Kemper CCS Project: 3 Years Behind, $3.9 Billion Over Budget. How’s that for ‘adequately demonstrated’?

by Marlo Lewis on October 29, 2014

in Blog

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Southern Company announced this week that its carbon capture and storage (CCS) coal-fired power plant in Kemper, Mississippi, will cost almost three times more and take three years longer than originally planned. Initially budgeted for $2.2 billion, the project is now expected to cost $6.1 billion.

This news does not bode well for EPA’s Carbon Pollution Standards rule, which relies on a handful of subsidized projects, with Kemper as pride of the fleet, to make the case that CCS technology is “adequately demonstrated.”

The rule establishes a carbon dioxide (CO2) new source performance standard (NSPS) for new coal power plants of 1,100 lbs. CO2/MWh. As EPA admits, today’s state-of-the-art coal plants emit 1,800 lbs. CO2/MWh (79 FR 1468).

This means the standard effectively bans investment in new coal generation, a policy that would be dead on arrival if introduced as a bill in Congress.

EPA says not to worry, because new coal units can meet the standard by installing CCS technology, which the agency certifies is “adequately demonstrated,” i.e., commercially viable.

Yet Kemper, which EPA mentions 13 times in the rule, now costs 88%-107% more than an advanced pulverized coal power plant without CCS and 496% more than an advanced natural gas combined cycle (NGCC) power plant.

power plants capital costs EIA report table 1 larger





Source: EIA, Updated Capital Cost Estimates for Utility Scale Electricity Generating Plants (April 2013)

New NGCC units, moreover, easily meet the standard (1,000 lbs. CO2/MWh) EPA proposes for that type of facility (79 FR 1486). So, absent generous subsidies, utilities won’t invest in coal with CCS when they can invest in much cheaper NGCC. I’ll take that as a demonstration CCS is not “adequately demonstrated.”

Even with subsidies (Kemper received a $270 million grant from DOE), utilities following EPA down the primrose path expose their investors and ratepayers to significant financial risk. Bloomberg reports:

The increased Kemper County costs will crimp third-quarter profit by $258 million, the company said today. The project has already surged past the $2.88 billion limit that can be billed to customers under an agreement with Mississippi regulators. Today’s charge adds to $963 million shareholders have already shouldered from project cost overruns in four of the prior six quarters.

Heritage Foundation economist David Kreutzer posts a witty commentary today on Kemper’s latest cost overrun, exposing the conflict-of-interest in EPA’s “adequately demonstrated” determination with the aid of a football metaphor:

Though the EPA and many of its green supporters may have been yelling victory chants, the plant’s owner knew that Kemper was not a viable model on which to base this costly, anti-affordable-energy EPA power plant rule. Southern spokesman Tim Lelejdal wrote, “The Kemper County Energy Facility should not serve as a primary basis for new emissions standards impacting on all new coal-fired power plants.” Lelejdal also noted that “[t]he revised new source performance standards would essentially eliminate coal as a future generation option.”
So, it seems the quarterback knew the score. It’s too bad the cheerleaders in this game are also the referees. They’ve rigged the game against America’s leading source of reliable electric power even though cost-effective technology has cut pollution emissions dramatically over the past 30 years.


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