Minnesota Power and the Dairyland Power Cooperative this week said they plan to co-develop a 525-550 MW combined-cycle natural gas-fired power plant in Superior, WI, to support major wind and solar investments in their service territories.
The entities plan to invest $350 million in the Nemadji Trail Energy Center, which would be built at a shovel-ready industrial site along the Nemadji River that has access to existing natural gas pipelines. Regulatory filings are planned for later this summer, and the facility is expected to be in service by 2024.
Minnesota Power, a utility division of the publicly traded energy provider Allete Inc., would purchase 250 MW of power from the facility under a joint ownership structure with Dairyland. As part of the company's filing with the Minnesota Public Utilities Commission, Minnesota Power would request another 250 MW of wind power capacity and 10 MW of solar power. The combined-cycle facility would complement the company's renewable resources as capacity backup and would help fulfill its initiative to cut carbon emissions.
Minnesota Power's plan calls for a 20-year power purchase agreement (PPA) from what would be a new wind farm operated by Tenaska in southwestern Michigan and the addition of 10 MW of solar power by 2020 through a 25-year PPA with Cypress Creek Renewables. If approved by regulators, the resource package, along with existing assets, would result in renewables generating 44% of the company's energy supply by 2025.
Minnesota Power's long-term goal is an energy mix of two-thirds renewable energy and natural gas, and one-third "environmentally compliant" coal. The company serves 145,000 customers, 16 municipalities and large industrial consumers within a 26,000 square-mile area in Northeastern Minnesota.
Dairyland, an energy cooperative formed decades ago that provides the wholesale electrical requirements for 24 distribution cooperatives and 17 municipal utilities in the Midcontinent Independent System Operator footprint, has long considered more natural gas in its portfolio. CEO Barbara Nick said the gas-fired plant would help diversify its generation assets.
The announcement comes at a time when natural gas deliveries for electric generation continue to climb because of the low-cost supplies from shale drilling. In the nearby PJM Interconnection market, dozens of gas-fired facilities are under construction to replace coal-fired facilities or outdated gas plants. Shale development has also influenced shifts underway in the Midwest and Great Lakes regions, which have long been some of the nation's largest consumers of coal-fired power.
While new markets for natural gas, electricity efficiency initiatives and price swings threaten the long-term role for gas in the generation stack, combined-cycle facilities have also gained as a capacity backup source because their turbines can be turned on quicker and come up to power faster to meet peak demand or fill the void of variable output renewables.
Minnesota Power said it needs the resource package to meet growing power demand within its service territory. Without the gas-fired plant, the company said it would be more reliant on "fluctuating wholesale market prices when sun and wind resources aren't available." The company expects state regulatory approval in the second half of 2018.