The Economics of a Power Plant

On 28 June 2017 Southern Company announced that Mississippi Power would stop trying to make the gasifiers at its Kemper County plant work. The plant, in east-central Mississippi, had been certified by the state's Public Service Commission in 2010 as a 582 MW "clean coal" station of a kind never built at that scale: it would turn lignite from a mine next door into a synthetic gas, burn the gas in a combined-cycle power plant and capture about 65% of the carbon dioxide, which would be piped to oil fields and sold for enhanced oil recovery (reported). The gasification technology, called TRIG, had been developed by Southern and the engineering firm KBR at a pilot plant in Wilsonville, Alabama, backed by the Department of Energy. Washington was paying for carbon capture through grants and tax credits, and a federal carbon price was widely expected. A mine-mouth plant would have fuel at a known cost for forty years. In 2008, when the project was being planned, Henry Hub gas had averaged about $8.9 per MMBtu.

The budget at certification was about $2.4 billion (reported). Costs rose almost at once: the design changed after construction began, quantities of pipe ran far above estimates, labour costs and the schedule slipped (reported). The combined-cycle half of the plant began running on natural gas in August 2014. The gasifiers did not. They produced syngas in 2016 and made some power from it, but the systems failed repeatedly, and by 2017 the plant's cost had reached about $7.5 billion (reported), about $12,900 per kilowatt. In 2015 the Mississippi Supreme Court voided a rate increase that had let the company collect some of the cost and ordered refunds (reported). A New York Times investigation in 2016 reported internal warnings about cost and schedule that had not been disclosed, and the SEC opened an inquiry (reported). In June 2017 the commission asked Mississippi Power to propose a settlement under which the plant would run on gas only; the company suspended gasification instead of waiting to be ordered to.

The settlement of 2018 limited what customers paid to the cost of a gas-fired combined cycle (reported). Southern's shareholders absorbed most of the rest, about $6 billion or more of pre-tax charges in total (reported), and the gasifier structures were demolished in October 2021. Kemper still runs, as a gas plant of about 582 MW. Two things went wrong at once. The technology failed in the step from pilot to commercial scale, the step at which process plants usually fail. And by the time it failed, the fuel it had been designed to beat had fallen from about $8.9/MMBtu to about $2.5 (2016, EIA). Shale gas would have made Kemper uneconomic even if every gasifier had worked.