Neal St. Anthony: Big Stone II events may signal end of coal era

This week's decision by Great River Energy and a smaller Minnesota utility to pull the plug on their one-quarter share of the proposed Big Stone II plant could be a signal that no more traditional coal-burning plants will be built in these parts.

Coal plants are leading contributors to greenhouse gases because of the vast amounts of carbon dioxide they emit. But carbon dioxide emissions are not regulated. At least not yet.

However, the utility industry widely anticipates that CO₂ caps are coming. And in the meantime, many are wary of building old-style plants now for fear that they will require expensive modifications when CO₂ regulations go into effect.

For example, Xcel Energy Inc., Minnesota's biggest utility, seems to be finding that it can make more economical investments in conservation, renewable alternatives and upgrading older plants until new coal regulations are promulgated. New technology that will allow carbon dioxide to be captured and stored for burial or industrial uses is also on the drawing board.

Edward Garvey, deputy commissioner of energy and telecommunications at the Minnesota Department of Commerce, said Wednesday that the Big Stone II settlement agreement "has been put aside."This whole application for transmission lines, which is tied to the power plant, has to be reviewed. We need upgraded transmission lines across the state, partly to bring more wind power online. But our settlement was premised on our conclusion that there was a need for energy by the seven Big Stone partners that went above and beyond their ability to generate new energy from efficient and renewable energy sources. We need to review that."

Lawyers for Otter Tail Power and the remaining partners in the 630-megawatt Big Stone II project notified the Minnesota Public Utilities Commission this week that it may bring in new partners, reduce the project's size or add wind generation. They still see consumer demand growing fast enough to merit construction of a traditional pulverized-coal plant.

But don't bet on a fast response from state regulators, who appear a bit perplexed that the project is changing only days after they signed off on a pollution-mitigation deal that would have let the Big Stone owners refurbish power lines into Minnesota with larger-capacity lines.

"There needs to be more transmission lines built," said Bill Grant, who heads the Midwest chapter of the Izaak Walton League, one of several major opponents. "But it shouldn't be tied to an old-technology coal plant."

Great River, Minnesota's third-largest utility, had been wavering over the past year and pulled the plug only after negotiations to buy power from the proposed Big Stone plant broke down because of price.

The Elk River-based company said the plant's projected costs have soared at the same time that demand from its cooperative members is expected to rise less than forecast. That's due in part to 2007 state laws requiring increased investments in consumer efficiency and conservation, and alternative fuels that are supposed to reach 25 percent of power generation by 2025.

Moreover, Xcel CEO Dick Kelly, Great River and others have cited the likelihood of state and federal laws in the next few years that are expected to dictate rollbacks in carbon dioxide emissions. Great River pledged this year to start work on its own to reduce carbon dioxide emissions to below 2000 levels over the next decade, even as it grows its business.

On its face, the original $1.6 billion Big Stone II settlement contained some admirable provisions designed to hold pollution to current levels, even as generation more than doubled.

The existing 450-megawatt Big Stone I plant, owned by Otter Tail, would be modernized and refurbished. And the consolidated Big Stone I and Big Stone II complex of 1,080 megawatts would generate less mercury, sulfur dioxide, nitrogen oxide and other pollution than the smaller plant does today. The super-critical, high-temperature coal combustion plant would use 20 percent less coal to generate the same power as the 1970s technology it would replace. And the owners of Big Stone II would pay $10 per ton of carbon dioxide emitted into a Minnesota environmental fund, estimated at about $25 million annually for its share of Minnesota-sold power. That's twice what the owners wanted to pay, but half the $20 sought by environmental interveners in the case.

Regardless, the regulatory environment is changing too quickly and the costs are rising too fast for Great River to invest its $400 million share into a project that could be obsolete, at least from a regulatory standpoint, the day it opened in 2012.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com