Recent Cost Overruns, Challenges Still Worth the Risk, VP Says
Tamar Hallerman
GHG Monitor
5/17/13
PITTSBURGH—Despite substantial cost increases and an ongoing legal and regulatory battle with the Sierra Club, a Southern Company official said in a speech this week that the utility giant is still pleased with its multi-billion-dollar investment in its Kemper County IGCC project. During a plenary address here at the 12th Annual Conference on Carbon Capture, Utilization and Storage, Southern Company Senior Vice President and Chief Environmental Officer Chris Hobson said the traditionally coal-reliant utility—which has in recent years switched a significant chunk of its generation to natural gas—still sees Kemper as a good fit for the company’s portfolio. “The beautiful thing about IGCC is that the cost of electricity beats natural gas even today,” he said about the 582 MW gasification facility currently under construction in eastern Mississippi. “Mississippi lignite is a very inexpensive fuel source, so while the capital costs for this kind of project are high, the energy costs going into the future are very low. So even today, with very low natural gas prices, Kemper looks like a very good decision.”
Southern’s Kemper County facility—which is expected to be in service in May 2014—has faced a series of legal, regulatory and economic woes over the last year. Most recently, the utility announced late last month that it plans to absorb $540 million in cost increases from the facility instead of passing the expense on to its nearly 200,000 customers. The facility now has an updated price tag of $3.42 billion (excluding the cost of its lignite mine and CO2 pipeline), more than $1 billion above the plant’s initial baseline cost. Southern Company and its subsidiary Mississippi Power have also faced consistent legal and regulatory challenges from the state chapter of the Sierra Club, which is aiming to void the project’s certificate as approved by state utility regulators.
The project has a $270 million Department of Energy grant to capture 65 percent of CO2 emissions for local enhanced oil recovery operations operated by Denbury Resources. Southern also plans to rely on more than $133 million in federal investment tax credits to make the project work economically. Hobson underscored during his speech this week that a lot has changed in the years since the utility first committed to the project. “It is a first-of-a-kind technology, so there will always be issues associated with such new technologies,” Hobson said. “Kemper hasn’t been immune from those, but we are still very excited about the project and we think that it is going to provide energy from the citizens of Mississippi for many years to come at prices that are very affordable.”
