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ND lignite group seeking resiliency compensation for coal producers

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ND lignite group seeking resiliency compensation for coal producers

A North Dakota lignite organization wants coal producers to be compensated for the resiliency of the fuel in the energy market.

Jason Bohrer, president and CEO of the Bismarck-based Lignite Energy Council, said in an Oct. 8 interview with S&P Global Market Intelligence that his organization is "looking for ways to make sure that coal operators are compensated for the value that they provide through resiliency in the grid."

"I don't think it's necessarily that we're looking to increase the cost per se," he said, "but we're just looking for better ways to ensure that what we're providing to the grid is what we're being compensated for."

Ian Lange, director of the Colorado School of Mines' mineral and energy economics program, said that efforts to subsidize coal are common among pro-coal groups, and recently the U.S. Department of Energy, which point to coal's resiliency in their arguments. The Federal Energy Regulatory Commission scrapped a rulemaking by the U.S. Department of Energy in January that would have supported struggling coal and nuclear plants.

The council would need to be careful that its proposal would not affect electricity prices outside the state to avoid intervention by FERC, which regulates the transmission of electricity in interstate commerce, Lange said. He cited a federal court's decision to uphold Illinois' zero-emissions credit program for nuclear power plants, adding that North Dakota may be able to instate a similar program for coal so long as it passed similar standards as the nuclear credits.

North Dakota Public Service Commissioner Brian Kroshus said it would be "a tough sell" to North Dakotans, who are "price-conscious." Though many residents do support the state's coal sector, people would likely be most concerned with such a proposition's impact on their bills.

"Ultimately, the thing people have to realize [is] all of this goes back to the ratepayer," Kroshus said, "whether it's through the federal taxes they pay, potentially the state taxes they pay, but in all likelihood it's going to show up in their utility bill itself."

The industry would have to determine how to sell the notion of energy reliability to garner public support, he said. But until the council's plan is solidified, it is difficult to predict whether transmission organizations would be receptive to paying more for coal.

If the regional transmission organizations did agree to some sort of resiliency compensation, Kroshus said, he does not foresee a major impact to renewable energy sources in the short term because "companies are moving quickly on those projects to capture production tax credits."

North Dakota, the nation's top producer of lignite coal, has weather extremes, Bohrer said, and though wind has become a more prominent energy source in North Dakota over the years, the turbines stop spinning to avoid damage when the wind blows too hard. As a result, he says, coal is more reliable.

"That's not a knock on wind," he said. "That's just the technological limitation of how they are producing power and that limitation needs to be accurately represented in the power market."

The council does not have any specific percentages or dollar figures in mind at this time, Bohrer said.