Having failed with federal regulators, North Dakota’s coal industry is turning to transmission operators with hopes of extra compensation for coal-fired power plants.
The Lignite Energy Council plans to approach regional transmission organizations, such as Midcontinent Independent System Operator (MISO) and the Southwest Power Pool, about paying more for coal-fired power because it is considered a base load power source with more reliability in times of natural disaster, said Jason Bohrer, LEC's president.
The Federal Energy Regulatory Commission unanimously rejected in January a proposal from the U.S. Department of Energy that would have propped up the state’s main power source. Issued last fall, the DOE proposal would have paid power plants for keeping coal on hand.
Energy Secretary Rick Perry had suggested that FERC adopt a rule that pays base load power plants for having 90 days worth of fuel on-site, a standard that only coal and nuclear could meet. Opponents of the proposal questioned how much on-site fuel improves a source’s reliability.
Because many mines are located at the mouths of power plants, Bohrer said North Dakota lignite does not face the same type of competitive issues against natural gas as many other sources do. He cited 2017 numbers showing the cost of lignite power at $22.94 per megawatt hour, compared to $33 per megawatt hour for natural gas.
Bohrer said environmental proponents argue coal is losing in the marketplace but he says the market is not a fair one.
“They say that as if the market is not skewed against us,” he told crowds at the LEC fall meeting in Bismarck on Wednesday. “The market is a competitive market, but it is not a free market.”
Lignite’s largest competitor is wind.
The coal industry has long stated production tax credits provide an unfair advantage to wind energy — though many of the coal-fired utilities in the state also own wind assets.
Though FERC ruled last year's DOE proposal failed to meet Federal Power Act standards for implementing tariff changes, the commission did formally ask electric grid operators in March to show what they are doing to ensure that their grids remain “resilient,” a term defined as a power sources' ability to bounce back from natural or man-made disasters that disrupt fuel supply.
Bohrer said he thinks LEC could provide evidence to those operators of why paying more for resilience is necessary and cheaper in the long run due to the greater cost of losing power during an environmental catastrophe. Paying more for power would be a strange move for a transmission organization, which seeks to provide its members with an open market on which to buy and sell power, giving them the most cost-effective choice.
Bohrer pointed to another study recently released by the DOE as evidence of resiliency's importance, recognizing that data is coming from the same agency that made the FERC proposal. He said it will be up to MISO to make the judgement on whether that data is compelling.
LEC also has applied to be a stakeholder in MISO to provide a coal-centric voice, “sometimes overlooked in their boardroom and their circles,” Bohrer said.
He said the goal is to "inform, not influence," though he earlier told the crowd there was excitement "about the opportunity to influence where MISO goes as far as resilience."