Great River to sell coal plant, but still buy power from it

Great River Energy's massive North Dakota coal power plant — once slated for closure — will be sold to a North Dakota operator that will in turn sell coal-fired electricity back to Great River.

Affiliates of Bismarck-based Rainbow Energy Marketing have reached agreements to buy the Coal Creek power plant and Great River's 436-mile power line to the Twin Cities, the companies announced Wednesday. The price was not disclosed.

Rainbow will operate Coal Creek, which is near Underwood N.D., as a merchant power plant, selling electricity into wholesale markets. Maple Grove-based Great River, which provides power to about 700,000 Minnesotans, will be one of Rainbow's customers.

"Purchasing energy and capacity from Rainbow was not in our original plan, but it will serve as a reliable steppingstone in our power supply transition," Great River CEO David Saggau said in a press statement.

Great River's board on Wednesday OK'd the deal, which still needs regulatory approval.

Great River, a wholesale power cooperative that supplies 28 retail electricity co-ops, announced in May 2020 it would close Coal Creek early in 2022, saying the plant been consistently losing money — $170 million in 2019 alone .

At the time of the announcement, Saggau said no one would buy Coal Creek for even $1. Great River had expected that even with the plant's closure, its member co-ops would see their wholesale power rates fall by 13% within a couple of years.

"The [Coal Creek] sale is projected to have a somewhat positive impact on our member rates compared to Great River Energy shutting the plant down," the company said in a statement to the Star Tribune.

That statement does not suggest much of a premium for the plant and the power line, the latter of which is considered a key regional transmission asset. It has a book value of about $225 million.

Rainbow said it will be operating Coal Creek under a different business model, without the overhead costs that Great River has in serving a network of retail co-ops.

"I wanted a business plan in place that would actually make money, and that's what I have," Stacy Tschider, Rainbow Energy's president, told reporters Wednesday at a press conference.

Great River's decision to close Coal Creek was the key part of its pivot from coal. The company plans to move further into wind power — buying the output of five new wind farms — and convert a smaller North Dakota coal-fired plant to natural gas.

As part of its new strategy, Great River will also increase its purchases in the wholesale electricity market (which could entail power generated from many sources, including fossil fuels).

Under the deal announced Wednesday, Great River would buy power from Rainbow Energy Marketing for 10 years. In the earlier years of the contract, power flowing from Coal Creek to the Twin Cities would take up most of the space on the high-voltage, direct current (HVDC) power line.

Michael Noble, head of St. Paul-based advocacy and research group Fresh Energy, was disappointed that the power line would be used to transport so much coal power.

"I'm sorry to see the loss of this high-voltage power line that could be immediately delivering low-cost renewable energy to the Twin Cities," he said.

Tschider said that over the length of the 10-year deal, Great River's purchases will diminish and renewable power will take up more space on the power line. "We will put renewables on that HVDC line."

Great River's original plan was to build a $1.5 billion wind-power project near the Coal Creek site. The wind plant would have connected into the power line at Coal Creek, sending electricity to the Twin Cities.

But that plan was ditched after McLean County, the power plant's host, placed restrictions on new wind-farm developments, a move apparently aimed at keeping hopes alive for the coal plant.

While clean energy advocates in Minnesota applauded Great River's Coal Creek closure plan, in North Dakota it was seen as a big economic blow. The plant employs 240 people, while an adjacent coal mine that supplies it has well over 400 workers.

Plus, it has been the flagship of North Dakota's fleet of power plants that sit next to lignite coal mines.

The state has since been working to facilitate a deal for Coal Creek, which at 1,145 megawatts is one of the largest power plants in the Upper Midwest. The North Dakota Legislature passed a host of coal-power friendly bills this spring, including for tax breaks and financial aid.

Still, Tschider told reporters Wednesday that "we are not receiving any money from the state of North Dakota."

As expected, the installation of carbon capture equipment and technology at Coal Creek is a key part of Rainbow Energy's plans. The rap against coal is that it's a major carbon dioxide emitter.

"Carbon capture is going to be vital to this project," Tschider said. "I'm not looking to prop up coal just to prop up coal, but to take it to the next level."

Rainbow expects that equipping Coal Creek for carbon capture would cost $1.5 billion. Federal "45-Q" tax credits will be critical for the project. "Without 45-Q, you wouldn't have carbon capture at Coal Creek," Tschider said.

Carbon dioxide can be captured through an industrial process and stored in underground rock formations. Still, carbon capture is a relatively nascent technology that's economically challenging; it's seen its share of failures.

"I am skeptical of the economics of Coal Creek with or without carbon capture," said Noble, of Fresh Energy. Coal-fired electricity is increasingly losing out in wholesale power markets to cheaper renewables and gas-fired power — particularly the latter given there's so much of it.

Noble said he doesn't see how carbon capture changes that equation.

Rainbow has never owned power plants before, but Tschider said the company has managed them. It markets electricity throughout the United States and in Canada and Mexico.

Rainbow is part of Bismarck-based United Energy, whose businesses also involve oil production and oil and natural gas trading.