Otter Tail Power told regulators in three states that it may need to give up its 35% ownership interest in the 425 MW Coyote Station coal-fired power plant if the U.S. Environmental Protection Agency’s Regional Haze Rule requires it to make “a major, non-routine capital investment” in the plant.
The warning came as part of the Minnesota-based utility’s supplemental resource plan filed in North and South Dakota and Minnesota.
The updated plan also asked regulators to approve the addition of onsite liquified natural gas fuel storage at Astoria Station in 2026; the addition of around 200 MW of solar generation in the 2027-2028 timeframe; and initial steps to add around 200 MW of wind generation in the 2029 timeframe.
The utility said it also plans to repower most of its existing wind facilities in 2024 and 2025. Repowering was expected to equal the addition of around 40 MW of wind generation with a 50% capacity factor. Repowering would occur at the utility’s Langdon, Ashtabula, Luverne and Ashtabula III wind facilities, all of which are powered by General Electric turbines. Otter Tail’s Merricourt wind facility was not part of the repowering plan.
In 2021 Otter Tail said that it planned to sell its stake in Coyote by 2028, saying at the time that more flexible and economical resources were available. It also asked to add dual-fuel capacity at its Astoria Station in South Dakota and 150 MW of solar.
The utility said in its most recent filing on March 31 that the federal Inflation Reduction Act offered incentives that made additional renewable energy investments more attractive.
It also pointed to Minnesota’s recently enacted Clean Energy Law, which requires all Minnesota electric utilities to generate or procure sufficient electricity from carbon-free resources to provide retail customers with carbon-free electric energy by 2040.
Otter Tail said that these developments present a “markedly different planning landscape” than the one its initial filing addressed 18 months ago. The changes demonstrated “how quickly key planning assumptions can change and the importance of flexibility in any preferred plan.”
The utility said that as a winter peaking utility it is concerned about regional grid operator MISO’s new seasonal reserve margin requirements, ongoing questions concerning MISO accreditation methodologies, and projected capacity deficits within MISO.
It said those factors raised concerns about its future capacity position and the degree to which MISO capacity and energy markets would be available to support the utility’s obligation to ensure system resource adequacy at a reasonable cost.
As a result, the value of dispatchable capacity offered by Coyote Station “augers against a premature and irretrievable withdrawal” from the plant that may “unnecessarily expose our customers to risk.”
Otter Tail said it continued to support retaining its ownership interest in Coyote Station “unless and until there is a need for a large, non-routine capital investment” necessary to operate the plant or to “comply with a regulatory requirement, such as may be required by the federal Regional Haze Rule.”
It said that earlier resource planning studies made an “especially strong case” to exit Coyote Station if a large, non-routine capital investment in the plant became necessary. “Our modeling and analysis on this point have not changed,” Otter Tail said. “What has changed are the uncertainties and risks our customers now face.”
In mid-March, the EPA announced its final Good Neighbor Plan, a rule that it said will cut nitrogen oxide (NOx) emissions from power plants and other industrial facilities in 23 states.
EPA said the rule would cut emissions that contribute to problems downwind states face in attaining and maintaining air quality standard for ground-level ozone, known as the 2015 Ozone National Ambient Air Quality Standards (NAAQS).
The rule would use an approach during the summertime “ozone season” that is based on a NOx allowance trading program for fossil fuel-fired power plants in 22 states, and NOx emissions standards for targeted sources within nine industry categories in 20 states.
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