Another utility cuts back on coal

The state's most coal-dependant power company said Wednesday that it will stop burning the fuel at three of its oldest electrical generators in 2015.

The announcement by Minnesota Power is the latest sign of coal's decline in the electric power industry. Seven other power generators owned by three other Minnesota utilities also are turning away from coal to avoid adding expensive controls for mercury emissions by 2016.

Minnesota Power, the electric utility serving the Iron Range and central Minnesota, said it plans to convert both coal-fired units at its Laskin Energy Center in Hoyt Lakes, Minn., to burn natural gas in 2015. The project will cost $15 million, the utility said.

One of the three coal-fired units at the utility's Taconite Harbor power plant in Schroeder, Minn., will be retired in 2015, the company said. Two other coal units at the plant will keep operating, as will four coal units at two other Minnesota Power plants.

The three plants turning away from coal range in age from 46 to 60 years. But the company's CEO, Al Hodnik, said they have been well maintained, remained economical to operate and "are workhorses on the system." He said the company concluded that upgrading them to keep burning coal would not be a good investment.

Minnesota Power, which supplies power to 144,000 customers, generated 95 percent of its electricity from coal seven years ago, a share that is down to 75 percent today. The Duluth-based company also has wind farms and hydroelectric power, and plans to purchase more hydro from Canada.

"I would like to think that by 2025 we will be a third coal, a third natural gas and third renewables," Hodnik said in an interview with the Star Tribune Wednesday. "The principle that the company values the most, and frankly that the industry values the most nationally, is fuel diversity."

Hodnik said the switch to natural gas at the Laskin plant will require a third as many workers. The plant, which now has 45 employees, will try to avoid layoffs by shifting workers to other parts of the company as people retire, he said.

The upgrade and switch away from coal require approval from the state Public Utilities Commission. But regulators have encouraged the company to consider diversifying its energy mix.

The announcement comes just one day before regulators are scheduled to vote on whether Otter Tail Power Co. should shutter its two-unit, coal-fired Hoot Lake power plant in Fergus Falls, Minn., in 2020. The company proposes a $10 million upgrade to meet mercury standards, thus keeping the plant running for the rest of the decade.

Environmental groups have campaigned to retire coal power plants because they are a major source of carbon dioxide, a greenhouse gas, and other smokestack emissions, and produce coal ash that often ends up in landfills.

"We think it is a really good resolution," said J. Drake Hamilton, science policy director for Fresh Energy, a St. Paul-based nonprofit that supports the shift to renewable energy. "They are going to take out 50- and 60-year-old coal plants and modernize to clean energy."

"Minnesota Power has worked hard at having some of the most competitive electric rates," said Bill Blazar, the chamber's senior vice president. "We have quite a bit of faith in their analysis."

In Rochester and Burnsville, six coal power plants owned by other utilities are slated for retirement. A small coal burner in Austin, Minn., has switched to natural gas, currently a favored fuel by utilities because prices remain near record lows.

Xcel Energy, the Minneapolis-based utility that owns the Burnsville units, had retired two other Twin Cities coal plants in the 1990s and built natural gas units instead. The utility faces a similar decision this year about two Sherco coal units in Becker, Minn.

The U.S. Energy Department says that coal remains the largest energy source for U.S. electricity generation, but it will decline from 42 percent in 2011 to 35 percent in 2040.