Kemper: Good Investment of Dollars for Mississippi?

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With the EPA set to propose new carbon emission rules and hold forth the Kemper clean coal plant as a representative of carbon capture and storage technology, Bloomberg reviews the Kemper saga of cost overruns and controversy.

With the EPA set to propose new carbon emission rules and hold forth the Kemper clean coal plant as a representative of carbon capture and storage technology, Bloomberg reviews the Kemper story of cost overruns and controversy.

The article reports how Kemper’s costs have risen to a projected $4.7 billion with customers scheduled to absorb at least $2.88 billion in rate increases. Though operational costs are supposed to be cheap because of Kemper’s proximity to lignite coal, and though the power company plans to sell $50 million in coal byproducts a year, the high capital costs could be reduced:

If Southern just abandoned coal and used the turbines it’s already testing to burn natural gas, it could cut the cost of construction by more than half and generate more electricity for the grid, according to Ashby Foote, president of the Bigger Pie Forum, a Mississippi-based free-market non-profit representing ratepayers and businesses. Unless natural gas prices top $10 a British thermal unit for years and years, the plant will never cost less than a similar gas one, he said, citing a Mississippi Power document from 2009.

“If that’s the break-even point, this is going to be a big loser,” Foote said in an interview, citing the current drop in gas prices following the hydraulic fracturing boom. “This will be a drag on prosperity in Mississippi for the next 40 years.”

Even though the plant is supposed to be an example of clean energy, one of its opponents is the Sierra Club:

While many national environmental groups support carbon capture, critics look at the Kemper project and see a disaster. The Sierra Club says even with the new technology, coal is both [a] dirtier and more expensive fuel source than wind, solar or natural gas. And miners will continue to strip acres of land to unearth the coal, the group says.

Mississippi Power proposed the project as a way to deal with aging power plants and comply with environmental regulations. It was also a way to avoid an eventual 90 percent dependence on natural gas for power.

“Natural gas prices have been very volatile,” former Mississippi governor Haley Barbour, a proponent of the plant whose lobbying firm represents Southern, said in an interview. “It would be stupid to be reliant 80 percent on one fuel.”

In the same vein, what about putting 80 percent of your capital in one experimental low grade coal plant that will only produce 18 percent of your power? Would that not be equally stupid?

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