Minnesota’s largest electricity cooperative wants the option to burn diesel fuel oil at a central Minnesota peaker plant as a hedge against volatile natural gas prices.
Great River Energy is seeking approval from Minnesota regulators to install fuel oil equipment at its 170-megawatt Cambridge peaker plant, which now burns only natural gas. The generation and transmission co-op supplies power to 28 member cooperatives in the Upper Midwest.
Several environmental groups are opposing the plan, which would increase air pollution in an area that includes several homes, a planned regional medical center, and an elementary school serving students in special education.
“We understand [Great River Energy’s] concerns with resilience and reliability, but we’re concerned that taking this step backward towards fuel oil is not going in the right direction,” said Sarah Mooradian, government relations and policy director for CURE (Clean Up the River Environment).
Peaker plants generally run just a few hours at a time on days when high demand is stressing the electric grid and larger power plants are already operating at full capacity. They’re typically less efficient and more expensive to operate, but they can be fired up quickly and provide an important cushion for the grid.
Minnesota has around two dozen peaker plants, with many using fuel oil as the only energy source and others combining natural gas and fuel oil.
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Great River Energy initially asked the Public Utilities Commission last year to approve the fuel oil technology as a “minor alteration” to the Cambridge plant. However, a citizen’s petition organized by environmental organizations led regulators last June to require an environmental assessment.
The project had already received state permits from the Department of Natural Resources and Pollution Control Agency, though the DNR has since rescinded its water permit pending the environmental review, which is expected to be made public this year.
The co-op argues that adding the fuel oil option would allow it to better manage the volatility of natural gas prices and protect ratepayers against escalating energy costs. The company’s three other large peaker plants already run on a mix of fuel oil and natural gas.
Those plants offer flexibility when natural gas prices skyrocket, as they have over the past two years, said Zac Ruzycki, the company’s director of resource planning. During cold periods such as multi-day polar vortexes, demand for natural gas outstrips supply and prices jump, leaving the option of using cheaper fuel oil.
“We see a lot of value in fuel flexibility,” Ruzycki said. “We see this as an insurance policy — you don’t expect to use it, but if need to, you have it.”
The plant’s $25 million price tag is a modest investment that will not become a stranded asset, he said. Instead, Ruzycki said the investment could pay for itself when Great River Energy is able to sell electricity to the grid during periods of high demand.
The plant’s natural gas equipment has been retooled to burn fuel oil. In addition, Great River Energy will add onsite storage for the fuel oil.
Clean Up The River Environment, Public Employees for Environmental Responsibility, the Sierra Club and other environmental organizations note that burning fuel oil instead of natural gas will increase particulate matter, mercury, lead, carcinogenic diesel exhaust and arsenic.
Hudson Kingston, litigation and policy attorney for Public Employees for Environmental Responsibility, said that running the plant on diesel fuel oil “is going to have public health and environmental impacts.”
Ruzycki said emissions from the plant would stay well within limits set by the Minnesota Pollution Control Agency and the Department of Energy. The plant will operate on fuel oil for 24 to 48 hours annually, he said.
“Those permit limits have been set such that those levels of emissions are reasonable, given the human health and safety of the surrounding population,” Ruzycki said. “If we’re talking about running only 24 hours a year, that’s not much.”
Mooradian thinks the utility has other options. Great River Energy, for example, is piloting a long-duration battery storage project on the same site that might offer the same capability someday as a peaker plant, she said.
Even today, solar power, demand side management and a virtual power plant could replace a peaker plant and bolster the grid’s resiliency. “I think there’s a lot of options that, if used together, can act like what a peaker plant does in a way that makes sense in a carbon-constrained future,” Mooradian said.
But Ruzycki said the idea that battery storage could replace a peaker plant does not make economic sense.
A lithium-ion storage battery with the ability to dispatch electricity for 24 hours at the volume of the Cambridge plant would cost more than $1 billion. He said that the estimate “was being conservative.”
The environmental assessment worksheet is expected to be released later this year. Then, depending on the results, regulators could ask the company for a more extensive environmental impact statement and certificate of need before approving or denying the application.
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