In response to delays and cost increases for Southern Company’s Kemper Project, Southern announced it was ending its attempts to gasify coal and would operate the facility as a natural gas power plant.
With the encouragement of the U.S. Department of Energy under the Obama administration, which spent more than $415 million of taxpayer money on the project, Southern attempted to implement an untested new gasification technology at a power plant it was building in Kemper County, Mississippi.
The technology has never worked properly, and in early June, Southern announced critical machinery for the coal-powered section of the plant had started leaking and would take up to 24 months to repair, adding an additional $38 million to the total cost of the plant. This put the engineering and construction cost of the plant over $7.5 billion for a project that was originally supposed to cost approximately $1.8 billion.
Southern’s announcement evidently signaled the death knell for the coal gasification component of the plant. On June 21, Mississippi’s Public Service Commission (PSC) unanimously voted to refuse to ask utility customers to pay anything for Kemper’s nonfunctional, multibillion-dollar coal gasification technology. PSC re-designated the plant as a natural gas facility on June 21.
Rate Hike Dispute
In a joint press release explaining the decision, the PSC commissioners said their goal was “eliminat[ing] ratepayer risk for unproven technology and assur[ing] no rate increase to Mississippi Power customers.” PSC said it would work toward getting Mississippi Power, the Southern Company subsidiary that built Kemper, to roll back rates raised to pay for previous cost increases related to the coal gasification plant.
In a June 28 filing with the Securities and Exchange Commission, Southern announced it might record a $3.4 billion loss for the project in the second quarter of 2017 if Mississippi’s PSC does not allow Mississippi Power to charge ratepayers for the unexpected costs increases.
The Kemper facility will now operate as a natural gas-fueled combined cycle plant using natural gas from an existing pipeline.
‘A Foreseeable Result’
James Taylor, president of the Spark of Freedom Foundation, said the Kemper facility’s failure was completely avoidable.
“The Kemper facility was, in the words of the New York Times, ‘a central piece of the Obama administration’s climate plan,’ yet energy markets already provided affordable natural gas as a lower-carbon alternative to coal power,” Taylor said. “The Kemper facility nightmare is a foreseeable result of government attempting to outsmart market forces.”
“Using solely natural gas power at the Kemper facility should have been the obvious solution all along,” said Taylor. “It is no accident since 2008, as the fracking revolution spurred natural gas to overtake coal as America’s largest source of electricity, U.S. carbon dioxide emissions and inflation-adjusted electricity prices have fallen.”
‘A Boondoggle from the Start’
Lindsay Leveen, founder of Green Explored, says the federal government never should have encouraged the high-tech, untested, gasification process attempted at Kemper.
“With the encouragement and support of DOE, Southern tried to use a complicated, untried technology to gasify coal, when it could have used existing 100 year old technology,” Leveen said. “Absent federal and state government inducements, Southern could have built the same-sized natural gas plant for approximately $550 million.
“This facility was a boondoggle from the start, costing taxpayers, ratepayers, and investors billions of dollars for no good result,” said Leveen.
Michael McGrady ([email protected]) writes from Colorado Springs, Colorado.