Dive Brief:
- Southern Co. is "immediately suspending start-up and operations activities" on the gasifier units of its Kemper County power plant, the company said in a release Wednesday.
- The 582 MW plant was designed to convert locally-mined coal into a synthetic gas and capture over half of its carbon emissions. But years of cost overruns and construction delays led Mississippi regulators to direct the utility to draw up a plan for the plant to run solely on natural gas, prompting Southern's decision.
- Mississippi Power, Southern's subsidiary in the state, will continue to operate the Kemper plant as a combined cycle natural gas facility. Shareholders have already lost $3.1 billion on the plant and the utility could be on the hook for $3.4 billion more if the utility cannot reach a settlement with regulators.
Dive Insight:
Once the great hope of the "clean coal" industry, the Kemper plant's grand ambitions now appear dead for good.
Announced in 2006, the plant was meant to be a hedge against natural gas prices and potential climate regulations. The facility would use lignite mined adjacent to the plant, convert it into synthetic gas and then capture and sequester 65% of its carbon emissions.
The plant was envisioned as a flagship demonstration for both CCS and gasification technologies, allowing utilities to continue burning coal in the face of a tightening carbon budget and stricter emission rules. But problems were apparent almost from the start.
By 2010, Southern officials announced that the expected cost of Kemper had risen from $1.8 billion to $2.4 billion, and that the in-service date would be pushed back a year, to 2014.
By 2013, those cost estimates had ballooned to $3.4 billion amid more delays, and last year the utility estimated the cost would be $6.6 billion. The most recent estimate put the plant's total cost at over $7 billion, though a regulatory decision limited the costs to ratepayers at $2.8 billion.
Company whistleblowers blamed poor project management for the issues in a July 2016 New York Times report, saying Mississippi Power concealed cost overruns and pushed unrealistic timetables. The utility denies the claims.
Earlier this month, Mississippi Power notified regulators that it would need to redesign and replace a crucial component the gasifier unit, adding 18 to 24 months of construction time while the rest of the plant continued to operate. Southern said at the time that the gasifier had operated for roughly 200 days, but declined to specify how long it could continuously run without needing to shut down.
In response, Mississippi regulators last week directed Southern to work up a plan that would allow Kemper to run solely on natural gas. An analysis of the project’s economics by the Mississippi PSC indicated the project would only be economic if natural gas prices rose considerably.
That regulatory directive prompted Southern to throw in the towel, company officials said in a statement.
"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 Commission," Southern chairman, president and CEO Tom Fanning said in the statement.
With work on the gasifier suspended, Mississippi Power will continue operating Kemper on natural gas. The company said it will participate fully in a new regulatory docket on Kemper costs expected to be established by the Public Service Commission at its July 6 meeting.
