Correction: This post has been updated to remove references to potential regulatory discussions about abandoning the completion of gasification units at Kemper. Those references were attributed to reporting from Power Magazine, which has since updated its article.

Dive Brief:

• Mississippi Power needs to redesign and replace a crucial component of its Kemper integrated gasification combined-cycle project, adding 18 to 24 months of construction time while the rest of the plant continues to operate.
• The utility, a unit of Southern Co., told regulators that it expects the facility to be operational by the end of June, but will undertake improvement projects "over the next several years" to fix leaks in equipment that handles heated gas, along with other issues. 
• The utility also filed a rate plan with the Mississippi Public Service Commission that would allow current rates of recovery for portions of the Kemper plant to remain in place. The company is in discussions with regulatory staff on how to address recovery of the remaining project costs.

Dive Insight:

Mississippi Power’s Kemper project outside Meridian has been operating, but not as designed. The project has had trouble getting both of the project’s two gasifiers to operate consistently.

The 582 MW project is designed to convert locally mined lignite into a synthesis gas and to capture up to 65% of the carbon dioxide emissions from the plant.

But the project has been subject to multiple delays and cost overruns, the most recent in early May, when the utility said the project would be fully operational by the end of that month.

Mississippi Power now is shooting for full operation at the end of June, but construction will continue on the project's gasifiers, which have experienced leaks and unanticipated ash buildup during testing. 

"[A]chievement of long-term sustained operations is expected to require the redesign and eventual replacement of the syngas cooler superheaters sooner than originally expected, primarily as a result of the leaks experienced," Southern officials wrote in a filing with the Securities and Exchange Commission. 

Sustained operations will also require "relocation of the ash loading process," along with other "minor enhancements."

Every delay adds to the project’s cost. The project’s original cost, in 2012, was $2.4 billion. The cost is now $7.2 billion, and Southern did not give estimates on how much the extended gasifier construction would cost.

Redesigning portions of the gasifiers will not render the plant inoperable, as it has operated mostly on natural gas this year and has used the gasifiers for short periods of time.

While the company says Kemper has run on lignite-derived syngas for about 200 days, it declined to tell the Wall Street Journal how long the gasifiers can operate continuously without needing to be shut down.

An analysis of the project’s economics by the Mississippi PSC indicates that the project is not economic at current natural gas prices and would only be economic if natural gas prices were high.

Power Magazine reported last week the cost concerns could spark discussions between Southern officials and regulators about scrapping the gasification portion of the project. 

That post has since been updated to remove the reference, but Southern provided no comment on regulatory discussions when reached by Utility Dive. 

On an earnings call last month, Southern CEO Tom Fanning told analysts that the gasification portion of the plant remains a "hedge" on natural gas prices and that it is possible Kemper could end up operating simply as a combined cycle gas plant. 

"As we have built into the technology the ability to operate under dual fuels, we've been able to demonstrate the ability to deliver whatever energy is the cheapest," he said. "So there is a possibility you could do that, we'll just have to see."