Three Coal-Heavy Utilities Team Up on New Gas-Fired Power Plant

Bismarck, North Dakota-based Basin Electric Power Cooperative will join Dairyland Power Cooperative and ALLETE Inc. as co-owners of the planned Nemadji Trail Energy Center (NTEC), a combined cycle natural gas power plant proposed for construction in Superior, Wisconsin.

The deal between Basin Electric and ALLETE was announced on Sept. 28. Basin Electric will become a 30% owner in NTEC by purchasing for about $20 million a portion of ALLETE's stake in the plant, which had been 50%. Dairyland will remain a 50% owner in the planned facility. Minnesota Power, ALLETE's utility division, will continue as constructor and operator of the plant, which is expected to have a capacity of about 600 MW.

1. Nemadji Trail Energy Center is a proposed 600-MW combined cycle natural gas power plant to be built in Superior, Wisconsin. Courtesy: Basin ElectricCoal-Dominant Portfolios

All three of the utilities have relied heavily on coal-fired power generation in the past. According to ALLETE's 2020 annual report, more than 60% of the electricity that Minnesota Power supplied to customers from its owned generation was fueled by coal. Minnesota Power also has a long-term power purchase agreement with the Square Butte coal-fired power plant in North Dakota, which supplied more than 10% of the company's load in 2020.

Dairyland reported in its 2020 annual report that 70% of its nameplate capacity was coal-fired. Meanwhile, Basin Electric reported coal-based generation equaled 52.2% of its total energy portfolio mix in 2020. Basin Electric owns large stakes in four coal-fired power stations: Antelope Valley (100% of 900 MW), Dry Fork (92.9% of 376 MW), Laramie River (42.27% of 1,700 MW), and Leland Olds (100% of 666 MW).

Transitioning to Cleaner Resources

Yet, the three utilities have been moving toward cleaner forms of energy. ALLETE, for example, implemented a strategy in 2013 dubbed EnergyForward." Today, its goal is to provide 100% carbon-free energy by 2050, and its already more than halfway there. ALLETE claims it's the first utility in Minnesota to deliver 50% renewable energy to customers. However, much of that has been purchased power, rather than company-owned generation. Furthermore, Minnesota Power anticipates needing reliable and dispatchable power generation to facilitate the transition.

Natural gas remains an important part of Minnesota Power's EnergyForward strategy to achieve coal-free generation by 2035 and reach a 100 percent carbon-free electricity supply by 2050," Minnesota Power COO Josh Skelton said in a statement issued on Tuesday. Renewable sources such as wind and solar are not able to fulfill all of our customers' energy needs on demand around the clock. We need reliable, modern energy sources such as NTEC to provide sustainable energy for our region and economy."

In the case of Dairyland, its board of directors in 2020 approved a goal of reducing the cooperative's carbon dioxide intensity rate by 50% by 2030. On April 11, 2021, Dairyland's 345-MW Genoa Station 3 was taken offline for the final time following depletion of the facility's usable coal inventory. After 52 years of operation, the plant was officially retired on June 1, reportedly based on the tenets of Dairyland's Sustainable Generation Plan."

Basin Electric's power mix has shifted greatly over the past 20 years too. In 2000, coal-fired generation accounted for 84.6% of its portfolio, but that percentage was cut to 40.4% by 2020. Wind and gas-fired generation, which were both nonexistent in the co-op's mix at the turn of the century, grew to 25.3% and 19.3%, respectively, by 2020. Still, Basin Electric doesn't plan to exit coal any time soon.

Many of our coal-based power plants have a lot of undepreciated value on the books. We're evaluating the role these plants will play in the transition to a low-carbon environment and how best to efficiently and effectively recover their undepreciated value over their remaining useful lives as we become less reliant upon them," Paul Sukut, Basin Electric's then-CEO and general manager, wrote in the cooperative's 2020 annual report. We are not planning any immediate shutdowns, because we need this generation to maintain reliability for the foreseeable future; this transition needs to be done in a responsible, carefully considered manner."

NTEC Adds Flexibility

Nonetheless, Basin Electric's decision to buy a stake in NTEC gives it a new alternative. This partnership with a sister generation and transmission cooperative, Dairyland Power Cooperative, and ALLETE, gives Basin Electric a cost-effective, timely option for serving our members with reliable electricity," Todd Telesz, who took over as Basin Electric's CEO and general manager on Sept. 1, following Sukut's retirement, said in a statement on Tuesday. Furthermore, it demonstrates our commitment to developing resources that fit our all-of-the-above strategy. The dispatchable nature of NTEC allows us to optimize the value for our members."

Dairyland welcomes Basin as a new cooperative partner to share in the reliable and flexible Nemadji Trail Energy Center," Brent Ridge, Dairyland Power Cooperative president and CEO, said in a statement. Like Dairyland, Basin leads with a strong commitment to its members and local communities. NTEC is critical for helping meet our diversification goals, ensuring safe and reliable electricity as we transition to a lower carbon future."

The Minnesota Public Utilities Commission approved NTEC and the affiliated interest agreements between Minnesota Power and South Shore Energy (ALLETE's subsidiary that will hold its ownership stake in the NTEC project) in October 2018. The Public Service Commission of Wisconsin approved NTEC in January 2020 after a review that included a full Environmental Impact Statement. ALLETE is working with its two partners to secure the necessary permits to begin construction.

-Aaron Larson is POWER's executive editor (@AaronL_Power, @POWERmagazine).

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