The Institute for Energy Economics and Financial Analysis has issued a report that claims that Mississippi Power’s Kemper County integrated gasification combined cycle power plant project is in far worse shape than indicated in the company’s recent public statements.
“The analysis reveals that the plant, with its untested gasification technology, is behind schedule in both engineering and construction, and at less than fifty percent complete, is likely to see further delays and cost overruns,” said the Sierra Club in a Nov. 19 statement about the report.
“The evidence shows that Mississippi Power’s plant is more expensive, and is taking substantially longer to complete, than originally planned for by the company and the Public Service Commission,” said David Schlissel, with the Institute for Energy Economics and Financial Analysis. “Looking at a similar plant in Indiana, there’s a strong likelihood that Kemper’s costs will continue to rise and delays will continue. The picture is not nearly as rosy as Mississippi Power spokespeople would have the public believe. The Kemper plant will already be a serious burden for ratepayers, and if trends continue, the financial impacts will be disastrous.”
The report compares the Kemper County (also known as Plant Ratcliffe) project to Duke Energy’s (NYSE: DUK) Edwardsport IGCC in Indiana. The Edwardsport plant is two years farther along on construction than the Kemper County project, is more than one billion dollars over budget and is also significantly behind schedule, the Sierra Club said.
Highlights from the report findings include:
- The Kemper County project is likely only 40%-45% complete, not the “more than 70 percent complete” that Mississippi Power has claimed, and its construction is behind schedule;
- Direct construction costs are 20% higher than Mississippi Power predicted in 2010, during the certification process at the Mississippi Public Service Commission;
- Mississippi Power now estimates that it will have to spend nearly $200m more in project financing costs than the amount certified by the Mississippi commission and this figure could rise much higher;
- The most recent review by the commission’s Independent Monitor showed that concrete work at Kemper was 23% behind schedule at the end of July and steel work was 10% behind schedule; and
- Further construction cost increases and delays during plant startup and testing are likely.
“More than two years after the Public Service Commission originally approved this plant, we’re looking at a project that has consistently cost more than planned, has taken longer than planned, and shows no signs of correcting the course,” said Louie Miller, State Director of the Mississippi Sierra Club. “Sierra Club has fought this dirty, expensive, and unnecessary plant because in the end, Mississippi families and businesses will be forced to shell out, at present, $3.62 Billion dollars and rising, to build a plant that is already hundreds of millions over budget and is not guaranteed to work on day one. And once Mississippians start to pay, they will be paying for 40 years, even with cheaper, cleaner energy sources available. We knew this was a bad deal for Mississippi Power customers from the beginning. The Public Service Commission needs to step in and pull the plug before customers are made to foot the bill for Mississippi Power’s billion-dollar mistake.”
Mississippi Power cites project progress, monitor’s report
Mississippi Power, a unit of Southern Co. (NYSE: SO), had issued no response on its website as of the afternoon of Nov. 19 on the report claims. It did on Nov. 13 issue an update on the Kemper County project, noting that it is now more than 70% complete and has achieved several major milestones in recent weeks.
The reservoir that will hold the plant’s cooling water is now being filled with treated effluent from the City of Meridian, Miss. In addition to the environmental benefit of using treated effluent, the plant is designed as a zero liquid-discharge facility. None of the water used in the process of generating electricity will be discharged, protecting local streams and waterways.
Also, the plant’s two largest pieces of equipment were delivered to the site recently. The components will aid in reducing emissions, and the byproduct produced will be sold to lower the plant’s overall cost to customers once it is in service. The delivery was a coordinated effort between the Mississippi Department of Transportation, the Kemper County Sheriff’s Department, the City of DeKalb, Tennessee Valley Authority, 4-County Electric Power Association, East Mississippi Electric Power Association and Burkhalter Rigging.
Also, energy began flowing for the first time from the Mississippi Power grid and the plant’s switchyard to the main electrical building.
“These milestones are indicators of the tremendous progress being made every day to deliver 21st century coal technology to our customers,” said Tommy Anderson, vice president of generation development at Mississippi Power. “And with more than 3,000 workers on-site today, the project is helping to fuel the Mississippi economy.”
In addition to these construction milestones, the Mississippi commission’s independent monitor recently completed a thorough review and filed a report in which it agreed that the Kemper County facility is the most economic option when compared to converting this facility to natural gas or building a new natural gas plant at one of the company’s existing facilities, the utility sad. “The independent monitor’s findings lend further confirmation the project is the best solution for meeting Mississippi Power customers’ long-term energy needs,” said Anderson.
Kemper County remains on target for deployment in May 2014, Southern CEO Tom Fanning said in the Atlanta-based holding company’s third quarter earnings call on Nov. 5. The $2.88bn plant is designed to gasify locally-mined lignite coal and capture most of its CO2 emissions. The Sierra Club still has an appeal on the IGCC plant pending in Mississippi courts, Southern officials said.
The Southern CEO also took pains to say that the Kemper County project would not be subject to the cost issues associated with the Edwardsport IGCC project. “This is our technology. We are not buying from a third party,” Fanning said. The Southern CEO also stressed that Southern has been deeply involved in coal technology research for decades. “We know how to build stuff,” Fanning said.