The fossil fuel generates the lion's share of electricity in this country. But concerns about pollution could signal change.
In its conclusion, the advisory panel noted that the plant's developers "failed to demonstrate that they have explored the possibility of obtaining power from renewable energy sources and that Big Stone II is less expensive (considering environmental costs) than power generated by renewable energy sources" as required by state law.
The new math
In the past two years, the number of proposed coal plants has dropped from 152 to around 100. In one high-profile case last year, the prospective owners of Texas' largest utility, TXU, canceled eight of 11 planned coal plants, partly to win the support of environmental groups for the acquisition.
The major force stopping the construction of new coal plants is the near certainty of federal regulations that would limit carbon emissions and levy a charge for each ton produced, effectively making coal-generated power more expensive, and nonpolluting energies such as wind and solar less so.
Plant developers are waiting to learn how low the limits and how high the charge will be, to decide whether any particular coal plant could still make money in this new "carbon-constrained" market, as the industry calls this new era.
In February, big lenders including Citigroup Inc. and J.P. Morgan Chase & Co. said that they have stopped financing coal plants that can't prove that they will operate profitably under whatever new environmental restrictions come. In March, the U.S. Department of Agriculture suspended its loan program for rural electricity development -- 80 percent of which has been coal -- while it waits for clarity concerning the new "emission standards and associated costs."
In Minnesota, the largest electric utility, Xcel Energy Inc., has announced that it plans no new coal plants through at least 2022. Duluth-based Minnesota Power also has pledged no new coal plants until there's a solution for carbon emissions.
But don't count coal out, the utilities industry argues, because of its abundance and the lack of feasible alternatives to cover ever-growing consumer demand.
"Coal-fired projects are still being proposed and still being approved, even though the market is tougher now," said Charlotte Wright, managing editor in Washington of Platts Coal Trader, an industry publication.
The United States has the world's largest coal reserves, 27 percent of the world's total and a 250-year supply at the current rate of use, said Luke Popovich, spokesman for the National Mining Association in Washington. Last year, U.S. consumption hit a record 1.13 billion tons, up 1.5 percent from 2006 -- and 93 percent of it was used to produce electricity, according to the U.S. Energy Information Administration.
"Coal is the workhorse of electricity generation," said Jim Owen, spokesman for the Edison Electric Institute in Washington, an association of shareholder-owned electric companies.
Even growing conservation measures can't cover new consumer demand, which historically accounts for about a 2 percent increase each year, said Ward Uggerud, senior vice president of Otter Tail Power Co., a partner in Big Stone II.
But others say that Minnesota's Next Generation Energy Act of 2007 puts the state well on its way to replacing coal. It requires electric utilities to create conservation measures that will cut consumption by 1.5 percent a year, and it requires them to produce 25 percent of their power from renewable resources by 2025.
"With those two in combination, the reality is, you don't need new coal plants," said Duke Bascom, CEO of Global Green Energy, an Edina firm that invests in clean energy projects.
The law also requires utilities to prove that they can't meet customer demand by using conservation or renewable energy before adding coal capacity, so long as they are not more expensive -- after factoring in the new carbon charges, said Barbara Freese, an attorney and consultant to the Union of Concerned Scientists in St. Paul.
That's what Big Stone II failed to do to the satisfaction of the administrative law judges reviewing the plan for Minnesota regulators, Freese said.
"Their only question was, 'Is this coal plant a penny cheaper for their ratepayers?' " she said.
Coal supporters say that the future lies not in giving up coal but in cleaning it up. They want government to support faster development of a new technology -- sometimes called coal gasification or carbon sequestration -- that generates energy from coal without releasing carbon into the atmosphere. There are plans to retrofit the Basin Electric Power Cooperative's Antelope Valley Station in North Dakota with that capacity in 2012, said Steve Van Dyke, spokesman of the Lignite Energy Council in Bismarck, N.D. The demonstration project is estimated to cost about $200 million. There are also plans for a $2 billion, 600-megawatt Mesaba Project on Minnesota's Iron Range to be built with that technology. Construction is scheduled to begin next year and be finished in 2013.
The national popularity of this new technology helped the Mesaba Project win three federal awards: a loan guarantee for 80 percent of construction costs, $36 million in development loans and a recently announced $133.5 million federal tax credit, project co-CEO Julie Jorgensen said.
But there has been local push-back.
Xcel has said that it won't need to be a customer of the Mesaba Project, partly because of its nation-leading wind energy capacity. Also, environmentalists question whether the technology is really ready.
Price is another point of contention. Coal defenders say the leading, reliable alternative is natural gas, which is getting more expensive and increasingly will need to be imported from less-than-friendly nations such as Russia and Venezuela. Environmentalists foresee a power mix of renewables -- such as wind, solar and biofuels -- with natural gas as an occasional backup for reliability.
"At this point, putting more money in the coal basket is the riskiest way to go," said Beth Goodpaster, the attorney for several environmental organizations that are fighting the Big Stone II plant.
The one thing that both sides agree on: Conservation is fundamental, because the cheapest power plant is the one you never have to build.
H.J. Cummins • 612-673-4671