We have come to expect an annual increase in our electric rates from Arrowhead Electric, but for 2012 the AECI board of directors and management may struggle to appease co-op members.
Great River Energy (GRE), which supplies power to Arrowhead Electric and 27 other member co-ops, has spent 437 million dollars building a state-of-the-art coal-burning power plant in North Dakota. Although the “Spiritwood” plant is now fully functional, Great River Energy will be taking it off-line until 2013…possibly longer.
Construction began on Spiritwood in October of 2007 with an original cost estimate of 277 million dollars. The project was encouraged by North Dakota political leaders to promote lignite coal mining in the state. In addition to power generation, the plant was to sell steam to a large malt plant owned by Cargill and a proposed new ethanol plant. As steel prices rose, both the financial crisis and housing recession hit. Construction costs increased and the demand for power dropped.
GRE has budgeted 30 million dollars to cover interest on bonds, some depreciation and the hiring of nine new employees to maintain Spiritwood in 2012 as it sits idle. Rick Lancaster, vice president for generation at GRE claims the plant is a victim of market forces. In 2008 power demand from its customers fell, the price of power to the grid was reduced and construction of the proposed ethanol facility was canceled.
GRE now plans to partner in a joint venture to create its own second steam customer, spending even more money to buy land and build both a new corn-ethanol plant and an additional biomass or cellulostic ethanol plant. As coal prices continue to rise some critics feel that expensive coal-fired power plants like Spiritwood will be unable to profitably compete for market share.
Great River Energy’s debt service for Spiritwood will likely be passed on through the cost of electric power to its 28 member cooperatives and their customers.
The light at the end of the tunnel appears to be getting dimmer.
Bob LaMettry
Grand Marais
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