Project Tundra received $16.9 million in 2020 from the U.S. Department of Energy (DOE) and $9.8 million in the fall of 2019 to start the project, instead of evaluating whether the project is viable in the first place
Minnkota has pledged it will not pursue Project Tundra if it “substantially increases electric rates.”
Square Butte Electric Cooperative and Minnkota Power Cooperative own and operate Unit 2 at the Milton R. Young (Young Unit 2) coal-fired plant in Center, N.D. The cooperatives are proposing to retrofit the 43-year-old, 455 megawatt-capacity unit with equipment to capture 90% of its carbon dioxide (CO2) emissions and either sequester the CO2 underground or sell it for use in enhanced oil recovery (EOR) activities.
The proposal, dubbed the Tundra Project by its supporters, received $16.9 million this spring from the U.S. Department of Energy (DOE) to complete the permitting work needed for two underground injection wells and then build them. Last fall, the project was awarded $9.8 million in DOE funds to complete a front end engineering and design (FEED) study for the project, with the goal of developing “design, costing and performance data needed to commence project financing activity,” as well as a final project schedule.
In short, this DOE money is being used to start the project, instead of evaluating whether the project is viable in the first place. This is critical, as Minnkota has pledged it will not pursue Project Tundra if it “substantially increases electric rates.”
IEEFA’s analysis of the project shows it faces significant risks and uncertainties that could undermine its economic viability and lead to higher electric rates for the ratepayers of the cooperatives that buy power from Minnkota or Minnesota Power. These include:
Minnkota has acknowledged that carbon capture, utilization and storage technology has not been adequately demonstrated for nationwide use.2 However, it is gambling that Project Tundra can succeed because of its “unique geographical location.”3 If it loses this bet, the ratepayers of the 11 cooperatives that own Minnkota and Square Butte may have to pay substantially higher rates for power from Young Unit 2, or indeed, for a failed project.
Square Butte and Minnkota Power would be well-served by taking the time afforded by the DOE grants to weigh the risks carefully—going forward risks putting their co-op customers on the hook for significant construction cost overruns and long-term responsibility for higher operations and maintenance costs. A better option would be to follow the lead of Great River Energy which earlier this year announced plans to retire the younger, larger and better running Coal Creek station, close Young Unit 2, and embrace the renewable energy transition by building cleaner, lower-cost wind with storage to meet its capacity needs.