Russell Gold for the Wall Street Journal:
Southern Co. said it has nearly completed a first-of-its-kind “clean coal” power plant, though a new analysis suggests it might not make sense to burn coal in it.
After taking nearly seven years and $7.1 billion to build, the Kemper County, Miss., facility, which can burn coal and capture much of the carbon-dioxide output, should be fully operational by the middle of next month, the company said.
But a required economic analysis of the project, the most expensive fossil-fuel power plant ever built in the U.S., found that lower natural gas prices and higher-than-expected operating costs “negatively impact the economic viability” of the facility.
The company analysis, disclosed this week, concludes that only if natural gas prices are high would the economics of the clean-coal plant compare favorably to a gas-burning plant. The Kemper facility was initially forecast to cost $3 billion in 2010.
The company declined to specify the gas price assumptions it used in its scenario for the Kemper plant’s viability, but said on a conference call with investors Wednesday that the scenario included a price above $5 per million British thermal units in 2020 and trending upward.
By comparison, the U.S. Energy Information Administration’s forecast doesn’t anticipate gas prices to top $5 until 2030.
The project looks to be a very expensive hedge. If Southern had built a natural gas power plant of comparable size, it would have cost about $700 million—one-tenth of the facility’s overall cost, according to widely used capital construction cost estimates.
Southern is now headed toward a showdown over who should pay for the plant’s extra costs.
It plans to ask state officials to approve passing on $4.2 billion in costs to ratepayers of Mississippi Power. But the company has critics who contend the plant was ill conceived and poorly executed, and are expected to ask regulators to approve only a portion of those costs.