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ND plant sale a rare win for coal-fired generation boosters

In an unusual development for America's declining coal industry, a 1,151-MW North Dakota coal-fired power plant slated for early retirement in 2022 is being snatched up by a wholesale power marketing and trading company for an undisclosed sum.

Rainbow Energy Marketing Corp., a subsidiary of North Dakota-based oil and gas producer United Energy Corp., said its newly formed Rainbow Energy Center LLC will tap into federal 45Q tax credits for carbon capture to reduce emissions from the Coal Creek power plant. The company would also benefit from recently enacted state legislation that created a five-year tax break for operating coal plants and exempted sales taxes for companies that secure carbon in geologic storage.

Great River Energy, the Minnesota-based electric cooperative that has owned and operated the plant since the late 1970s, wanted to close the plant because it was no longer economical. However, a North Dakota official in October 2020 disclosed that several parties were interested in buying Coal Creek and an associated 400-kV line.

Rainbow Energy and Great River on June 30 announced they have reached a deal on the sale of the plant. A separate Rainbow entity, Nexus Line LLC, will acquire the associated high-voltage transmission line.

Stacy Tschider, Rainbow Energy's president, said in an email that his company expects to have carbon capture up and running at Coal Creek in "less than five years" and that the plant will primarily serve the wholesale market. That means the Coal Creek Station will continue to operate without carbon emission controls until the middle of this decade and at a time when utilities nationwide are shifting to cleaner energy sources.

Coal plant lost $170 million in 2019

Great River Energy last year said it would close Coal Creek Station because the plant could no longer compete against wind and solar resources. In 2019 alone, Great River Energy lost $170 million on energy sales from the plant, according to a 2020 company press release.

"The shutdown of Coal Creek Station was based on economics and done in the best interests of our member-owner cooperatives," David Saggau, the power co-op's president and CEO, was quoted as saying.

To make up for that lost capacity, Great River Energy plans to add 900 MW of wind energy by 2024 and is converting a plant that today runs partly on coal to only burn natural gas. But under the deal with Rainbow, the company can buy some power from its former plant to serve Great River's 28 distribution co-op members in Minnesota while building out its non-coal portfolio.

North Dakota Gov. Doug Burgum, a Republican, applauded the deal, which came after a year of sustained efforts by his administration to keep the state's coal plants in business.

"This is a great day for North Dakota, a big win for U.S. energy security and reliability, and a huge sigh of relief for the residents of … communities in coal country who depend on the jobs and economic activity generated by Coal Creek and the nearby Falkirk Mine," Burgum said. "It's also great news for the regional power grid and consumers who depend on the reliable, affordable electricity that coal provides."

Industry shrinking fast

But the announcement of the sale raised concerns for renewable energy advocates and industry observers who had supported Great River Energy's shift to cleaner and cheaper energy sources.

"GRE is a very well-run company and if they can't make it work I'm surprised anyone can," Beth Soholt, executive director of Minnesota-based Clean Grid Alliance, said in an interview. "You can clearly see that North Dakota really wants to make carbon capture and storage feasible, but the jury is still out on whether it's going to happen or not. I think it's risky."

Coal-fired generation of power has been on a steady decline in the U.S. for the past decade, accounting for 19% of total power production today. That is down from 67% in 2010. Last year, power generated by renewable sources surpassed that produced by burning coal for the first time.

SNL Image

Adding carbon capture to the plant will make Coal Creek Station more expensive at a time when coal is already having difficulty competing with other sources, predicted David Schlissel. He analyzes the industry for the Institute for Energy Economics and Financial Analysis, a group that has criticized carbon capture projects as uneconomical.

"The coal plant is sitting in the middle of lots of low-cost wind and can't compete without subsidies," Schlissel wrote in an email. "No way will this deal work out for the buyer unless they get really big bailouts and subsidies from the state and, or, the federal government."

But Rainbow Energy in a press release asserted it could run the plant economically. "As a privately held company, we are uniquely positioned to actively pursue customers that purchase power on the open market, which includes power purchased by Great River Energy," Rainbow Energy explained.

The Coal Creek plant burns about 22,000 tons of coal mined daily at the nearby Falkirk lignite mine. North Dakota's Lignite Energy Council, an industry trade group, had been pushing for the tax breaks and other industry benefits that Burgum signed into law this year. One of the bills allows utilities in the state to recover costs for carbon capture from ratepayers.

The sale of the plant will "turn a new page for Coal Creek Station," the Lignite Energy Council's president and CEO, Jason Bohrer, said in a statement. "LEC is thankful for the leadership of Gov. Burgum, Lt. Gov Brent Sanford, and other elected officials who worked tirelessly with GRE CEO David Saggau to protect the workers and communities from the potentially damaging effects of closure."