Talk about timing. Southern Co. last week pulled the plug on its Kemper integrated gasification combined cycle (IGCC) project in Mississippi just as President Donald Trump was wrapping up what the White House called Energy Week.

The Kemper project was supposed to turn coal from an adjacent lignite mine into gas to fuel a 582 MW power plant and capture and as much as 65% of the carbon dioxide that the plant would have emitted.

Originally estimated at $1.8 billion, Kemper's cost ballooned over a decade to $7.5 billion project. Its failure is an expensive black eye for Southern, but it is also being viewed as a death knell for "clean coal," which happens to be one of Trump’s central energy agenda items.

The New York Times called it a “blow” to the technology, and a post by Sandy Buchanan, executive director of the Institute for Energy Economics and Financial Analysis said that Kemper’s failure “proves that clean coal is a myth.”

In fact, the two newest technological components of the project are both technically functional. Coal gasification works, though Kemper was never able to run its units for long periods of time. And carbon capture and sequestration (CCS) works; it has been used reliably for decades by oil companies.

The problem is getting either technology to pencil. 

In the power sector, CCS technology is in use at the Boundary Dam project in Saskatchewan, Canada, a $1.5 billion, 160 MW (110 MW net after CCS) that captures 90% of its CO2 and entered service in 2016. Most of the captured CO2 is injected into oil wells for enhanced oil recovery. The rest is stored underground.

But Southern was not able to get the Kemper gasifiers to work reliability, consistently and in concert with the other components of the project, leading to its eventual scrapping. Southern now says it plans to run the project on natural gas.

The Mississippi Public Service Commission has scheduled a July 6 meeting to draw up a potential solution to the Kemper project. In a June letter about the meeting, the PSC said any potential solution to the Kemper issues should include measures “to remove the risk from ratepayers for the lignite coal gasifiers and related assets” and modifications that would “allow only for operation of a natural gas facility at the Kemper Project location.”

“The ultimate responsibility for determining the fate of Kemper lies with the PSC,” Southern spokesperson Schuyler Baehman said. But no matter the outcome of that proceeding, insiders say market conditions and the regulatory environment mean new "clean coal" projects face long odds. 

Kemper's demise 

In the aftermath of Southern's announcement, many post-mortems focused on accusations of poor project management at the CCS plant. Company whistleblowers shed light on many of the issues in a July 2016 New York Times report, saying Southern subsidiary Mississippi Power concealed cost overruns and pushed unrealistic timetables. The utility denies the claims. 

But regardless of project management, the Kemper project was always an ambitious technological endeavor. The company was trying to step up its gasification technology from a pilot scale to a commercial project — an increase in scale of more than 100 times — said Howard Herzog, senior research engineer at the MIT Energy Initiative.

Southern was also trying to pioneer a gasification technology called Transport Integrated Gasification (TRIG) that it co-developed with Kellogg, Brown, & Root (KBR) and the Department of Energy at a site in Wilsonville, Ala.

Kemper would have taken that technology to commercial scale.

The DOE also helped fund Kemper, providing $407 million of “total cost share," about $270 million in original financial assistance as part of Clean Coal Power Initiative and an additional $137 million under the 2016 Consolidated Appropriations Act for Kemper.

Kemper also received 85% of the $160 million total reallocation of funds based project recipient cost share under 2016 Consolidated Appropriations Act mandated reallocation of funds.

Southern also had, or has, ambitions for selling the TRIG technology globally. After Trump’s energy speech last week, Thomas Fanning, Southern’s CEO, told Axios that his company has signed “a variety of agreements around the world that need this kind of technology.”

Most of those projects are in the study phase, he said, adding that places like Eastern Europe, Serbia, Romania, Poland, South Korea, and China “will find that technology valuable.”

In 2015, Southern and KBR signed a letter of intent with Alps Energy of South Korea to evaluate the use of the TRIG technology at a 1,000 MW plant in South Korea. Southern and KBR have also licensed the TRIG technology to the Tian Ming Electric Power Co. for a facility under construction in China.

It remains unclear if the Kemper cancelation will affect those overseas contracts, but CCS boosters point out that a simpler carbon capture project is already operating in the U.S. 

Clean coal's future

Petra Nova, the only operating CCS project at an operating power plant in the nation, stands in stark contrast to the complexity and scale of the Kemper project.

Petra Nova, which was developed by a partnership of NRG Energy and JX Nippon Oil & Gas Exploration, captures about 90% of the CO2 from a 240 MW slipstream of NRG’s much larger W.S. Parish coal plant. The project went online last fall, capturing CO2 and shipping it to Hilcorp's West Ranch oil field in Jackson County, Texas.

The CCS portion of the Kemper project cannot be used separately from the gasifiers because the CCS technology was designed to be used with the much higher pressure of gas coming from the gasifiers. Baehman said the CCS portion of the Kemper project was suspended along with the gasifiers.

In contrast to Kemper, Petra Nova used off-the-shelf CCS technology and involved a retrofit of an existing plant, not the building of a new plant, making it much cheaper than Kemper.

The Petra Nova facility received $300 million from NRG and from JX Nippon. And, like Kemper, Peta Nova received government support. The DOE provided a total of $190 million in funding. And the Japan Bank for International Cooperation and Mizuho Bank Ltd. provided $250 million in loans.

In the end, the complexity of Kemper's new gasification and CCS technology proved the nail in Kemper's coffin, while low gas prices pushed it closer to the grave.

Early in June, Southern officials told regulators they would need to continue work on the gasifiers "over the next several years" to fix leaks in equipment that handles heated gas. Meanwhile, a PSC analysis indicated it would be cheaper burn natural gas in the plant unless prices for the fuel rose considerably.

Following those findings, the PSC issued its June letter pushing gas-only plans for Kemper, leading Southern to scrap the gasification portion entirely. Shareholders have already lost $3.1 billion on the plant and the utility could be on the hook for $3.4 billion more if it cannot reach a settlement with regulators.

Industry officials say it is important to view those costs in the context of the current energy environment, in which low cost natural gas made possible by hydraulic fracturing is under cutting most other forms of conventional generation, such as nuclear and coal-fired plants.

When Southern was planning Kemper, gas prices were about $10 per million British thermal units. They are now about $3/MMBTU. “I think that's where the issue is,” Fanning told Axios.

Most analysts expect gas prices to remain low for the foreseeable future and that, as much as anything else, is bad news for the prospects of CCS.

Herzog said he does not expect to see new projects as big as Kemper and expects CCS activity to be very low.

“If you can put carbon in the atmosphere for free, why snap [CCS] on?” he said.

Strong regulations on carbon could make CCS plants more viable, Herzog said, but that “is the exact opposite signal being sent out of Washington."