Great River's power line gives it leverage in any potential sale

Six months after Great River Energy made a stunning decision to shutter its North Dakota power plant, the coal-fired behemoth's ultimate fate is still unknown — and with it the future of a valuable power line running to the Twin Cities.

Maple Grove-based Great River will close its Coal Creek plant in 2022's second half, becoming the first major electricity producer in the Upper Midwest to completely abandon coal.

The plant, supplier of electricity to about 700,000 Minnesotans, is awash in red ink. Great River's CEO David Saggau said earlier this year he essentially tried to give the plant away but found no takers.

Apparently, that has changed.

"We have experienced a tremendous interest in both of the assets — the Coal Creek plant and transmission line," said Priti Patel, Great River's chief transmission officer.

Some companies have been evaluating the plant alone, some the power line only, and some a joint deal.

Michael Noble, head of St. Paul-based renewable-power group Fresh Energy, doubts the plant has a future. Great River is closing Coal Creek precisely because it has been losing money as coal-fired power has become increasingly less competitive across the country.

"There's nothing that a new owner can do that can change that," Noble said.

John Weeda, head of the North Dakota Transmission Authority, sees it differently. Great River Energy has "a different business purpose" than other companies might have. "I am optimistic there will be a coal plant buyer," Weeda said.

Weeda and Patel wouldn't disclose prospective buyers.

The coal plant's fate will partly determine the future of Great River's 436-mile power line. "It is an incredibly valuable asset because it goes through the heart of an energy production area to the Twin Cities," Noble said.

North Dakota, along with being a big coal-power producer, is also a major wind energy provider.

Noble and other renewable energy advocates want Great River's power line to be a conduit of wind and solar power to Minnesota. That would be in keeping with Minnesota's energy policy goals, too, which stress renewable power.

But North Dakota is a fossil-fuel friendly state and its goals are quite different: Retaining coal-fired power plants like Coal Creek — economic anchors in rural North Dakota — is paramount.

Indeed, the state is trying to facilitate a deal for Coal Creek, one that could include financial aid.

North Dakota has a state-owned bank that could serve as a lead lender. "They can bring some great support," Weeda said. Coal Creek is likely to surface this winter when the state's Legislature convenes, and "they are anxious to help," he added.

From the mid-1960s to the mid-1980s, five big power plants were built in North Dakota, all adjacent to or near coal mines. Coal Creek, near Underwood, N.D., is the biggest with 1,100 megawatts of capacity, and it's long been known as particularly cost-efficient.

However, due to dramatic changes in wholesale electricity markets in recent years, Coal Creek is losing money — $170 million in 2019 alone, according to Saggau.

With Great River's exodus from coal and turn toward more renewable energy, its 28 owner-members — electricity co-ops — will see a 13% decline in rates, the company said. Great River is Minnesota's second-largest electricity supplier.

The announcement of Coal Creek's closure sent tremors through the North Dakota coal power industry and the communities that host it.

The power plant-mine complexes are big employers and property taxpayers: Great River alone employs 260; the independently owned coal mine next door, over 400. And all of the coal plants face the same brutal economic forces that caused Great River to pull the plug on Coal Creek.

Regional electric-grid operators match buyers and sellers of wholesale power, and the order of dispatch is determined by fuel cost. Solar and wind are free, so they get dispatched first. Then comes gas, which is cheap due to a historic production surge in North Dakota and other U.S. shale-oil states.

Any buyer would likely operate Coal Creek as a "merchant" power plant, selling into wholesale markets — but with no base of customers like Great River. "Great River has a significant amount of overhead from its system" because it's selling to retail co-ops, Weeda said. A new owner likely wouldn't have that.

All companies looking at Coal Creek want to use carbon-capture technology, he said. The idea is to separate carbon dioxide created from fossil-fuel generation and then store the stuff in underground rock formations. Carbon capture is technologically feasible, but economically challenging.

If someone succeeds in keeping Coal Creek open, it's unlikely to run at full capacity. So Great River's transmission line would also likely be a conduit for some wind power, Weeda said.

North Dakota is the nation's 10th-largest wind-energy producer, and as with coal, some of that power is exported. (The state exports almost half of its electricity production, much of it to Minnesota).

But there are roadblocks to putting wind on Great River's power line. In Great River's original plan to close Coal Creek, the company would have swapped out coal for a $1.5 billion wind-power project at the power plant site. The huge project would have connected into the power line at Coal Creek.

That plan was ditched after McLean County, the power plant's host, effectively placed restrictions on new wind-farm development, a move apparently aimed at keeping hopes alive for the coal plant. McLean also banned new solar power for two years. Mercer County, adjacent to McLean and the heart of the state's coal country, also put a moratorium on new wind farms this year.

"The hope is that cooler heads will prevail in North Dakota, so people see the value of bringing in wind and solar projects," said Beth Soholt, executive director of Clean Grid Alliance, a St. Paul group that represents wind and solar developers and renewable-energy advocates.

Great River's transmission line is a key piece of the regional power grid. And as Soholt put it, "transmission capacity is at a premium right now."

The 400-kilovolt, high-voltage direct current (HVDC) power line is a rarity in the U.S. Most transmission lines, like the country's electric system generally, run on alternating current (AC).

A high-voltage DC line loses less power over long distances than an AC line, increasing the efficiency of electricity transportation. But grid interconnections to an HVDC line entail a significant extra cost: a DC to AC converter station.

So, tapping into Great River's line anywhere outside of its starting point at Coal Creek — say for a wind farm — would require the construction of an AC converter.

"It's not a deal-breaker for Great River to find a buyer for the line, though it might change the shape of the deal," Noble said.

After Coal Creek closes, Great River will no longer need the HVDC line in the same capacity and is looking for a buyer while also exploring some more novel options.

Great River could continue to own the power line and sell space to new users, or put the line into the Midcontinent Independent System Operator regional grid. If Great River retains ownership, the line's users would pay for their share of the operational and maintenance costs, Patel said.

"I can honestly say right now that it is hard to say what the ideal solution is," Patel said.

Mike Hughlett • 612-673-7003