Will Kemper County IGCC Become the World's Most Expensive Gas-fired Power Plant?

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Mississippi Power Company (Gulfport, Mississippi), a unit of the Southern Company (NYSE:SO) (Atlanta, Georgia), may wind up being the not-so-proud owner of the world's most expensive gas-fired power plant--the Kemper County integrated gasification combined-cycle (IGCC) facility. On June 21, Mississippi utility regulators voted unanimously to have legal counsel prepare a draft order mandating that Mississippi Power burn only natural gas at Kemper, abandoning gasification of lignite as a power plant fuel and forcing the companies to eat billions of dollars of cost overruns tied to the plant's lignite coal gasifier and related assets.

The Mississippi Public Service Commission (MPSC) (Jackson, Mississippi) will vote on the draft order July 6.

If approved, the order would be a humiliating, multibillion-dollar defeat for the utility and its corporate parent. Originally developed when natural gas prices were significantly higher than they are today, and with the prospect of a carbon tax on the horizon, the 582-megawatt (MW) Kemper County IGCC would use a first-of-its-kind process to turn local lignite into synthesis gas, burn it in a generator and capture about 65% of the carbon dioxide (CO2) emissions. Originally budgeted at about $2.9 billion, the plant's price tag now is about $7.5 billion, and it is years behind schedule.

Assuming $7.5 billion is the final price tag to build the Kemper County IGCC, the lignite mines and the CO2 pipeline to transport the gas, Mississippi Power will have paid about $12.9 million per MW of installed generating capacity--over 12 times what it cost to build a new high-efficiency gas turbine power plant. Mississippi Power officials estimated they have spent about $1.54 billion for the lignite mine and the CO2 pipeline. Even if those costs are removed from the calculations, Kemper County IGCC would still be the world's most expensive gas-fired power plant, costing about $10.3 million per MW of installed capacity.

The project has been plagued by delays and cost overruns. Mississippi Power and Southern Company have pledged to absorb some of those cost overruns. Twice in the last two months, Mississippi Power has had to postpone the date of commercial operations for the new plant, most recently when it determined it needed to repair equipment. For more on that, see June 14, 2017, article - Kemper County Plant Delayed Again, Will Need Costly Repairs and May 3, 2017, article - Kemper County IGCC Delayed Again, Expected to be Operating by End of May.

But there is a chance Mississippi Power and Southern Company can cut their losses on the Kemper plant. In a June 21 statement, Mississippi utility regulators encouraged a settlement between the plant's owner and a variety of intervenors that covered the following items:

• Remove risk from ratepayers for the lignite coal gasifier and related assets
• No rate increase to Mississippi Power Company customers
• The potential for a rate reduction, particularly for residential customers
• The settlement should include modification or amendment of the original certificate to allow only for operation of a natural gas facility at the Kemper Project location

The MPSC also is seeking a "solution that eliminates ratepayer risk for unproven technology and assures no rate increase to Mississippi Power customers," the agency said in a June 21 news release.

While critics of the plant and its ballooning costs welcomed the move, Mississippi Power officials had a more measured response: The MPSC "established a process to address project costs and encouraged discussions among all parties to reach agreement" said a statement from the utility. "The MPSC provided several guidelines to consider for the negotiations, including the possibility of the project only operating as a natural gas-fueled combined cycle plant. We expect the process for any negotiations and this new docket will be formally addressed as part of a proposed order the commission will consider at their July 6 meeting."

"While IGCC technology has been available for decades, the TRIG [Transport Integrated Gasification] technology being used at Kemper County, to convert low-Btu, high-water-content lignite to syngas, is new," said Britt Burt, Industrial Info's vice president of research for the Global Power Industry. "The Kemper County project is a very good reason why power companies are hesitant to be the first to demonstrate a new technology, particularly an expensive one. Originally envisioned as a critical element in keeping the coal option alive for power companies operating in a carbon-constrained world, the market found other solutions, including natural gas and renewable energy."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook-Twitter-LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.