Sierra Club, Mississippi Power spar over IGCC cost report

A report issued in partnership with the Sierra Club said Mississippi Power’s Ratcliffe integrated gasification combined-cycle (IGCC) power plant in Kemper County, Miss., is likely to cost at least $3bn and could lag as much as eight months behind schedule.

The Southern (NYSE: SO) subsidiary touts the 582-MW facility as a landmark technology project that will gasify locally-mined lignite coal to generate electric power.

But the Sierra Club said Nov. 28 that a study by the Institute for Energy Economics and Financial Analysis (IEEFA) indicates that project could be a budget buster.

The IEEFA website describes its mission to “accelerate the United States’ transition to a diverse, sustainable and profitable energy economy and to reduce the nation’s dependence on coal and other non-renewable energy resources.” In recent months it has issued reports critical of a proposed coal export terminal as well as the economics of the Prairie State coal station being developed by American Municipal Power (AMP) and other stakeholders.

Company rejects Sierra Club claims

“The Sierra Club’s assertions are just another example of this out-of-state, special interest group’s attempt to stop this project,” a Mississippi Power spokesperson said Nov. 30. “The project is creating jobs and will provide low-cost electricity to benefit Mississippi Power customers for decades.”

The Sierra Club findings are at odds with findings by an independent state monitor, the company representative said.

The latest IEEFA counters what the utility said in an Oct. 19 news release that said the project is 70% complete and on schedule for completion in May 2014. The company also said the project remains on target to stay at or below $2.8bn in costs.

The Sierra Club said the IEEFA study and an analysis by Burns and Roe casts doubt on Mississippi Power’s claim that the project is 70% complete.

The Nov. 19 report by the IEEFA’s David Schlissel said although the project’s direct construction cost is capped, further cost increases will raise the non-mine financing costs that ratepayers will have to pay.

The IEEFA report also said that while the process that the utility plans to use to capture carbon dioxide (CO2) has been used in industry, “it has not yet been used on the commercial scale at which it would be used at the proposed plant.”

The project is designed to capture much of its CO2 for use in enhanced oil recovery efforts.

“The company has continued to try to whitewash this boondoggle but that dog won’t hunt,” said Louie Miller, state director of the Mississippi Sierra Club. “The Burns and Roe Engineering analysis suggests that the start of commercial operations could be as much as six or seven months later than Mississippi Power admits. By failing to use basic project management practices, Mississippi Power is ignoring the most important tools to track and control costs. Why?”

“Mississippi Power can no longer credibly claim that the Kemper plant is in good shape,” added Miller. The Sierra Club official said the Mississippi Public Service Commission should pull the plug on the project.

The Sierra Club likens the Ratcliffe IGCC to the over-budget and behind-schedule Edwardsport IGCC being developed in Indiana by a Duke Energy (NYSE: DUK) subsidiary.

Southern CEO Tom Fanning has said Kemper is much different than Edwardsport.  Southern has formed an alliance with KBR (NYSE: KBR) to market the type of “transport integrated gasification, or TRIG” technology being used at the Kemper County facility. The technology allows for gasification of low-rank coals, Southern officials said.

“This is our technology. We are not buying from a third party,” Fanning said in a recent earnings call.

The company said Nov. 13 the state PSC’s independent market monitor has concluded that the Kemper County facility remains a better option than developing another natural gas-fueled power plant.

There are roughly 3,000 workers onsite at the construction project, the Southern subsidiary said in November.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.