hit, and that’s not even considering the spinoff jobs” that have been created, he said. “The bottom line: You’ll pay more for your power and your taxes will go up.”

Looking for alternatives

Julie Pierce
MinnPost file photo by Walker Orenstein
Julie Pierce
Minnesota Power, which has been meeting with Hagy and others in Cohasset for several years, plans to file its proposal for closing the coal-fired units with the MPUC in April, said Julie Pierce, the company’s vice president of strategy and planning. She said the company, which provides power in northeastern Minnesota, had not settled on closure dates.

“This is the heart of our system,” she said, speaking of the Boswell operation. “It serves as the backbone to reliable energy in the region, so there are a lot of things we need to consider.”

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Asked about the potential for rate hikes, she added: “We’re really digging into what the alternatives are to leverage that infrastructure while keeping the reliability and affordability of energy for our customers in the forefront.”

At the Sherco site in Becker, southeast of St. Cloud, fewer Xcel Energy employees will be needed to run the solar plant that will largely replace coal. City officials hope to create an industrial park there once the coal units shutter, with the idea that new businesses will help replace lost revenue. (Funding for that proposal is part of a statewide bonding bill that has stalled at the Legislature).

Sherco 3 plant
Xcel Energy
Sherco 3 plant
“That’s the hope and that’s the plan,” said City Administrator Greg Pruszinske, noting that Becker, with a growing population of about 5,000 residents, has been experiencing business growth. He added: “That’s also a tall order.”

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Greg Pruszinske
Greg Pruszinske
The Sherco plant provides 75 percent of the city’s tax base, Pruszinske said.

“There will be an impact,” said Christopher Clark, Xcel’s president for Minnesota and the Dakotas. “For the most part, in communities where such a transition is happening, they can do things to replace part of (the lost revenue), but they can’t entirely replace that benefit.”

Meeting green goals

Three-fourths of the greenhouse gases emitted by electric companies in Minnesota come from Xcel Energy and Minnesota Power plants, according to MPCA statistics. The percentage is even higher for coal-produced emissions.

Last year, Gov. Tim Walz announced a strategy to wean Minnesota power companies off of coal and any other carbon-generating source by 2050. A related bill, known as Clean Energy First, would push electricity suppliers toward green energy by restricting the MPUC’s ability to approve new fossil-fuel power. (Neither bill has been signed into law).

Christopher Clark
Christopher Clark
Meanwhile, the state’s major utilities continue to chip away at their carbon footprint.

In 2005, for instance, 95 percent of the energy Minnesota Power produced was from coal; since then, the company has closed seven of its nine coal-fired units and will be producing 50 percent of its energy from renewable sources by the end of this year with the completion of a hydroelectric station, the company said.

Xcel Energy, meanwhile, hopes to generate 80 percent of its power from renewable energy sources, such as wind and solar, by 2030 and to generate all of its energy from renewable sources by mid-century. (It recently announced, as part of a plan to accelerate utility projects amid the COVID-19 pandemic, that it would add a major solar project at the Sherco site. For its part, Minnesota Power said it planned to add solar at plants in Hoyt Lakes and Brainerd).

Otter Tail Power, which provides electricity across western Minnesota, plans to replace its Hoot Lake Power Plant in Fergus Falls with energy from a wind farm under construction in North Dakota and a natural gas plant being built in South Dakota, a spokeswoman said. The coal plant was built in the 1950s.