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

2. 2 6/20/13

3. 3 130,000+ Customers

4. 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 Station Center, N.D. Headquarters Grand Forks, N.D.

5. 5 6/20/13 Transmission Distribution Generation

6. 6 6/20/13 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

7. 7 6/20/13 Our Generation Facilities 1,086 nameplate megawatt capacity Coal605 MW 73% Young Station – 477 MW Coyote Station – 128 MW Wind359 MW 19% Hydro122 MW 8% (A megawatt is the capacity to serve about 800 homes)

8. 8 6/20/13 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

9. 9 6/20/13 Class Activity on Energy Choices 1.Nuclear 2.Hydropower 3.Natural gas 4.Wind 5.Solar 6.Lignite

10. 10 6/20/13 Nuclear Advantages No CO 2 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

11. 11 6/20/13 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) Montanas Yellowtail Dam finished in 1967 Hydro

12. 12 6/20/13 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

13. 13 6/20/13 Advantages Renewable No air emissions Disadvantages Has intermittent production Turbines take a lot of space Equipment aesthetically unpleasing to some and kills birds Because of intermittent nature, requires back-up generation sources Wind

14. 14 6/20/13 www.minnkota.com www.minnkota.com

15. 15 6/20/13 Question on Diversity Petersburg Minot Wilton Valley City EdgeleyHydeChamberlain Pipestone Langdon Ashtabula Crosswind

16. 16 6/20/13 Wind Comparison (Each site normalized to 1 MW)

17. 17 6/20/13 Solar Advantages Renewable No air emissions Disadvantages Expensive Intermittent production

18. 18 6/20/13 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

19. 19 6/20/13 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_______

20. 20 6/20/13 Classroom Activity Coal42% Gas25% Nuclear19% Hydro08% Other 06% Based on 2011 information from Department of Energy

21. 6/20/13 North Dakota 7 th lowest retail electricity prices in the nation Average retail price 7.7 cents Power rates are very low because 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% Coal Wind 6/21/12

22. 6/20/13 Minnesota 19 th 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 states electricity imported from North Dakota Source: 2011 Energy Information Administration Coal 62.1% Nuclear 24.8% Coal Nuclear Other Natural Gas 6/21/12

23. 6/20/13 South Dakota 14 th lowest retail electricity prices in the nation Average retail price 8.4 cents Relatively high distribution costs are largely offset by low cost coal generation and hydroelectric generation Coal Hydro Source: 2011 Energy Information Administration Other 6/21/12

24. 6/20/13 Montana 12 th cheapest retail electricity prices in the nation Average retail price 8.3 cents Power rates are low because of high proportion of low cost coal (62 percent) & hydro (32 percent) Source: 2011 Energy Information Administration Coal Hydro 6/21/12

25. 6/20/13 Iowa 7 th cheapest retail electricity prices in the nation Average retail price 7.7 cents Power rates are low because of high proportion of low cost coal (72 percent) & nuclear (7 percent) Source: 2011 Energy Information Administration Coal Other 6/21/12

26. 26 6/20/13 This Region Depends On Coal-Based Electricity Coal must remain a part of Americas future New technology is required Time is important Sharing of risk Federal Industry

27. 27 6/20/13 Importance of Coal-Based Electricity Affordable, reliable electricity is important to families and businesses Important for low-income families Important competitive factor for regions farms & businesses Important economic development incentive

28. 28 6/20/13 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

29. 29 6/20/13 Challenges of Resource Planning Regulatory Uncertainty Each generation source has advantages and disadvantages Large investments Generation sources expected to last 50 years or longer

30. 30 6/20/13 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

31. 31 6/20/13 So as a fellow CEO….I hope you would agree that an all of the above energy policy is best!

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33. 33 6/20/13 Thank you for your dedication in educating students on the lignite industry!