The Kemper power plant seems to have morphed from a model clean coal plant to a warning sign, according to a front page story in Monday’s Wall Street Journal.
The article explains that while the federal government has pinned hopes on clean coal, holding up Mississippi’s Kemper power plant as a model for meeting new low carbon emission standards, circumstances have grown smoggy for Kemper investors and customers.
The plant has tallied close to $2 billion in cost overruns. It recently had to forego $133 million in tax credits because it won’t meet its completion deadline. Stock and company value have dropped. And customers have already been charged a 15 percent rate increase even though the plant hasn’t supplied them with power yet.
The energy market has grown skittish:
“One of just three clean-coal plants moving ahead in the U.S., Kemper has been such a calamity for Southern [Company] that the power industry and Wall Street analysts say other utilities aren’t likely to take on similar projects, even though the federal government plans to offer financial incentives.
Southern recently took $990 million in charges for cost overruns approaching $2 billion. The company’s stock has been battered in the past year, and the company’s market value has dropped $6.4 billion since April, to $35.8 billion. Mississippi Power’s credit rating has dropped to three notches above junk.
Kemper ‘is scaring people away,’ says Michael Haggarty, an analyst for Moody’s Investors Service in New York.”
Those at the federal level still seem confident about the building of more clean coal plants like Kemper, though Southern Company seems uncertain about widespread imitation of the plant.
Kemper is designed to cut out 65 percent of CO2 emissions by turning lignite coal into syngas before it’s burned. Those at the federal level say new technology is often expensive to start with, but costs should eventually drop.
The natural gas boom cast a new light on the value of such technology. Instead of natural gas prices making their way to $20 per million BTUs, as Mississippi Power had forecast, new natural-gas extraction methods have kept prices low, currently at $3.75 per million BTUs.
Critics of the plant are concerned about the effect of Kemper’s higher electricity prices on Mississippi’s competitiveness. One small business owner said this could mean the difference for whether he stays open or not:
“In Meridian, just south of Kemper County, Neubern Atkinson says his Lucas Road Art and Jewelry gallery hasn’t recovered from the recession. ‘I’m already on a shoestring budget in this economy,’ the 66-year-old says, ‘and this may be the deciding factor in me staying open.'”
Apparently, most of those who favor Kemper are the locals who’ve benefited from the business boom caused by the plant’s construction. Interestingly, some of them won’t even have to pay Kemper rates because they get power from Tennessee Valley Authority, one of the cheapest providers in the country.
Source: Smith, Rebbecca & Cameron McWhirter. “Mississippi Plant Shows the Cost of ‘Clean Coal.‘” The Wall Street Journal. 13 Oct. 2013.