Utilities Drop Plans for Big Stone II Coal Plant, Clearing Way for Wind

Nov 4, 2009

By Jesse Emspak

Renewable energy could get a boost on the Northern Plains after the utilities behind the controversial Big Stone II coal-fired power plant dropped the project this week.

The proposed plant near Milbank, S.D., would have generated 500-580 megawatts. It had been backed by Montana-Dakota Utilities Co., Missouri River Energy Services, Heartland Consumers Power District, Central Minnesota Municipal Power Agency and Otter Tail Power Co., but Otter Tail pulled out in September citing cost and an uncertain regulatory climate.

The remaining four utilities announced on Monday that, because of the lack of a fifth, the $1.6 billion project had to be scrapped. Four utilities, they say, is not enough to make efficient use of the power generated.

Michelle Rosier, senior regional organizing manager at the Sierra Club's Minnesota chapter, says the success of the campaign to stop the coal plant is another step toward making wind power competitive.

Big Stone II was opposed by local groups from the start. It drew attention last year when the plant's transmission needs ran up against a new Minnesota law requiring utilities to use renewable energy and seek out the lowest cost option. Two administrative law judges determined that renewable energy would be cheaper and recommended against approval. Three Minnesota utilities that had planned to purchase power from the plant also dropped out, citing the new renewable energy rules.

Then, in January, the Obama administration weighed in, rejecting the plant's air permit in one of the new EPA's first official actions. While the permit was rewritten and later approved, the EPA's move on Jan. 22 was a sign that the federal government's attitude toward coal was changing, and that injected more uncertainty into the regulatory environment for coal-fired power across the country.

Rosier notes that even without new greenhouse gas emissions rules from the EPA or a carbon-capping law from Congress, the costs were high enough and the regulatory landscape was such that wind projects were more attractive.

"It signals a shift in mentality," she said.

MDU spokesman Mark Hanson says the problem was that the plant's licenses were for a 550-600 MW facility. A smaller one could be built, but the current permits would not allow that, so the utilities would have to go through the process again. Even with that, a smaller plant would not be as cost-effective.

Another big reason for the project's problems were that the national economy went south in 2008, when the permits had already been approved, says Bill Radio, of Missouri River Energy Services. It was no longer clear that the demand for energy would be as great, he said.

On the question of renewable sources vs. coal, Hansen says that while utilities are building wind farms — MDU has a $38 million 19.5 MW wind farm in operation already — there is still a need for some baseline power that is available continuously. Wind may be a good supplement, he said, but it's only a small part of the 508 MW of generation that the company owns.

The argument that wind is not constant enough isn't necessarily true, says Chuck Laszewski, communications director for the Minnesota Center for Environmental Advocacy.

He notes that on the prairies, the wind is usually blowing somewhere. That can be enough, especially if it is supplemented with other sources, which can be transmitted from other sites where renewable energy is used. "The wind used to drive some people crazy" he said, "precisely because it was so constant."

The move by the power companies to abandon the plan for the coal plant "really opens up the field," Laszewski said. "We think something will appear, and hopefully it will be many somethings," to address increased demand for energy.

The Big Stone II plant was originally proposed in 2004 as an addition to the existing 450 MW Big Stone plant near the Minnesota border. Despite opposition from local groups, the project was approved by the South Dakota Public Utilities Commission in 2007.

The same year the project was approved, Minnesota passed a law requiring that utilities get at least 25% of their power from renewable sources by 2025. It also requires that utilities seek out the lowest cost option. The renewables requirement was a factor in decisions by Great River Energy and Southern Minnesota Municipal Power Agency to not purchase power from Big Stone II. The project took another hit when the municipal utility for Elk River, a Minneapolis suburb, also pulled out.

Even though South Dakota's PUC had approved the project, Otter Tail still had to go the Minnesota PUC for approval of the new transmission lines that would be needed to serve the plant. The lines were eventually approved, despite the recommendation that renewable energy would be cheaper, but that wasn't enough to keep the project going.

After Otter Tail dropped out, the remaining utilities tried to recruit others to commit to buying the power from Big Stone II, but failed to do so, leading to the abandonment of the project.

 


See also:

43 New Coal Plants Would Escape Climate Bill CO2 Standards

Survival Strategy for an Aging Coal Plant: New Hampshire's 'Big Dig'

Sierra Club Chalks Up 100th Victory in Fight to Stop New Coal-Fired Power Plants

Another State Urges Utility to Think Twice About New Power Plant Plans

EPA Review Reverberates Through U.S. Energy Industry

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