Southern Co. moves ahead on ‘clean coal'

By Margaret Newkirk

The Atlanta Journal-Constitution

The future of carbon caps became murkier than ever when the latest version of carbon regulation died in the Senate this month.

But Atlanta-based Southern Co. is thinking ahead.

This summer, the utility giant won permission from Mississippi regulators to build a large coal plant that can remove carbon gases produced when coal burns -- and do it while burning the cheapest kind of coal.

It's a move somewhat at odds with Southern Co.'s reputation as a staunch foe of carbon regulation, based on the cost it could add to power produced with coal:  Although its stance has now softened some, the  company has loudly opposed carbon limits for years.

Southern's Mississippi Power project is a sign of what it thinks its utilities may need to do, if and when they have to either cut their emissions or pay fees for producing them.

If the Mississippi plant proves successful, it could give Southern a boost toward keeping coal-fired power plants viable inan era of carbon caps.

The strategy comes at a cost. When finished, the $2.4 billion "clean coal" plant will cost Mississippi ratepayers more than Mississippi Power's entire fleet of generation plants is worth now.

Because of that, it took 17 months, hundreds of millions in federal subsidies and intervention from both the Obama administration and Mississippi's Republican governor to push Southern's first carbon-friendly coal plant to the point of construction.

The plant is a big deal for Southern.  Southern CEO David Ratcliffe, speaking to analysts this week, put the plant's approval on his short list of significant business developments, alongside building nuclear reactors in Georgia.

Carbon dioxide is one of four major emissions created by burning coal, and the last to face regulation. The hotly-debated push to cut carbon emissions stems from concerns about climate change.

Power plants contribute more than one-third of carbon emissions in the U.S.  Because utilities had no agreed-upon way to remove CO2 and no strategy for what to do with it if they did, carbon regulation has been called a coal killer, which could end utilities' use of coal.

Utilities have worked with the DOE to find a solution. A handful, including Southern, are beginning to build commercial-scale plants that capture carbon.

A second challenge is what to do with it. With the DOE's Carbon Capture Initiative, Southern and its peers have been scouring the Southeast since 2003 for locations where carbon dioxide gas can buried for centuries.

"What we're finding so far, is that the Southeast (though not Georgia) is really the premier region across the United States for storing carbon," said Richard Esposito, a researcher and geologist with Southern Company Services in Birmingham.

Southern looked at deep underground caverns filled with brine, and at coal seams that can't be mined. It also turned to nearly depleted oil fields, where oil companies pay $30 per ton for carbon gas used to force more oil to the surface, said Tom Sarkus, of the Clean Coal Initiative:  "We have all this talk about carbon caps and the oil industry can't get their hands on enough CO2," he said.

Southern has injected about 4,000 tons of carbon into test wells in Mississippi and Alabama, which Esposito described as a "baby step." Each of Southern's coal plants emit 1 million to 5 million tons of carbon dioxide yearly. Southern is also working with Mitsubishi to build a facility that will eventually be used to cut carbon emissions at an existing coal plant in Alabama.

"Southern has been very aggressive and very forthcoming with funding for the evaluation of this technology," Esposito said. "We don't know whether we would use it in the future, or if we'll have to. But we want to position ourselves to be ready to deploy on this" while keeping electric rates reasonable.

The Mississippi plant will be Southern's first commercial-scale carbon-removing coal venture. The project includes a plant that converts coal to a gas, which is then burned to produce power.  It can cut carbon emissions by 65 percent. It also can use lignite, a cheap, low grade coal typically shunned by utilities.

Lignite is abundant in Mississippi: One of the plant's selling points was that it will bring lignite mining and jobs to the area.

The project is the company's first stab at getting ratepayers to fund a pricey experimental clean coal facility.  It was far from a given: American Electric Power, the only U.S. utility bigger than Southern, had to drop plans for a clean coal plant after Virginia regulators rejected its cost.

In Mississippi Southern argued the plant would position the state well for the future and ahead of the game if utilities have to cut the carbon they produce. Two out of three public service commissioners agreed.

Critics said the project is an experiment, with ratepayers shouldering the risk. They said the company had cheaper options and that regulators should wait until they knew what was going to happen with carbon rules.

The plant will get $682 million in federal subsidies and tax credits, and an unspecified amount of federal loan guarantees. That money, plus 11th hour pleas from both Mississippi Gov. Haley Barbour and DOE Secretary Steven Chu, helped push the plant through in June, just before the latest carbon control bill died in the U.S. Senate.

Southern said it wills move ahead anyway. The impact on Mississippi bills isn't publicly known. The company filed that information at the PSC as trade secret.