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Serving Northern St. Louis County, Minnesota

Green light for more green power

Minnesota Power making huge strides in energy transition

Marshall Helmberger
Posted 6/23/16

REGIONAL— Earlier this month, the Minnesota Public Utilities Commission gave the green light to Duluth-based Minnesota Power to continue the company’s remarkable transition to renewable forms of …

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Green light for more green power

Minnesota Power making huge strides in energy transition

Posted

REGIONAL— Earlier this month, the Minnesota Public Utilities Commission gave the green light to Duluth-based Minnesota Power to continue the company’s remarkable transition to renewable forms of energy.

The company, which generated 95 percent of its electrical energy from coal as recently as 2005, today generates more than a quarter of its power from renewable sources, primarily wind and hydropower, and the company is poised to reach nearly 40 percent from such sources by 2020.

The company provides power to Tower-Soudan, portions of Lake Vermilion, and to the Ely Public Utilities Commission, in addition to the region’s major industrial plants and many larger cities.

Over the past three years, Minnesota Power, a subsidiary of ALLETE, has made enormous strides in implementing what it calls its Energy Forward plan, a strategy to transition away from producing electricity from the burning of coal, in favor of renewables, natural gas, and increased energy efficiency. It’s also spent hundreds of millions of dollars to rebuild its own hydropower resources that were damaged by flooding and to reduce harmful emissions from its existing coal-burning power plants, all while increasing its financial returns to shareholders.

It’s a stunning change for a major utility, one that far outpaces the timelines and the targets established in the state’s renewable energy standard, a law passed several years ago to push utilities in Minnesota to reduce carbon emissions. That standard requires most investor-owned utilities, like Minnesota Power, to produce 17 percent of their electricity from renewable sources, like wind, solar, or hydro, by 2016, and 25 percent by 2025. But Minnesota Power surpassed that 25-percent goal last year, a full decade early, and it plans to be generating nearly 30 percent of its power from renewable sources by the end of this year, a percentage that’s close to double what’s mandated in state law. That puts Minnesota Power close to its overall goal of producing one-third of its 1,900 megawatts of power from renewable sources.

Yet the company is also expanding its existing relationship with Manitoba Hydro, and plans to add as much as 383 megawatts of additional hydropower to its energy mix once the new Great Northern transmission line is completed. That project, which still requires federal approval to cross the U.S. border, is currently scheduled for completion in mid-2020. That will push Minnesota Power’s renewable portfolio to nearly 40 percent, according to David McMillan, Executive Vice President at Minnesota Power.

While Manitoba Hydro has faced criticism in the past for the environmental impact of its hydro projects in the North, McMillan said the company has worked to minimize those impacts and to develop co-owned projects with the Cree First Nations that live in the affected areas. “We wouldn’t be partnered with them to the extent we are if weren't 100 percent sure they were committed to doing right by the environment and the Cree First Nations,” said McMillan.

Such strides are the main reason the MPUC gave its approval to the company’s proposed integrated resource plan, said McMillan. “They said, yep, keep going. Energy Forward is the right direction,” McMillan said.

Minnesota Power has moved quickly in its transition, according to McMillan, because the company found the time was right financially, and because of increasing customer demand for alternatives to coal. “The opportunity presented itself to do this in an economical way,” said McMillan, noting that high quality wind sites in North Dakota were available and federal tax policy made wind investments particularly lucrative for utilities. While the Taconite Ridge development is a prominent project close to the company’s end users, McMillan said the company is focused primarily on North Dakota for its wind production due to greater reliability. He said the Taconite Ridge turbines produce power about 28-30 percent of the time, compared to 45 percent for similar turbines at the company’s vast Bison wind facility in New Salem, N. D. Minnesota Power, through a swap with MinnKota Power Cooperative, recently acquired a major power line that used to transmit lignite coal-fired power production from a plant in North Dakota to Minnesota. That line now carries Minnesota Power’s nearly 500 megawatts of North Dakota wind power, instead.

McMillan said the intermittent nature of wind makes hydropower a good match, since its always available on those days when the wind isn’t blowing. “It’s like having a big battery,” he said.

McMillan said wind, despite being intermittent, has proven to be a reliable and affordable source of power, in part because the wind is predictable, so utilities can often plan days in advance to tap other power sources on calmer days.

McMillan said the MPUC is encouraging Minnesota Power to explore additional wind investment and he said that’s a possibility. The company did agree to issue Requests for Proposals for an additional 100-300 megawatts of wind production, although the company has made no firm commitment on moving forward at this time. He said wholesale power prices remain low, so purchasing power on the open market seems likely to fill any production gaps for the foreseeable future.

Minnesota Power is moving quickly, however, to invest in solar power in order to comply with a new state law that requires utilities to generate 1.5 percent of their capacity with solar by 2020. The company is in the process of constructing a 10-megawatt utility-scale solar array at Camp Ripley, in central Minnesota, which will produce nearly a third of the 33 megawatts the company will need to generate to comply with the state’s new solar requirements. Minnesota Power is also developing a one-megawatt solar array in Duluth that should be operational later this year. It’s planning two other similar arrays to be built in northern Minnesota within the next year or two.

At the same time, the company is expanding its SolarSense program, which provides sizable rebates to residential customers who install their own solar panels. Customers can receive rebates of up to $20,000 depending on the size of the solar array they install. The rebates can reduce the initial price tag of a solar panel installation by 30 percent and are offered in addition to other financial incentives for the installation of solar power.

Phasing out coal production

Meanwhile, the company has transitioned some of its current coal-burning capacity to natural gas, which is another way utilities are reducing carbon emissions. The company converted its Laskin Energy Center, in Hoyt Lakes, from coal to natural gas last year, at a cost of $15 million. Laskin became Minnesota Power’s first natural gas-fired power plant in the process, although it’s a facility designed to fill occasional production gaps rather than produce power on a regular basis.

The company also announced it will cease burning coal at the Taconite Harbor Energy Center by 2020. One of the three 75-megawatt generating units at the facility is already retired and the two others are slated for idling by this fall. The facility might see limited use, for what the company calls “grid reliability” over the next few years, but coal burning at the site will be phased out entirely by 2020. At this point, the company is not planning to convert the site to natural gas, although it has not ruled out the use of biomass at the facility. Without a transition to a new power source, the facility will be permanently closed.

Minnesota Power plans to continue to use coal for about a third of its energy production for the foreseeable future, and that’s part of the reason behind the company’s decision to invest $260 million in pollution controls at its flagship Boswell 4 coal plant in Coleraine, which produces up to 585 megawatts of power.

“The new state-of-the-art technology at Boswell 4 will make the generating unit among the cleanest and most efficient in the nation while helping to preserve the reliable and affordable power our customers expect,” said Al Hodnik, ALLETE chairman, president and CEO. “The project is the latest achievement in our initiative to further lower emissions that began in 2006, and it demonstrates Minnesota Power’s commitment to a balanced energy future through its EnergyForward strategy to help transform the nation’s energy landscape.”

The pollution upgrades were designed to reduce emissions of mercury by 90 percent and reduce nitrous oxide, sulfur, and fine particulate emissions by 70 percent.

While the Boswell 4 facility is now among the nation’s cleanest coal-burning plants, the upgrades did not reduce carbon dioxide emissions, which contribute to climate change.

Affordable power, profitable company

Even as Minnesota Power continues to invest in a cleaner energy portfolio, the company remains one of the most rate-competitive utilities in the country, according to McMillan. “Our retail prices compare favorably within Minnesota and very favorably when compared across the country,” he said.

While some critics of less carbon-intensive energy have suggested that the transition will create price shocks for consumers, that hasn’t been the case thus far for customers of Minnesota Power.

The company hasn’t filed for a rate increase since 2010, although McMillan said the company won’t be able to avoid a rate increase request much longer. He said the company could still file the papers for a rate increase later this year. Even so, the company’s residential rates are still almost certain to remain among the lowest in the country.

At the same time, the company continues to return steady profits and dividends for shareholders. “We continue to increase our dividend,” said McMillan, “and we have for some time. We’re proud of our track record with shareholders.”