NorthWestern Energy’s Electric Emissions Reduction Plan

NorthWestern Energy’s approach to serving our customers’ energy requirements reflects a carefully considered balance  between customer affordability, reliability, and our commitment to environmental stewardship and sustainability. At times, decisions require tradeoffs or prioritizations in order to maintain regulatory compliance or meet expectations from our stakeholders.

Environmental sustainability

Environmental sustainability is at the foundation of all NorthWestern Energy’s energy resource decision‑making. However, we acknowledge the financial impact energy bills place on many of our customers and the significant amount of our low income customers’ disposable income that is devoted to energy costs. In Montana it’s estimated that about 25% of our customers are eligible for low income assistance and about half of those customers are living below the actual poverty level. Our resource acquisitions for the portfolio must continue to be focused on cost‑effectiveness in order to help provide affordable energy bills.

The reliability of our system is also paramount when planning and operating our power system, especially during critical weather when it’s bitterly cold and snowy or hot and sunny. From the generation data we collect for our system, we recognized the intermittent renewable generation, on our system, provides diminished capacity at times of key demand. In the winter, this diminished capacity frequently occurs for a large number of hours or even days. In fact, during our peak load day in February 2022, over 950MWs of power were imported onto our system since wind resources were largely unavailable. Even if battery storage would have been available to us, it would have only provided us with 4 hours of capacity. This is why long duration resources are important to our reliability.

View our real-time generation chart

Chart showing our owned and long-term contracted electric portfolio timeline

The Yellowstone County Generating Station and the Beartooth Battery project, along with a 5‑year power purchase agreement with Powerex for 100 megawatts of capacity and energy products delivered from the BC Hydrosystem, were selected from a request for proposals issued in January 2020 by NorthWestern Energy for long-term capacity resources. This selection is the most diverse and flexible option at a cost‑effective price for our customers.

Adding these resources to NorthWestern Energy’s energy generation and supply contracts serving our Montana customers will reduce some of the risk of relying on market purchases to meet 40‑50% of peak energy demand – risk to reliability and price stability – that impacts our customers today.

NorthWestern Energy must have resources that can provide service through an entire high‑demand period at different  load levels. NorthWestern Energy must have resources that can generate throughout the entire length of a high energy

demand event, such as back-to-back days of extreme cold or hot weather, and resources that can also ramp up and down to adjust to load levels.

In addition, capacity resources are required to be available to meet Resource Adequacy requirements and keep the grid stable. Natural gas generation such as the Yellowstone County Generating Station, will have these capabilities.

Short‑term storage, such as Beartooth Battery, and variable generation, such as wind and solar, cannot provide sustained energy over the duration of a multi‑day extreme weather event without significantly overbuilding the resources.

While ensuring affordability and reliability, environmental sustainability drives how we are planning to meet and serve our customers’ and society’s future energy needs. We provide our customers electricity service in both South Dakota and Montana with low carbon electric portfolios, implementing innovative technology, supporting de‑carbonization of our state’s transportation sectors, while also supporting stable and affordable energy bills for our customers. NorthWestern Energy’s electric portfolio is diverse, comprised of owned and contracted generation using multiple fuels from the sun, wind and water to coal and natural gas. Importantly, NorthWestern Energy already has a low‑carbon based electric portfolio. In 2020, NorthWestern’s total electric generation portfolio was 65% carbon free. In 2021 this percentage decreased to 56%, primarily due to a decrease in wind and hydroelectric generation due to weather and several retrofitting projects at our hydro plants designed to increase their available capacity. Nonetheless, NorthWestern Energy’s portfolio starts at a point today that is well ahead of the rest of our industry, which has an average of 40% carbon‑free.

Our electric portfolio is a diverse mix of resources using various fuels. Currently, about 40% of our portfolio is derived from long‑term contracts and power purchases from resources such as waste coal and petroleum coke (both from facilities that are federally required Qualified Facilities) along with natural gas, hydro, wind and solar. The power purchase contracts we have entered into includes a high percentage of carbon‑free generation. Our owned and long‑term contracted resources play a critical role in ensuring our customers a reliable and affordable product.

In 2021, our portfolio delivered about 16% more carbon‑free energy than the national average. NorthWestern is striving to improve and transition our fleet in order to significantly reduce carbon emissions over the next two decades.

We have added about 850 MW of carbon‑free generation between 2014 and 2020.

The utility industry is currently focusing efforts on moderating and eventually eliminating what are referred to as Scope 1 emissions. NorthWestern’s Scope 1 emissions are associated with our currently owned generation assets and the assets we are projecting to own in the future. A majority of our current Scope 1 emissions come from our minority ownership in four coal plants; one plant serves our Montana customers and three serve our South Dakota customers. The estimated carbon emissions from those plants in 2021 totaled approximately 2.46 million metric tons. We currently have gas peaking plants in both Montana and South Dakota but they collectively produce a much lower level of carbon emissions (approximately 0.21 million metric tons).

 

NorthWestern Energy owned fossil fueled generation

Coal

NameOwned MW Capacity% OwnershipLocationExpected Year of Retirement*2018 Generation in Wh's2019 Generation in Wh's2020 Generation in Wh's2021 Generation in Wh's2018 Emissions in Metric Tons2019 Emissions in Metric Tons2020 Emissions in Metric Tons2021E Emissions in Metric Tons
Colstrip Unit 422230.0%Montana20421,315,1881,429,074975,4451,455,3211,441,5221,564,7491,248,1621,688,172
Big Stone11123.4%South Dakota2046454,487542,742358,384373,915492,072563,623413,598403,454
Neal 4568.7%Iowa2040260,314123,05461,038122,512249,636119,02659,858115,529
Coyote4310.0%North Dakota2041301,654203,820262,584228,875337,798229,253291,489257,256

 

 

Natural Gas Peakers

NameOwned MW Capacity% OwnershipLocationExpected Year of Retirement*2018 Generation in Wh's2019 Generation in Wh's2020 Generation in Wh's2021 Generation in Wh's2018 Emissions in Metric Tons2019 Emissions in Metric Tones2020 Emissions in Metric Tones2021E Emissions in Metric Tones
Dave Gates Generating Station150100.0%Montana2045219,951224,039177,383263,673149,040153,664126,467170,000
Aberdeen Peakers80100.0%South Dakota205435,66648,33426,69354,89923,76132,00219,70936,782
Misc.
Combustion
Turbine Units
& Small
Diesel Units
25100.0%South DakotaVarious14,2273,5211,611-9,5452,3651,082-
*These dates are the expected years of retirement which are also end of the plants’ depreciable lives. As minority owners in all four coal plants, other owners could dictate earlier retirement dates, and the plants could be retired earlier if they are no longer economic to operate.

Net Zero Statement

Chart showing our accredited capacity contribution resources

Net Zero Statement

In 2018, NorthWestern issued a Montana only 90% reduction to our carbon emission intensity by 2045 off of a 2010 base for electric generation. We stated that we would update that goal and now NorthWestern Energy has a companywide goal, using Scope 1 and 2 measurements, of being Net Zero carbon emissions no later than 2050. In addition, NorthWestern is pledging to only acquire non‑carbon emitting generation resources beyond 2035.

 

Resource Additions 2022‑2035

Between now and 2035 NorthWestern must obtain additional long duration capacity to maintain reliability. Given the large amount of intermittent generation (e.g., wind and solar), lack of dispatchable on‑demand generation, and a hydro system that is largely run of the river, additions of dispatchable thermal generation capacity remain necessary to maintain grid reliability as we transition to Net Zero. These additions will help to continue to reliably and cost effectively serve our customers. They will also be necessary to meet minimum participation requirements for joining regional reliability organizations and likely future regional transmission organizations.

There are also some contracted thermal resources in our portfolio that greatly affect our portfolio carbon emissions. NorthWestern does not own them, therefore they do not affect our Scope 1 emissions, but they do increase the carbon intensity of our portfolio of resources. These resources were carbon emitting Qualifying Facilities that NorthWestern was obligated under federal law to purchase. These resources in 2018 were responsible for 36% of carbon production but only 11% of generation. Our preference is to replace these resources as their contracts expire, with non‑carbon emitting resources or limited natural gas resources which will result in a significant decrease in the carbon intensity of our portfolio.

Between now and 2035 NorthWestern has reliability concerns for meeting peak periods of capacity demand. Continued  significant reliance on market purchases, especially for those periods of highest demand and lowest amount of available supply places unacceptable affordability and reliability risk onto our customers. NorthWestern has worked diligently to increase our access to capacity resources that only need to operate at key critical times.

Though the chart above is only for our Montana operations, it does a good job differentiating the amount of capacity from various generation resources. The Attributed Capacity of thermal (fossil fueled) generation ranges from about 92% to 97%; while that of wind is only about 13%. This means, to provide an equivalent amount of reliability we would have to build or acquire nearly seven more megawatts of wind for every one megawatt of thermal generation. Obviously  spending this type of money would seriously affect our ability to affordably serve our customers. Over time we expect technology to enhance the performance and costs of this intermittent generation as well as storage.

The Attributed Capacity is not a calculation derived from NorthWestern but is the capacity contribution as estimated by resource and region specific industry standard calculations. This points to a very clear need to prudently manage the roll off of thermal generation from our portfolio. Another important point is that our hydro fleet, which produces clean, carbon free energy also has an impressive 60% capacity contribution and is forecastable.

Resources Beyond 2035

Timeline of projected owned and contracted resources

Resources Beyond 2035

Beyond 2035, large investments in cost‑effective, long duration, carbon free generation, such as hydro, pumped storage, geothermal, small modular nuclear reactors or hydrogen fueled generation will be necessary. Technological advancements along with decreasing costs of carbon-free generation and the regionalization of intermittent generation will significantly contribute to achieve our goal of Net Zero carbon emissions by 2050. The pace of transition to Net Zero will depend on the timing of technological advancements, cost, and retirement of our existing coal fleet.

As shown in the chart above, we do not specify which resources we will be adding to our fleet over time. In South Dakota and Montana, NorthWestern develops an Integrated Resource Plan (Plan) every 2 and 3 years, respectively. These Plans presented to our state regulatory commissions, identify resource needs, known and expected risks, as well as key variables to be used in evaluating resources. NorthWestern then undertakes a transparent resource solicitation process, run by an independent third party, to evaluate the least cost resources that address key risks and needs identified by the Plan. All generation types have the opportunity to participate in our Request for Proposals. Therefore NorthWestern is unable to state with certainty the specific resources that will be acquired to meet future need. The future solicitation processes will provide that clarity.

Our current owned thermal assets provide baseload and peaking generation for service reliability and protection against market price volatility and resource scarcity. These resources generate an average of 2.5 GWh of the total annual load of 8 GWh. Since our coal‑based generation currently provides such a reliable, economical source of baseload generation ‑ and the plants are jointly owned ‑ our plan for the future must include retiring these facilities at the end of their respective depreciable lives.

Early retirement of these facilities would be dependent on agreements with other joint owners, new laws or regulations, market pricing and technological advancements. However, due to the significant uncertainty and the many variables governing retirement dates, we are making conservative assumptions about the future of our coal‑based generation.

NorthWestern will also be participating in partnerships with key renewable market leaders and technological frontrunners in order to leverage their expertise and help guide our future non‑carbon emitting investments.

Portfolio Transition

State laws and regulations focusing on reliable and cost effective electric and gas service have been the primary drivers in developing portfolios for both Montana and South Dakota. As NorthWestern transitions its portfolio, new resources will be acquired using a competitive bidding process and with resource selections meeting the regulatory requirements in the states we operate. Additional resources needed to maintain resource adequacy will match the needs of customers with the most cost effective resources available at that time. Our pledge to only acquire non‑carbon emitting resources after 2035 must also comply with the applicable laws and regulations in place at the time of acquisition.

A graphical representation of our road to Net Zero is provided in the figure below. We expect our carbon emissions to approach zero as thermal facilities retire and are replaced with non‑carbon emitting resources. Any remaining carbon emissions from necessary dispatchable thermal resources are expected to be offset through carbon credits to reach Net Zero by 2050.

 

Aligning NorthWestern's Scope 1 Emissions with Climate-Change Policy

NorthWestern's electric generation portfolio Scope 1 emissions chart

Aligning NorthWestern's Scope 1 Emissions with Climate-Change Policy

In addition to driving towards Net Zero by 2050, NorthWestern is also making portfolio decisions with the intent to align with the Paris Agreement – a landmark international accord adopted in 2015 with an intent to limit the global temperature increase this century to less than 2°C. In order to help make informed resource planning decisions that align with the 2°C goal, NorthWestern referenced two studies completed by the Electric Power Research Institute (EPRI).1 EPRI is an independent, nonprofit organization for public interest energy and environmental research, focusing on electricity generation, delivery, and use to enhance the quality of life by making electric
power safe, reliable, affordable, and environmentally responsible. EPRI conducts research, development, and demonstration projects for the benefit of the public in the United States and internationally.

The EPRI studies provide the public with scientifically‑based technical resources that can serve as foundations for  informed decision‑making on company climate policy scenario analysis and emissions goals. The EPRI studies evaluate, summarize and provide insights for over 1,200 climate model emissions scenarios from the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA) as well as others. The studies assess scenarios and pathways aligning with the 2°C and are useful tools to gain an understanding of the state of the science associated with climate modeling and to aid in informing and developing sector and company goals.

The chart above illustrates NorthWestern’s modeling of our actual and forecasted emissions versus plausible global carbon emission reduction pathways published in EPRI’s reports. Our projected emissions reductions associated with this scenario fall within the bookends of the plausible ranges for the 2°C pathways, with high‑end of the range peaking by mid‑century2,3,4. NorthWestern will continue to assess its energy supply portfolios against plausible pathway and scenario models as the scientific assessments of those scenarios and pathways continue to be updated and revised.

1Rose, S. and Scott, M. 2018. Grounding Decisions: A Scientific Foundation for Companies Considering Global Climate Scenarios and Greenhouse Gas Goals. EPRI, Palo Alto, CA. #3002014510. Rose, S., M. Scott, Review of 1.5˚C and Other Newer Global Emissions Scenarios: Insights for Company and Financial Climate Low‑Carbon Transition Risk Assessment and Greenhouse Gas Goal Setting. EPRI, Palo Alto, CA: 2020. 3002018053.

2There are limitations associated with using global pathways as benchmarks. As noted in Rose and Scott, 2018 and 2020, results from global scenarios are problematic for direct use due to embedded assumptions, missing relevant data, and other future socioeconomic uncertainties. Global scenarios are also not representative of individual companies, or specific company and local regulatory requirements, such as those governing least cost resources and maintaining certain levels of grid reliability. Results shouldn’t be used to imply all companies should have the same relative emissions trajectories or be used as a prescription for an individual company.

3An initial attainability assessment was done to apply a high‑level plausibility filter to the global pathways. Pathways unlikely to be realized, such as those assuming immediate global cooperation, economy‑wide coordination, global emissions peaking prior to 2020 and rapid global deployment of negative emissions technologies were filtered.

4Actual emissions will vary from projected emissions.