The Kemper Project: Clean-Coal Gone Awry – 2/1/17

Southern Co.’s “clean-coal” plant in Kemper County, Mississippi has been hailed as a first-of-its-kind project; it could also be the last.

After running more than two years behind schedule and $4 billion over its original $2.88 billion budget, the Kemper project was already hard to call a success. That difficulty becomes nearly insurmountable when you add a number of cheaper, cleaner alternatives to coal and a climate change skeptic in the White House.

The Kemper project began around 2008 when many believed that natural gas would soon become scarce. Shortly after, hydraulic fracturing applied to shales in the United States unlocked so much natural gas that the U.S. soon became a net exporter of the fuel.

And with skyrocketing supplies came plummeting prices.

In a matter of years, natural gas became a much better bet than coal.

Emissions related to combusting coal (206 to 229 lbs CO2/MMBtu) are also higher than those associated with combusting natural gas (117 lbs CO2/MMBtu), according to the EIAA cleaner burn makes natural gas more palatable for environmentalists and helps insulate it from future regulation of emissions. Such qualities are a must for new power plants which have lifetimes measured in decades and must remain profitable through multiple presidential and Congressional administrations.

Kemper was supposed to show how coal could be “clean”, but utilities have to make money too and Kemper only showed how far away carbon capture technology is from matching up to other available options.

On the regulatory side of things, the Trump administration’s committment to clean-coal technology and reviving America’s coal industry seems like a lucky break for the Kemper project. However, promises to roll back energy regulations hold their own problems.

Trump’s antipathy toward the Clean Power Plan would make the financial justification for clean coal an even tougher sell, said Christine Tezak, a managing director at Washington-based ClearView Energy Partners.

“The economics are incredibly disadvantageous,” Tezak said.

Once the government is no longer pushing for lower emissions, the Kemper project loses one of the few justifications for existing, or at least appears to, making it harder to build support.

On top of its economic and regulatory problems, the Kemper facility remains in a tricky legal situation as well. Oil producer, Treetop Midstream Services LLC, is suing for $100 million because of a canceled CO2 supply contract and customers are alleging Southern failed to fully disclose facts related to the plant’s cost. An institutional investor filed suit against Southern on Jan. 23, accusing the company of giving false information about the project.

Southern recently told state regulators that the five-year operating and maintenance costs of the facility have nearly quadrupled to about $1 billion from the original estimate, according to a regulatory filing. When some of those costs are passed along to ratepayers, as they inevitably will be, the project will grow harder and harder to defend.

Print Friendly, PDF & Email

Comments are closed.