South Dakota clashes with Minnesota over clean energy and coal plant closures

Stu Whitney
| South Dakota News

The political border war between South Dakota and Minnesota over tax policy, abortion and the pandemic response could have implications for renewable energy and the future of coal-fired power plants.

At issue is the pace at which gas and electricity companies will be able to transition away from fossil fuels without compromising reliability and affordability for customers, and the role government plays in that calculation.

That reliability has been tested several times over the past few years, one South Dakota official said, including during a winter storm in January that nearly caused total power outages.

Minnesota’s Democratic-dominated legislature passed a law in 2023 requiring all utilities in the state to generate only carbon-free energy by 2040, using energy sources such as solar, wind, hydro and nuclear.

Xcel Energy, which has 3.7 million electricity customers, including about 100,000 South Dakotans, is headquartered in Minneapolis, so the law also applies to the utility.

The South Dakota Public Utilities Commission, made up of three elected Republicans, sent a letter to Xcel in January asking it to reverse plans to close several coal-fired power plants early as part of its transition.

“A growing body of evidence indicates that premature closures… will increase the risk of power outages, particularly during times of high demand, including hours of extreme cold and extreme heat, and hours when wind generation is low,” the letter stated. “These events can pose a threat to life and property.”

The company has kept on track with a schedule to replace coal-fired power plants with solar projects over the next few years, a plan that has been approved by the Minnesota Public Utilities Commission.

“An extremely frustrating conversation”

Minnesota PUC members recently clashed with utility company Otter Tail Power over its decision to change a long-term plan aimed at delaying the closure of coal-fired power plants — including Big Stone near Milbank, in northeastern South Dakota — until at least 2040.

On May 30, the Minnesota PUC approved Otter Tail’s Integrated Resource Plan after concessions that included discontinuing the company’s use of the Coyote Station facility in North Dakota for Minnesota customers after 2031.

Otter Tail’s latest models predict that the South Dakota-based Big Stone mine will be retired in 2046. It has been operating since 1975 and burns coal from the Powder River Basin in Wyoming.

“I think it’s just an incredibly frustrating conversation,” Minnesota PUC Commissioner Joe Sullivan said at a May 30 meeting. “I understand Otter Tail, because you have two different jurisdictions that look at the world differently. But if (Coyote Station) was in Minnesota, we would say, ‘Otter Tail, it’s time to get out.’”

Otter Tail, which provides electricity to about 130,000 customers in Minnesota, North Dakota and South Dakota, submitted its 2022-36 plan to the state’s renewable energy commission, addressing the delicate balance in transitioning to renewable energy.

“Shifting the focus of the generator fleet toward dispatchable gas resources and away from coal will help improve operational flexibility while hedging market risks,” the report says. “That said, it is also necessary to ensure the availability of fuel-safe generation during periods when stand-alone generation is necessary to maintain system reliability.”

South Dakota opposes new EPA rules

Disputes over the urgency of abandoning fossil fuels in favor of clean energy begin at the federal level, where the Environmental Protection Agency (EPA) applies protocols aligned with the party that controls the White House.

The Environmental Protection Agency (EPA) released new rules April 25 that tighten pollution controls for the coal industry, affecting wastewater discharge, coal ash handling and carbon dioxide emission limits. EPA Administrator Michael Regan, appointed by Democratic President Joe Biden, called it a “defining moment” for the agency.

South Dakota joined 22 other states in asking a federal court to review the new standards, which North Dakota Attorney General Drew Wrigley said were deliberately put in place to “destroy the coal industry.”

In a statement to News Watch, South Dakota Attorney General Marty Jackley cited a recent Supreme Court decision that overturned the landmark 1984 Chevron ruling, which largely limited the authority of federal agencies like the EPA to interpret the regulations they enforce, leaving that matter to the courts.

“The EPA directive and the attack on fossil fuels are yet another example of a federal agency imposing undue burdens on states and private companies without adequate authority, while Congress fails to act,” Jackley wrote. “The Supreme Court’s ruling in Chevron seeks to address this type of federal bureaucracy.”

SD 8th place in terms of energy consumption per capita

The Inflation Reduction Act passed by Congress and signed by Biden in 2022 provides $370 billion in tax breaks and other support for clean energy initiatives.

South Dakota has increased wind energy production to 55% of the state’s total net energy production, a larger share than all other states except Iowa, according to the U.S. Energy Information Administration (EIA). Other energy sources include hydropower (29%), coal (10%), natural gas (6%), oil (0.3%), and solar (0.01%).

However, South Dakota ranks eighth among U.S. states in per capita energy use, with 31% of households using electricity to heat their homes during the often harsh winters.

Resource reliability and rising energy costs are issues that Kristi Fiegen, chairwoman of the South Dakota PUC, is focusing her concerns on as discussions about climate change and reducing greenhouse gases take place, she told News Watch in a phone interview.

“When I talk about grid reliability, I want dispatchable generation for customers in South Dakota,” said Fiegen, who is running for re-election in 2024. “Non-dispatchable power (wind and solar) is weather dependent. And when it’s weather dependent, we don’t know when we turn on the lights whether it’s going to be there.”

Winter storms put the power grid to the test

Fiegen, who was first elected to the PUC in 2011, helps regional transmission organizations (RTOs) maintain and monitor the power grid, which was stretched to its limits during recent winter storms, nearly causing blackouts.

The 61-year-old Chancellor State resident serves as an executive at Southwest Power Pool (SPP), a nonprofit organization that manages electricity transmission in 14 states, including South Dakota.

South Dakota is also part of the 15-state Midcontinent Independent System Operator (MISO), which helps ensure power is distributed regardless of whether a customer uses Xcel, MidAmerican Energy, Black Hills Energy, NorthWestern Energy, Otter Tail or another utility company.

Collaboration between these and other RTOs around the country was critical during Winter Storm Gerri, which brought brutally cold air and blowing snow to much of the Midwest in January.

“During that storm, we got 7,000 megawatts (of electricity) from the East to help us keep the lights on,” Fiegen said. “If we hadn’t gotten that, we would have turned the lights off in January, the first week of the (legislative) session.”

A year earlier, in December 2022, Winter Storm Elliot led to MISO declaring a maximum generation event due to higher-than-expected electricity use and lost production from natural gas facilities due to freezing conditions, mostly in the South. Similar issues arose during the 2021 winter storm that rocked Texas and knocked out power.

“We’ve spent a lot of time since then on resource adequacy,” said Fiegen, who serves with fellow Republicans Chris Nelson and Gary Hanson on the PUC. “We believe in clean energy, but our No. 1 goal as commissioners in South Dakota is to provide our customers with reliable, affordable electricity.”

“It’s a matter of life and death, not convenience”

In 2016, coal was replaced by natural gas as the most important energy source in the United States. Natural gas now accounts for 39% of electricity generation, while coal accounts for 20%.

Switching too quickly to solar and wind power could impact grid reliability under extreme conditions, according to a long-term grid reliability assessment conducted in 2023–24 by the North American Electric Reliability Corp. (NERC).

“A broad stakeholder dialogue is needed when policies and regulations have the potential to impact future electricity generation,” the study said. “Regulations that could accelerate generator retirements or limit their operation must have sufficient flexibility and provisions to support grid reliability.”

The report was cited by the South Dakota PUC in a letter to Xcel Energy, which responded that it shares the commission’s reliability priorities and intends to increase solar and wind capacity, as well as dispatchable power using nuclear and hydrogen-capable gas turbines.

The company’s stated goal is to provide customers with “100% carbon-free electricity by 2050 and to reduce carbon dioxide emissions from its operations by 80% below 2005 levels by 2030.”

Nelson, the South Dakota PUC member, told News Watch in April that there will always be demand for electricity generated from coal, natural gas and other sources that don’t slow down when the weather turns calm and cloudy.

“I expect we’ll see a pretty significant increase in solar and wind because we really need to maintain a diversity of energy sources,” Nelson said. “But there will be times when the wind isn’t blowing and the sun isn’t shining, and we need to have some way to generate electricity for those times. When the temperature drops to 25 degrees below zero, you want your house to be warm because at that point it’s a matter of life and death, not a matter of comfort.”

This story was produced by South Dakota News Watch, a nonpartisan, nonprofit news organization. Read more in-depth stories at sdnewswatch.org and sign up for an email every few days to receive stories as soon as they are published. Contact Stu Whitney at [email protected]