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Rising costs, climate change concerns shaping energy plans

WILLMAR -- Rising construction costs and concerns over global warming are leading utilities to drop plans for new coal plants in the United States.

The Associated Press reported that proposals for 16 coal-fired power plants nationwide have been scrapped in recent months, and more than three dozen others have been delayed.

Will rising construction costs jeopardize plans for the $1.6 billion Big Stone II plant, which has recently been forced to downsize after two major partners withdrew from the project?

Timing is the big issue, according to Dan Sharp, communications director for the project. Every month the project is delayed will mean higher construction costs. Those higher costs will be reflected in the monthly electric bills of customers, he said.

The Minnesota Public Utilities Commission held a hearing last week on the need for transmission line projects in the state related to Big Stone II. The PUC was originally going to deliberate on the issue Oct. 11, but the change in project plans means that date has now been moved back to March 6, Sharp said.

Big Stone II was originally proposed as a 630-megawatt plant. The partners are now looking at 500-megawatt and 580-megawatt versions. The larger the plant, the better the economies of scale, but Sharp said the down-sizing in this case does not harm the economics as much as might be expected. The plant is to be built adjacent to Big Stone I near Big Stone City, S.D. Infrastructure such as rail connections and water access were built with the possibility of an expansion in mind, he said.

Engineers are developing new cost projections for the possible 500- and 580-megawatt versions of the facility. Theoretically, if the project is delayed long enough and construction costs continue rising, the point could be reached where the project would be too costly, said Sharp.

But he quickly added: "We believe we're not anywhere near that.''

Sharp said the project managers remain confident that the new models will show a coal-fired Big Stone II project as the "least-cost resource" to meet electric needs. The new models will be presented to the PUC on Nov. 5.

While the costs for construction of coal plants are rising, Sharp said that the costs to erect natural gas-fired plants or wind turbines to produce electricity are rising as well.

Rising costs to develop wind farms are not likely to halt the growth of the wind industry, according to State Rep. Aaron Peterson, DFL-Madison, who was instrumental in the passage of the state's new renewable energy legislation. Peterson said much of the increase in the costs for wind turbines is result of a weak dollar and rising worldwide demand for wind turbines.

He believes that what some see as an obstacle to wind power development could prove to be an opportunity. It could lead more manufacturers to set up facilities in the United States, he said.

Global concern over greenhouse gases could prove the biggest factor in determining the fate of Big Stone II, according to one opponent of the project.

Duane Ninneman, Clean Up the River Environment, said an intergovernmental panel of climate scientists and 154 governments recently released a report on global warming. Among its recommendations is a moratorium on all new coal-generated power.

The construction of coal-fired plants continues to move us in "the wrong direction,'' Ninneman said. He said 70 percent of Minnesota's electricity now comes from coal. The switch to clean forms of energy will help improve our environment and our rural economies, he said.

The Willmar Municipal Utilities is making its plans based on the idea that future energy needs will be supplied by a mix of energy sources -- wind, biomass and coal.

The Willmar Municipal Utilities is committed to purchasing up to 10 megawatts of power from Big Stone II through the Southern Minnesota Municipal Power Agency, one of the remaining project partners. Bob Bonawitz, president of the Willmar Municipal Utilities Commission, said the city will need the power when its contract with Great River Energy expires in 2015. Along with supplying power now provided by Great River Energy, the city needs additional power to meet its growth, he said.

At the same time, the city is moving toward developing its own wind power generation. It is also hopeful that engineering studies on the city's aging coal-fired plant can offer options to convert the plant to produce power from biomass, he said.