Southern Co.’s “clean-coal” plant has been hailed as a first-of-its-kind project. President Donald Trump’s climate-change skepticism could make it the last.
The facility in Kemper County, Mississippi, is slated to finally start generating electricity and capturing carbon dioxide from coal by Jan. 31. The plant has been plagued by construction challenges, running more than two years behind schedule with a $7 billion price tag that’s more than double its original $2.88 billion budget. Southern has had to write down about $2.6 billion before taxes for Kemper, and faces lawsuits it says are baseless. Now the challenge is a new administration that supports coal but promises to roll back environmental and energy regulations.
“There’s nothing wrong with the technology except the price tag,” said Howard Herzog, a senior research engineer who tracks carbon-capture projects at the Massachusetts Institute of Technology. “What will make carbon capture and storage move forward is when climate rules get tough, and there’s no sense from this incoming administration that they’re going to get tough with climate policy.”
‘Big Bet’
The Kemper project was conceived during a different energy age in the U.S., when natural gas prices were rising and the fuel was thought to be becoming scarce. “Nobody could have predicted when this plant was first ordered” that fracking would lead to plentiful gas supplies and low prices, Southern Chief Executive Officer Tom Fanning said in an interview.
Kemper’s challenges stem from making a “big bet” on a new technology, Fanning said. In 2010, when Mississippi regulators approved the project, only about 10 percent of the engineering had been completed, leaving “some bandwidths of uncertainty,” Fanning said.
According to Southern, the project has created about 1,300 direct and indirect jobs and is expected to produce $44.7 million annually in state and local taxes through the first 10 years of operation.
The coal industry has been counting on plants like Kemper to pave the way toward cleaner-burning technologies. But utilities have been closing coal plants and replacing them with cheaper, lower-emitting natural gas. Wind and solar power have also dropped in price.
“Power-generation technology is bypassing coal,” said Mark Brownstein, vice president of the climate and energy program at the Environmental Defense Fund.
Trump, however, has been a supporter of coal. “We’ll unleash the full power of American energy, ending the job-killing restrictions on shale oil, natural gas and clean, beautiful coal,” he said Thursday. “And we’re going to put our coal miners back to work.”
The 582-megawatt Kemper facility, in the east central part of Mississippi, is expected to supply enough power for 200,000 homes. It’s backed by $382 million in grants from the U.S. Energy Department, according to Southern, and designed to turn low-grade coal into gas to generate electricity while also capturing carbon dioxide and pumping it underground to aid oil recovery.
The plant feeds coal into a device called a gasifier, which converts the fossil fuel into a synthetic gas through a chemical reaction and strips out carbon dioxide that can be sent, by pipeline, to nearby oil fields.
“We see carbon capture as one of the critical-path technologies to get to a low carbon world,” said Kurt Waltzer, managing director for the Clean Air Task Force, an environmental group.
Read more: The future of coal
Trump has offered contradictory opinions on how to deal with coal-plant emissions. He’s vowed to kill the Obama administration’s Clean Power Plan, which calls for sharp cuts in greenhouse gases from power plants, providing a justification for projects like Kemper. At the same time, his administration says it’s committed to clean-coal technology and reviving America’s coal industry, according to the White House website.
Elsewhere, support remains for carbon capture, which some environmentalists say curbs the worst effects of climate change. On Jan. 10, U.S. power generator NRG Energy Inc. and Japanese energy producer JX Nippon Oil & Gas Exploration Corp. finished, on time and on budget, a $1 billion carbon-capture coal plant southwest of Houston. The carbon produced by the facility pumps oil and gas out of the ground, which helps cover its cost.
Bipartisan proposals to extend tax breaks for carbon-capture facilities such as Kemper have been introduced in Congress. They could provide additional revenue of as much as $4.5 billion to Southern, according to a study by Taxpayers for Common Sense and Friends of the Earth.
But 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.
Beyond Border
Fanning said he sees a “tremendous need” for carbon capture to reduce emissions across the globe, with coal expected to remain the backbone of electricity production in developing countries such as India and China. Atlanta-based Southern has struck clean-coal development agreements in South Korea and China.
“This technology will have ramifications far beyond the border of the U.S.,” Fanning said.
Yet the Kemper facility remains a point of legal contention. An oil producer, Treetop Midstream Services LLC, is suing for $100 million because of a canceled carbon dioxide supply contract. Customers including a Mississippi casino owner also sued, 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 said the legal challenges have no merit.
Operating Costs
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.
Mississippi regulators will have to decide how much of Kemper’s remaining cost can be passed on to the utility’s 186,600 customers. Per capita income in the state is the lowest in the U.S.
Regulators originally capped the amount ratepayers could be billed for Kemper’s construction at $2.88 billion, but another $1.4 billion may be passed along to customers to pay for financing, pipelines and a nearby coal mine related to the facility.
“It’s the gift that keeps on taking,” said Paul Patterson, an analyst for Glenrock Associates LLC, a New York-based research firm.