Kemper IGCC plant costs escalate by another $45M

Dive Brief:

Mississippi Power reported to parent Southern Company and the Mississippi Public Service Commission that the cost of its Kemper County integrated gasification combined cycle (IGCC) plant, originally estimated at $2.4 billion, has gone up another $45 million to $6.17 billion.
The Kemper facility went online in August using natural gas as its fuel. Gasification of the lignite coal from the mine at the plant’s site is presently scheduled for the first half of 2016. The new costs are reportedly due to completing the plant’s construction, preparing it for operation, starting it up, and commissioning it.
Though Mississippi Power reported there could be further unbudgeted construction costs associated with weather delays, labor, and new technology engineering and design issues, it will not seek cost recovery through customer rate increases or joint owner contributions beyond the $2.88 billion cost cap imposed by state regulators.

Dive Insight:

While cost overruns are becoming more common at Kemper, Mississippi Power told Utility Dive it's because the utility started construction with only 15-20% of the design completed.

“Where we missed it, and where many first-of-a-kind facilities like the Kemper facility miss the mark on estimating, is in the quantities of piping and wiring and the labor associated with these materials,” Media Relations Manager Natalie Campen wrote to Utility Dive in December.

By converting coal to gas, the Kemper facility reduces the carbon dioxide and other pollutant byproducts of electricity generation to levels comparable to those produced from burning natural gas. The company claims the technology will reduce carbon dioxide emissions by 65%.

The Kemper facility uses the Transport Reactor Integrated Gasifier (TRIG) technology which adds to the efficiency of the lignite burning process by re-processing unconverted coal a second time. That allows for conversion at a lower temperature and therefore a lower cost than in other gasification technologies, according to the utility.

The Kemper IGCC technology would, according to Mississippi Power, allow for the continued use of lignite in electricity generation and keep up to half the world's coal reserves in the resource mix.

Southern Co. reported Q4 2014 probable losses on the Kemper IGCC facility of about $70 million, in addition to previous charges of $1.98 billion prior to Sept. 30, 2014.