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Utility Commission pushes back Willmar, Minn., power plant renovation

WILLMAR -- The Willmar Municipal Utilities Commission is delaying for now the multimillion-dollar power plant improvement project.

The purpose of the project was to allow the utility to generate power by burning both corn cobs or other biomass and coal in boiler No. 3, according to Wesley Hompe, interim co-manager.

Boiler No. 3 primarily burns coal and has natural gas burners in it to supplement the coal when more power is needed.

The permit from the Minnesota Pollution Control Agency allows the utility to burn coal up to half the capacity of the generator.

Beyond that, further power with that boiler must be produced with natural gas, Hompe said.

At the time the project was conceived in 2008, power costs were rising, natural gas prices were three times higher than now and the projected cost of power would exceed the cost of buying corn cobs and coal to burn in boiler No. 3.

"The utility burns natural gas after we get 50 percent of our load from coal, and because natural gas had been so expensive, we didn't use it very often except when the electric market was so high that it made economic sense for us to do that,'' Hompe said.

After cobs and coal were successfully test-burned together in 2009, the utility applied for a change in the MPCA air emissions permit that would allow the change in operations that co-firing would cause, Hompe said.

This past March, MPCA granted the revised air permit to the utility.

But in the time that elapsed during the permitting process, the electricity market in the upper Midwest changed dramatically and natural gas prices have fallen to a 10-year low, due to a glut in the market caused by increased oil drilling.

Hompe said the change in markets has made the proposed improvement project uneconomical to pursue right now.

"The way the electric market and the gas market are right now is very different than when we instigated this study a few years ago,'' Hompe told the utility commission May 14.

"Right now it doesn't make sense for us to put the capital out to do a corn cob and coal combustion plant upgrade. We all know that gas prices change very rapidly and vary extremely, and next year at this time we'd have a totally different conversation. But right now, the economics of it don't make sense,'' he said.

The Municipal Utilities Commission's Planning Committee recommended delaying the improvement project, estimated at $10 million to $16 million. Improvements at the 64-year-old plant would include a bag house to capture sulfur dioxide, a cover over the coal pile, and special cob feeding mechanism to go along with the coal feeding mechanism.

Since the MPCA permit gives the utility five years to make improvements and because the electric market and natural gas market fluctuate significantly, the utility will periodically update project costs relative to the markets to determine whether upgrading the plant at a later date makes sense, according to Hompe.

If markets rise again, which is highly likely, the utility has the option to move ahead with the project to compete with those higher costs, Hompe said.

David Little
David Little covers the Willmar City Council, Willmar Municipal Utilities and other city news.
(320) 235-1150