Another Clean Coal Power Project on the Brink of Failure

Published September 3, 2015

Kemper County Mississippi is both one of the poorest places in America, and home to one of the most expensive power plants ever built, Mississippi Power’s 582 megawatt clean coal power plant with carbon capture. 

For Southern Company, owner of Mississippi Power, the federal government and the state of Mississippi, Kemper County Energy Facility was intended to be the showcase for multi-decade dream of “clean coal,” using technology to gasify coal for cleaner burning and capture its emissions for use in other purposes or stored underground. If the Kemper plant opens, in fact, there will be nothing else like it in the world: The coal will come from an adjacent mine dramatically reducing shipping costs and instead of releasing millions of tons of carbon dioxide into the atmosphere, it will capture 65 percent of that greenhouse gas and pipe it to an aging oil field, enhancing oil production by as much as 2 million barrels a year.

Unfortunately for Southern Company, taxpayers, Mississippi ratepayers and clean-coal boosters among both Republicans (President’s Reagan and George W. Bush both pushed funding for clean coal) and Democrats, the Kemper clean coal plant, despite commitments to begin operating in 2013, has yet to generate any power and is way over budget. 

Blown Deadlines, Exploding Costs

Though when construction began, the plant was scheduled to begin generating power in 2013, during the permitting and regulatory approval process, opening day was moved first to 2014 then, during construction, to May 2015, another deadline that has come and gone with Mississippi power now saying the plant won’t be online until the first half of next year at the earliest.

The Kemper plant is blowing through money faster than it blows through deadlines. The original estimated price tag of $1.8 billion has swelled to $6.2 billion. For missing the 2014 deadline, Southern was forced to repay $130 million in federal tax credits. More recently, activist and businessman Tommy Blanton won a narrow 5-4 Mississippi Supreme Court decision in February ordering Mississippi Power to refund more than $257 million in rate increases collected to help fund the power plant’s construction. 

“These are some of the poorest people in our whole country being asked to pay for an experimental science project,” Politico reported Blanton as saying in May 2015. “Ethically, it doesn’t pass muster.” 

Every month’s of delay adds between $25 million to $30 million to the price tag of the project according to Southern Company’s financial disclosures to the SEC. 

Part of Kemper’s delays were due to court battles Southern was forced to fight against environmental groups challenging the state permits for the project. The Sierra Club won a unanimous 2012 Mississippi Supreme Court ruling rejecting the plant’s state construction permit. A two-year appeal battle following the state’s second authorization effort ended last August in a settlement forcing Southern Company to phase out coal use at two other major power plants in south Mississippi and Greene County, Alabama. 

This summer, Kemper lost one of its major partners because of the construction delays and higher-than-expected costs projected for producing electricity when a group of Mississippi electric power cooperatives cancelled plans to buy a 15 percent share of the Kemper plant. In response, Fitch Ratings warned of “mounting pressure” on Mississippi Power’s financial rating and predicted a one or two notch downgrade because of continued uncertainty over the power plant. For its part, Mississippi Power said it was “disappointed” South Mississippi Electric Power Association was backing out of the Kemper project and promised it would refund $275 million in deposits, plus interest, while also exploring its future financing options. 

In an effort to salvage the project, in mid-August, state regulators approved an emergency rate increase for Mississippi Power in order to keep the company afloat as it completes the increasingly-expensive Kemper plant. Mississippi Power customers will see a temporary rate increase of 18 percent. The increase could become permanent, depending on the utility’s financial health. 

Kemper, a Symbol for Coal’s Difficulties

Kemper’s difficulties, even its failure, would just be a regional, though expensive, business problem if not for what the project has come to represent: Perhaps the last best hope for a clean coal plant with carbon capture in the United States. Under tremendous pressure and in decline due to multiple regulations placed on mining and coal fired power plants in the Obama administrations push to fight climate change, many see Kemper as representing coal power’s best survival strategy. The Kemper plant, and any future coal fired power plants following its blueprint, would be able to function under the EPA’s new clean power plant rules. In 2013, Energy Secretary Ernest Moniz visited Kemper with dozens of foreign dignitaries to promote clean coal technology. Following the visit, Moniz wrote on Facebook saying plants like Kemper “represent the future of fossil energy.” 

The question is, will it ever come on line, work properly when it does, and can other company’s learn from Southern’s mistakes, to reduce costs enough to make a worthwhile profit. These are all huge, unanswered questions.

Politico notes, as clean-coal projects go, Kemper — even with its delays and cost overruns — practically counts as a success story. Construction never started on American Electric Power clean-coal project in Ohio despite garnering regulatory approval in 2007, as the company was unable to secure the estimated $2 billion needed for the 600-megawatt plant. Excelsior Energy’s proposed Mesaba Energy Project in Minnesota also never broke ground with projected costs ballooning to more than $2 billion. More recently, in February, the federal government pulled its support for the FutureGen 2.0 clean coal carbon capture project in central Illinois. Absent federal support, the project died. 

Mucho Dinero, Nada Energy

Despite billions of federal, state, local and ratepayer dollars invested in clean coal research and technologies over the past three decades, there’s been no payoff in terms of electricity produced or carbon dioxide reduced.

Commenting on this fact, Politico quotes Sen. Tom Carper (D-DE), senior member of the Environment and Public Works Committee, saying “If somebody had told me that all these years later and all these dollars later we’ve gotten no further than we’ve gotten I’d have not believed it. It’s hard to understand.” Carper finds the lack of progress, “Hard to fathom. A great disappointment.” 

Despite the continuing setbacks, spokesmen for Southern Company and the Department of Energy still sound positive notes regarding Kemper’s prospects.

Southern says Kemper is 98 percent or so complete, though it still needs about a year of tinkering and testing to ensure it can operate safely, reliably and efficiently.

“You don’t build any plant and you just turn it on and it works,” said Tim Pinkston, a Southern Company veteran who has worked for more than a decade developing the specific brand of carbon-capture technology being deployed at Kemper. “There’s always things you have to adjust on,” said Pinkston to Politico.

Southern Company CEO Tom Fanning touted Kemper in a recent Atlantic Council speech as a model for new power plants worldwide because of its reliance on lignite, a soft form of coal making up about half of the world’s reserves and its carbon capture process which he said would produce and income stream from selling the ammonia and sulfuric acid byproducts captured at the plant, and by using its CO2 emissions to generate an estimated 2 million barrels of oil a year. “Not bad,” Fanning said. “That could make a lot of sense in a developing economy.”

According to Politico, the Energy Department is taking the long view as well. It has stood by Kemper during its delays and budget overruns and, in an interview, Christopher Smith, the assistant DOE secretary of fossil energy, said it is “unquestionable” the Mississippi power plant will soon be up and running.

Smith continued, “When you’re doing something for the first time, it’s a big undertaking. In order to get these technologies off the ground, you’ve got to find companies willing to go first. Southern has been a really good ambitious and forward-leaning partner in that regard.” 

Neither Fanning nor Kemper addressed the long-term viability of the Kemper project in the light of the mounting debt attached to it, and the fact buyers for the electricity generated by the plant — because the price is likely to be higher than from other sources and reliability of the plant questionable based on performance of pilot projects at other locations — are cancelling their contracts. In addition, if and when it becomes operational, Kemper’s power generation, and thus its power sales will be limited because approximately a quarter of the electricity generated by the power plant is dedicated to run the equipment to capture its carbon emissions. 

These factors are leading some analysts to question Kemper’s future. Bud Albright, who led the formerly led the Energy Department clean coal program under President George W. Bush, noted the DOE realized by late 2007 the math didn’t add up for the clean coal projects they were pursuing at the time, threatening to leave taxpayers on the hook billions of dollars in failed loans.

Though Albright won’t say whether he thinks the billions of dollars the federal government and the private sector have poured in clean coal technology over the decades has been wasted, he does note there’s been no commercial success on carbon capture efforts at a power plant absent substantial, ongoing federal financial support. 

Albright told Politico, “I’m not negative on [carbon capture], I just haven’t seen it work. Everyone talks about it being ready in two years, in five years,” said Albright. “It’s always tomorrow. It’s never today.” 

H. Sterling Burnett, Ph.D., ([email protected]) is the managing editor of Environment & Climate News.