When Great River Energy decided to build its Coal Creek Station power plant in 1979, the facility was designed with one goal in mind: efficiency.
Decades later, the plant still provides some of the most cost-effective and reliable power in the country. One of the secrets to its success is its location near an affordable and abundant fuel source in coal country of central North Dakota.
By building the plant near its fuel source (known as a “mine mouth plant”) Great River Energy minimized fuel transportation costs, which left mining (i.e., getting coal out of the ground) as the most significant variable cost.
Over the past 10 years, the location of coal seams at the Falkirk Mine – which provides fuel to Coal Creek Station – and skyrocketing prices of resources necessary for mining have led to increases in coal prices and, in turn, the cost of generating electricity.
Mining for fuel
The ease with which a mining company can access coal reserves is expressed by a “strip ratio,” which is a measurement of the number of yards of earth that must be removed in order to mine one ton of coal. The entire Falkirk Mine has a calculated strip ration of 9:1. Coal seams with a lower strip ratio can be mined more efficiently because they require the removal of less “overburden,” or the earth that lies above coal seams.
In 1996, electric utilities were faced with possible deregulation of the utility industry, which would have allowed for competition among electricity providers. With that possibility looming, utilities across the country took a lowest-cost approach to their business.
At that time, Great River Energy made a decision to mine the most inexpensive fuel at Falkirk Mine by targeting coal with a strip ratio of 6:1. That plan lasted approximately 12 years.
As the mining has progressed, Falkirk Mine and Great River Energy recently have begun mining coal located deeper underground and farther from the power plant. Future coal will come with a strip ratio of approximately 10 ½:1.
To put it another way, the previous mining plan required the removal of approximately 50 million yards of dirt per year in order to mine lignite coal – and it was all done with a dragline. Today, more than 80 million yards of dirt must be removed annually – and it requires the services of a truck-and-shovel fleet working ahead of a dragline. That has resulted in a need for more equipment, more workers and more fuel.
Under typical circumstances these changes would result in only minor cost increases; however, they came at a time when costs associated with a stepped-up mining operation had never been higher. The cost of diesel fuel has increased 300 percent since 1999; steel, a vital resource in mining, has roughly doubled since the early 2000s; and rubber, which is needed for tires and mining equipment, has increased by about 50 percent over the past decade.
These trends aren’t unique to Great River Energy. Utilities across the country are experiencing increases in fuel costs for a variety of reasons. Although costs have increased, Falkirk Mine remains a cost-effective fuel source, and Coal Creek Station still produces some of the most efficient electricity in the region.
Find more news by reading the November edition of Great River News.
