Flagship "clean coal" project abandoned, despite $10bn investment | RenewEconomy

Flagship “clean coal” project abandoned, despite $10bn investment

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The project, which relied on a “gasifier” to turn a cheap and common grade of coal into fuel, is over, at least for now, Southern said.

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Desmog Blog

In a major blow to proponents of “clean coal” technology, Southern Co, parent company of Mississippi Power, announced in a Securities and Exchange Commission filing today that it’s throwing in the towel on efforts to generate electricity from coal and will instead use only natural gas at its flagship Kemper County, Mississippi power plant.

thomas fanning CEO copy

The project, which relied on a “gasifier” to turn a cheap and common grade of coal into fuel, is over, at least for now, Southern said.

“On June 28, 2017, Mississippi Power notified the Mississippi PSC that it is beginning a process to suspend operations and start-up activities on the gasifier portion of the Kemper IGCC.”

Further, Southern warned that it may record a $US3.4 billion loss for the project in the second quarter of 2017, depending on how negotiations with state utility regulators unfold.

If “Mississippi Power does not ultimately obtain rate recovery of the $3.4 billion … , Southern Company and Mississippi Power would be required to recognize a charge to income in the second quarter of 2017 for those unrecovered costs, in addition to any other costs required to be incurred,” the SEC filing says.

The filing comes on the heels of a historic vote by Mississippi’s state regulators that rejected asking the 187,000 customers who may get electricity from Kemper to pay for the long-delayed and far over-budget “clean coal” experiment.

The 582-megawatt plant, initially projected to cost $US1.8 billion, has so far run up a bill of over $US7.5 billion ($A10 billion) in construction and engineering expenses. In comparison, a typical 700-megawatt natural gas plant would have cost roughly $US700 million to build, according to the Wall Street Journal.

Earlier this month, Southern told investors that vital machinery for the coal-powered section of the plant had started leaking, and would take 18 to 24 months to repair.

Mississippi Power Co. still plans to try to recover some or all of the $US3.4 billion from power customers, Southern Co. said in its SEC filing.

The company will pursue that through settlement negotiations and “any available settlement alternatives” and other options to recover its costs.

The state regulators have been gearing up for the potential legal battle, expanding their legal budget from $200,000 to up to $2.5 million and hiring two large law firms with experience in utilities law, as the Climate Investigations Center recently reported.

“The ultimate outcome of these matters cannot be determined at this time,” Southern Co. said in its 8-K filed today.

Over a Decade of Delays

Kemper was supposed to be the nation’s first new “clean coal” power plant, capable of taking the world’s dirtiest but most abundant kind of coal, lignite coal, and turning it into a dirt-cheap fuel providing electricity while churning out roughly the same carbon emissions as a power plant burning natural gas – a plus for the power bill as well as the planet.

Plans for the Kemper project were first announced by Southern Co. in December, 2006. Over a decade later, the power plant is still not fully up and running and its price tag has spiked from $US1.8 billion then to $US7.5 billion now – making it one of the most expensive power plants per megawatt ever built in the U.S.

Earlier this month, Mississippi officials sent a clear message to the plant’s builders: when it comes to “clean coal,” we’re not buying what you’re selling any more.

Mississippians don’t want to pay for a ticket on a plane that isn’t going to fly,” Paul Patterson, a utilities investment analyst, told the Wall Street Journal.

Instead, the Kemper power plant “should operate using only natural gas,” the Mississippi Public Service Commission announced, adding that it was commencing negotiations with Mississippi Power Co. to figure out how to protect the state’s electricity customers from having to pay for a plant that seems to have been better at burning through capital than coal.

In its SEC filing today, Southern Co. said that while the “clean coal” portion of the plant is suspended, Kemper will indeed keep running on natural gas, but added that it planned to dispute some of the $3.4 billion in costs – meaning that legal battles may be only just beginning.

We are committed to ensuring the ongoing focus and safety of employees while we consider the future of the project, including any possible actions that may be taken by the [Mississippi Public Service] Commission,” Southern Company Chairman, President and CEO Thomas A. Fanning said in a statement.

“We believe this decision is in the best interests of our employees, customers, investors and all other stakeholders.”

The Kemper project has suffered from a long string of delays and cost-over runs. The most recent setback, which was made public by Southern on June 5, will require builders to rip through a dense labyrinth of steel pipes to replace crucial equipment that’s already started leaking, adding up to two years of additional work at a cost of $164 million.

Company records, recorded phone calls and other testimony provided to the New York Times last year by a whistleblower showed Southern Co. officials may have deceived investors and the public by knowingly concealing problems along the way.

Last May, the Securities and Exchange Commission launched an investigation into those concerns.

Source: Desmog Blog. Reproduced with permission.

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  1. Tim Buckley 3 years ago

    Tony Abbott and Josh Frydenberg love “clean coal”, and will view this minor setback as part of the learning curve. Australia should build one of these with taxpayer money, according to the MCA. There’s a great value-adding idea to take Australia forward, not!

    • john 3 years ago

      Yes it will be brilliant it will produce power about 18c per kWh which means you pay about 40c per kWh how good it that do you not feel great again?

      • Ren Stimpy 3 years ago

        More 457 visa workers brought in to scrub CO2 out of the coal with brushes and good old elbow grease might help get some of that cost down.

        • Marcus L 3 years ago

          Not to mention the GL of scarce water used

          • Calamity_Jean 3 years ago

            Mississippi has plenty of water. What they don’t have is plenty of money. It’s a relatively poor state.

    • Chris Fraser 3 years ago

      The question is How do they keep a straight expression while discussing it ? Surely it’s not just their pig-ignorance of their subject ?

      • Goldie444 3 years ago

        Err Yes

    • Joe 3 years ago

      Toned Abs and Joshie F……CLEEEEEEEEEEN COAL….that’s what we want. CLEEEEEEEEEN COAL now and forever.

  2. Tim Forcey 3 years ago

    So gas will be burned instead of coal. Will the CO2 produced from burning that gas be captured?

  3. john 3 years ago

    This whole exercise like the one north of it have shown that this is a total joke exercise which does not work.
    it is hideously expensive and delivers power at a non competitive price.
    Perhaps look at the type of fuel being used duh.
    No doubt this will be hailed as a brilliant example of the way to go forward by those who are let one say simply are deluded.

  4. trackdaze 3 years ago

    Taken to the cleaners

  5. Gnällgubben 3 years ago

    You get a lot of solar panels and wind turbines for $10bn. It might even be enough to get a decent amount of storage as well.

  6. Marcus L 3 years ago

    The high price of ideology, and looking after the old fossils

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