Lake Region Electric Cooperative
Inexpensive natural gas and fuel-free generation resources are combining to drive down short-term market price for electricity.
With increasing levels of variable resources, such as wind, flexibility is becoming more important to electric utilities.
Natural gas power plants are able to quickly ramp up or down electricity production, making them complementary to renewables. Coal-based plants can take advantage of these market conditions by becoming more flexible.
A balanced energy mix, including various fuel sources, insulates Great River Energy from the effects of volatility in the electricity market.
“Market conditions like we are seeing today underscore the importance of a diverse power supply,” said GRE Vice President and Chief Generation Officer Rick Lancaster. “The market will value different types of resources at different times, but we want to develop flexible approaches to maximize our value to the broader market.”
Today’s Market Drivers
No matter what method is used to produce electricity, power is sold into the regional electricity market. During windy days, an oversupply of electricity can drive market prices for electricity very low. Record-low-priced natural gas also affects market prices.
“Every day, the market helps determine what resources will be used to meet demands for electricity,” said GRE Vice President and Chief Market Officer Jon Brekke. “It’s a competitive clearinghouse, designed to help determine an optimal daily solution to demand conditions.”
The price received for the electricity generated at Stanton Station fell significantly in 2008 and continued to trail down for several years. Prices hit new lows earlier this year, making it challenging to recover the costs to operate the plant in the long run, ultimately leading to the decision to retire the plant in 2017.
Great River Energy was faced with making significant improvements at Stanton Station. Those improvements, if made, would have further increased the cost of electricity from Stanton Station, making it more challenging to recover costs to operate the plant.
“Stanton Station has been a very efficient and well-run plant thanks to our dedicated employees,” said Lancaster. “The plant has served our members for generations. We owe a debt of gratitude to all the employees who gave our member cooperatives competitive and reliable power from Stanton Station for 50 years.”
Great River Energy’s Coal Creek Station and Spiritwood Station, both fueled by DryFine lignite coal, remain key foundational elements of the cooperative’s power supply portfolio going forward. Great River Energy is implementing ways to enhance their performance in today’s market, seeking greater flexibility of operations.