1 6/20/13 June 20, 2013 Mac McLennan President and CEO Minnkota Power Cooperative Generation...

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June 20, 2013

Mac McLennanPresident and CEO

Minnkota Power Cooperative

Generation Choices

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36/20/13

130,000+Customers

6/20/13

Minnkota headquarters in Grand Forks 352 employees

177 Grand Forks 175 Young Station

Primary source of generation is the Milton R. Young Station near Center, N.D.

Minnkota supplies electricity to 11 distribution cooperatives, three in eastern N.D., and eight in northwestern Minn.

Young StationCenter, N.D.

HeadquartersGrand Forks, N.D.

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TransmissionTransmission DistributionDistributionGenerationGeneration

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Types of Generation Baseload power is available for 24-7 demand

• High-capacity generating plants

• Plants cost less to operate when at full efficiency

Peaking power is available when demand is highest• Higher cost to operate, but quick start-up to react

to demand changes

Intermittent power is available when supply allows• Cannot be relied upon to react to level of demand

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Our Generation Facilities

1,086 nameplate megawatt capacity Coal 605 MW

73% Young Station – 477 MW

Coyote Station – 128 MW

Wind 359 MW 19%

Hydro 122 MW 8%

(A megawatt is the capacity to serve about 800 homes)

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Class Activity on Energy Choices

Discuss in small groups what energy resource(s) you would use to meet significant future demands Choices: lignite, nuclear, hydropower, natural gas,

wind, fuel cells and/or solar

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Class Activity on Energy Choices

1. Nuclear

2. Hydropower

3. Natural gas

4. Wind

5. Solar

6. Lignite

17%

1

17%

2

17%

3

17%

4

17%

5

17%

6

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Nuclear

Advantages No CO2 emissions

Relatively low-cost fuel

Disadvantages Large capital cost

Radioactive waste

Almost impossible to solve waste disposal problems through Congress

Last U.S. nuclear power plant licensed in the 1970s

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Advantages No fuel cost Low-cost energy to consumer No air emissions

Disadvantages Affects fish and wildlife habitat Alters the natural flow of rivers Virtually no resources left to develop

(some dams being removed) Montana’s Yellowtail Dam finished in 1967

Hydro

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Advantages Moderate capital costs

Less emissions than lignite-produced electricity

Currently, natural gas is low-priced

Natural Gas

Disadvantages Potential resource adequacy

Costs have been historically volatile

Natural gas sold to electric utilities increased from $2.62 per dekatherm in 1999 to $12.80 per dekatherm in 2008 – currently at about $4.50 per dekatherm

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Advantages Renewable

No air emissions

Disadvantages Has intermittent production

Turbines take a lotof space

Equipment aesthetically unpleasing to some and kills birds

Because of intermittent nature, requires back-up generation sources

Wind

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www.minnkota.com

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Questionon Diversity

Petersburg

Minot

Wilton

Valley CityEdgeley

Hyde

ChamberlainPipestone

Langdon

Ashtabula

Crosswind

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Wind Comparison (Each site normalized to 1 MW)

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Solar

Advantages Renewable

No air emissions

Disadvantages Expensive

Intermittent production

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Advantages Abundant fuel source Relatively inexpensive fuel

source Reliable Increasingly clean

Disadvantages Low Btu content High moisture content Cannot economically rail New federal emissions

regulations cause uncertainty

Lignite

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Classroom Activity What percentage of the electricity in the

United States is generated by:(take one minute to do) Coal _______

Nuclear _______

Gas _______

Hydro _______

Petroleum _______

Renewables _______

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Classroom Activity

Coal 42%

Gas 25%

Nuclear 19%

Hydro 08%

Other 06%

Based on 2011 information from Department of Energy

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North Dakota 7th lowest retail electricity

prices in the nation Average retail price 7.7 cents

Power rates are very lowbecause of low-cost coal(82 percent) generation

Coal costs are nearly 40 percent below the national average because mine-mouth plants use local low cost lignite and do not pay for “transportation” costs

Source: 2011 Energy Information Administration

Coal 82%

North Dakota

Coal

Wind

HydroCoal

Wind

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Minnesota

19th lowest retail electricity

prices in the nation

Average retail price 9.23 cents

Power rates are relatively low

because of high proportion of

low-cost coal generation & modest nuclear exposure

52 percent of in-state utility generation from coal-fired stations

About one-sixth of state’s electricity imported from North Dakota


Coal 62.1%

Nuclear 24.8%

CoalNuclearNatural GasOther

CoalNuclear

Other

Natural Gas

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South Dakota

Hydro Coal

Other

South Dakota

14th lowest retail electricity prices in the nation


Relatively high distribution costs are largely offset by low cost coal generation and hydroelectric generation

Coal

Hydro


Other

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Montana 12th cheapest retail electricity



Power rates are low because of high proportion of low cost coal (62 percent) & hydro (32 percent)


Montana

CoalHydroOtherCoal

Hydro

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Iowa 7th cheapest retail electricity



Power rates are low because of high proportion of low cost coal (72 percent) & nuclear (7 percent)


Iowa

CoalNuclearOtherCoal

Other

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This Region Depends On Coal-Based Electricity

Coal must remain a part of America’s future

New technology is required

Time is important

Sharing of risk Federal

Industry

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Importance of Coal-Based Electricity

Affordable, reliable electricity is important to families and businesses Important for low-income families Important competitive factor for region’s

farms & businesses Important economic development incentive

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Importance of Coal-Based Electricity

Coal-based industry provides affordable, reliable electricity

North Dakota is one of 7 states meeting U.S. air quality standards

30 million tons of lignite consumed per year

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Challenges of Resource Planning

Regulatory Uncertainty

Each generation source has advantages and disadvantages

Large investments

Generation sources expected to last 50 years or longer

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Other considerations

Public wants affordable, reliable electricity

Regulators want economical and environmentally compatible sources

Environmental activists have demonstrated a proclivity to sue

• No comprehensive federal energy policy

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So as a fellow CEO….I hope you would agree that an “all of the above” energy policy is best!

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??????

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Thank you for your dedicationin educating students

on the lignite industry!

1 6/20/13 June 20, 2013 Mac McLennan President and CEO Minnkota Power Cooperative Generation...

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