CCS ADVOCATES HAVE HIGH PRAISE FOR KEMPER PROJECT

Tamar Hallerman
GHG Monitor
9/13/13

Carbon capture and storage advocates touted Mississippi Power’s Kemper County gasification plant as a pioneering ‘clean coal’ facility at a roundtable event this week, sidestepping reports of further cost increases at the now $4.7 billion plant. Speakers at an Atlantic Council-sponsored roundtable in Washington said Kemper—which is expected to become the nation’s first large-scale power generation plant with CCS—will provide invaluable information about the economics of the new technology. “First-of-a-kind demonstrations like Kemper will provide that learning curve to bring down costs and close those gaps in terms of contingencies on components that otherwise would make [CCS] projects higher in cost. Bottom line, Kemper allows us to do things better, faster and cheaper for the future,” said Victor Der, the Global CCS Institute’s general manager for North America who previously helped oversee the project as acting Assistant Secretary for Fossil Energy (FE) at the Department of Energy. 

Der said first-generation CCS demonstration projects like Kemper are especially valuable during a time when funding for all federal programs is tight. “We see that existing funding for demonstrations right now is sort of drying up. That makes these first-of-a-kind demos like Kemper not only important, but extremely precious, because they are the key to launching a CCS [industry] for the future,” Der said. Darren Mollot, director of FE’s Office of Clean Energy Systems, said demo projects like Kemper are needed to “show financiers, regulators and the public that there’s a [CCS project] that’s actually operating.” With the help of a $270 million DOE grant, Mississippi Power plans on capturing 65 percent of CO2 emissions from the lignite-fired facility and transporting that 3.5 million tonnes of CO2 via Denbury Resource’s existing Green Pipeline to a depleted oil field south of Houston for enhanced oil recovery operations.

Supporters Skirt Cost Concerns

Speakers at the event avoided discussing the cost of the 582 MW integrated gasification combined cycle facility, which, according to recent filings, has topped $4.75 billion, nearly twice Mississippi Power’s initial estimates for the plant. Randall Rush, general manager for Gasification Technology, Research and Environmental Affairs at Southern Company, Mississippi Power’s parent company, declined to directly answer a question about whether Kemper’s cost is of concern, especially now that Southern plans to market its TRIG gasification technology in use at the facility abroad. “Technically, [TRIG] is ready. I’m not sure I’m qualified to talk about costs,” Rush said. “Every country, every market has its own drivers and what makes economic sense. What might make economic sense in one country may not make economic sense in another.”

His remarks came days after Mississippi Power CEO Ed Holland told the Clarion Ledger newspaper that the utility plans to seek an overall 22 percent rate hike on its nearly 200,000 ratepayers to cover Kemper’s capital costs. “We will not come back to the [Mississippi Public Service] Commission for more rate increases for the Kemper plant,” if the 22 percent increase is approved, Holland reportedly said. Regulators approved a 15 percent rate hike for the utility’s customers in April and subsequently agreed to an additional 3 percent increase for 2014. But Mississippi Power officials have said that a rate increase of an additional 4 percent may be necessary after Kemper comes online in order to cover the $1 billion in bonds the utility is issuing under a January settlement agreement, which limits the amount of money the utility can recover from its ratepayers. The Sierra Club, Kemper’s most vocal and well-funded opponent, is pushing the PSC to rule that spending at the facility has been ‘imprudent,’ which would shift the entire cost of the facility to Southern’s shareholders, which over the last several months have shouldered nearly $1 billion in cost overruns tied to the IGCC plant. 

A trio of Mississippi state senators in attendance at this week’s event said that despite recent overruns, Kemper is being built “at a reasonable cost” and generally spoke in favor of the facility. “The rate increases are going to be somewhere near what they were when [Mississippi Power] opened its last plant down in Gulfport, Miss. It’s not exorbitant. It’s going to pay dividends down the road,” said Sen. Terry Burton (R), chairman of the Mississippi Senate’s Energy Committee.

Combustion Turbines First Fire

Mississippi Power said this week that both of Kemper’s combustion turbines have undergone first fire in recent weeks. “Employees safely and successfully executed the first fire process and completed all necessary checks and tests to ensure the combustion turbines’ capabilities,” John Huggins, vice president of generation development, said in a Sept. 12 statement. “This milestone is further indication that we are one step closer to the startup of the plant.” The utility said it also completed the first fire of Kemper’s auxiliary boiler ahead of schedule in August.

This story has been modified to clarify language related to rate changes for Mississippi Power’s customers.