The northern Minnesota utility has an opportunity to convince regulators of its need at a meeting Thursday in Duluth.
In an unusual convergence of opinion, clean energy groups and large industrial companies are asking Minnesota regulators to block a utility’s investment in a new combined-cycle natural gas power plant.
While the groups’ reasons for disapproving the project differ, both camps concluded that Minnesota Power hasn’t done enough to justify its stake in the proposed $700 million power plant, and an administrative law judge recently agreed.
The Minnesota Public Utilities Commission holds a hearing Thursday in Duluth to determine whether to approve the utility’s plan to invest nearly $350 million in the Nemadji Trail Energy Center in Superior, Wisconsin. The plant’s cost and up to 550-megawatt output would be shared with Wisconsin’s Dairyland Power Cooperative. The proposal is also currently going through Wisconsin’s regulatory process.
The gas plant has drawn criticism from the utility’s large business customers, environmentalists, clean energy organizations and residential ratepayers. More than 1,500 people submitted letters, most of them against it. A poll of 552 Minnesota Power customers by the Citizens Utility Board last year found 77 percent did not support the proposed plant and 92 percent called for a full analysis.
Lining up in favor of the plant is the Minnesota Department of Commerce, Superior-area officials, unions and development agencies. They say the utility has demonstrated the need for the plant and argue it will continue flexibility and stability as the grid transitions to more clean energy.
Clean energy organizations say the utility’s generation projections drastically overestimate its need for electricity and that carbon emissions are too great. Other alternatives such as energy efficiency, load shifting, and renewables were not seriously considered, they argue.
Less expected was the opposition from large power users, a group of mining companies, paper mills and other businesses that uses most of the utility’s generation. Their objections reflect an understanding that they will pay for much of the plant because of the utility’s unique customer makeup, unlike almost any other in the country.
Minnesota Power’s industrial customers absorb 74 percent of its energy generation, compared to 28 percent on average nationally. Residents and small commercial businesses split the different at 13 percent each, roughly a third of the national average for those segments.
“It’s an unusual congruence in that (large industrial customers) don’t see the need for the natural gas plant, either,” said J. Drake Hamilton, science policy director for Fresh Energy, a clean energy advocacy organization involved in the case.
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Large customers voice concern
The intervenors charge that the utility has not fully explored options for cutting energy demand and tapping other sources. “The Company has not demonstrated that its proposed purchase of 250 MW NTEC purchase is the best and lowest cost option to meet its projected energy and capacity needs due to deficiencies in its modeling and procurement process,” the Large Power Intervenors said in a PUC filing.
Members include ArcelorMittal USA, Blandin Paper Company, Boise Paper, Gerdau Ameristeel US Inc. Hibbing Taconite Company, Mesabi Nugget Delaware, LLC; Sappi Cloquet, LLC; USG Interiors, LLC; United States Steel Corporation, United Taconite, LLC; and Verso Corporation.
The Minneapolis office of Stoel Rives LLP submitted comments on behalf of the large customers. The argument is less about global warming and more about whether Minnesota Power provided enough evidence to prove the electric supply could be endangered without the plant.
The intervenors found deficiencies in the modeling, size and timing of the plant. A more thorough analysis should have been done of lower cost options for the power, they argue. And Minnesota Power should consider a demand response approach to energy reduction.
The company’s own projections show it doesn’t need 250 MW of additional power until 2031, when the phase out of some coal plants is completed. Demand response allows utilities to offer customers incentives for accepting an interruptible power supply. Intervenors identified 300 MW of demand response potential, enough to obviate the need for a natural gas plant.
The intervenors want a better argument and a strategy that may push construction of the plant out further or and greatly reduce its size, should it ever get built.
Minnesota Power’s position
Julie Pierce, Minnesota Power’s vice president of planning and strategy, said she understands the opposition of the large industrial customers but sees it as a difference in visions. They view their business in one to two-year cycles while the utility plans for decades, she said.
Minnesota Power has a “robust” demand response program and recently held a stakeholder meeting in Duluth to expand it. That effort “isn’t going away with consideration of this natural gas plant,” Pierce said. The opportunity to share the cost of a new plant with another utility may not come again for years, she said.
Addressing environmental concerns, Pierce said the natural gas plant is part of Minnesota Power’s “Energy Forward” strategy that focuses on renewable energy. The utility, part of the ALLETE, Inc., is replacing 700 MW of coal-powered generation with renewable energy, primarily wind and Canadian hydro along with a smaller amount of solar.
The natural gas plant can ramp on and off to supply electricity “when the wind isn’t blowing, and the sun isn’t shining,” Pierce said. The utility expects to use the plant’s output about “40 percent of the time,” she added.
By using a combined cycle natural gas technology, the plant emits a third less carbon than coal plants. The utility now receives 30 percent of its energy from renewables and is on the path to hit 44 percent by 2025, she said. As more wind, hydro and solar come online Minnesota Power predicts a 40 percent reduction in carbon emissions by 2030.
“It’s important that we have energy sources there for our customers, that’s our responsibility,” she said. “If we get a negative outcome we will have to re-evaluates options for bringing forward a cleaner energy future, that keeps reliability and affordability at the forefront. We take our responsibility seriously.”
The Commerce Department agrees with Minnesota Power and cites the project as offering several advantages. The department said in a filing it believes the plant will “reduce overall system societal costs,” diversity the company’s generation portfolio, decrease ratepayer exposure to market price risks and “displace more CO2-intensive generation.”
Clean energy alternatives and cost
Fresh Energy’s Hamilton does not think Minnesota Power has shown the plant is in the public interest or that this project “is the right one.” The utility has not fully investigated other strategies, from demand response to cogeneration, she said.
The plant would likely make it very difficult Minnesota’s established goal of reducing carbon by 80 percent by 2050. The plant would fill much of the budget the state has left for greenhouse gas emissions, Hamilton said, which includes the Xcel Energy Becker natural gas plant that has been approved.
“You would have very little flexibility left for 32 years for something else you might want to replace with natural gas,” she said. “It is a budgeting problem… that would put off other alternatives for three decades.”
Many customers in Minnesota Power want clean energy created in their own communities rather than paying for “dirty energy” being produced in another state, Hamilton said. The large outpouring of the utility’s customers see it as another assault on their ability to pay their bills, she added. “It’s a very large amount of money for a small number of customers.”
Minnesota Center for Environmental Advocacy senior staff attorney Leigh Currie said the plant is a questionable investment in a fossil fuel plant in a time of climate change. Clean energy organizations brought in five experts who described less expensive strategies for meeting the region’s electricity needs than a new natural gas plant, she noted.
Those included more investment in wind and solar, along with greater emphasis on efficiency and demand response initiatives. The idea that a flexible plant is required as Minnesota Power grows its renewable energy portfolio was found specious by those experts. “There are alternatives that better meet the needs of Minnesota Power,” Currie said.
Annie Levenson-Falk, executive director of the Citizens Utility Board of Minnesota, said her organization’s polling last November found Minnesota Power’s customers leery of a project that could significantly increase their bills. A Minnesota Power rate case that would have increased residential customers’ bills as much as 18 percent was reduced to 3.5 percent by regulators, she said.
“A lot of folks already have trouble paying their bills,” Leveson-Falk said. “I think people appreciate you have to keep the lights on and if (the plant) is necessary, it’s necessary… but they want to make sure the plant wouldn’t be built unless it is absolutely necessary.”
If a decision isn’t reached Thursday, the Public Utilities Commission has set aside time on Monday to continue the debate and discussion.