Southern Co. Chief Executive Officer Tom Fanning said the energy company's regional focus will center largely on nuclear power, natural gas and solar energy.
Photo: AJC
Photo: AJC

Pricey power plant hurts hopes for clean coal.

Georgia consumers have enjoyed relatively cheap monthly electric bills compared to the nation in large part because of the state’s reliance on power plants that burn cheap coal.

But an expensive gamble to keep coal in the nation’s energy mix is taking another painful hit.

Atlanta-based Southern Company, the parent of Georgia Power, made a big bet several years ago to build a first-of-its-kind power plant in Mississippi. The facility, which is still at least 15 months away from completion, was designed to use coal, turn it into a gas to be burned to generate electricity for Mississippi residents and still emit substantially less carbon than typical coal or natural gas plants.

Speaking at the plant’s groundbreaking four years ago, Southern chief executive Tom Fanning predicted the project would set an important course for the nation.

“We believe, with all the issues facing coal in America, this technology is the way forward to preserve the United States’ most plentiful energy resource,” he said.

But after brutal cost overruns and long delays, the company isn’t likely to attempt another one in the Southeast, Fanning told The Atlanta Journal-Constitution in a phone conversation recently.

He refined that answer to say he doesn’t expect the company to start another such power plant in the region for at least 20 or 30 years. “Here’s the reality,” he said, “we have higher-than-desired capital costs.”

He did, however, say the innovative plant remains feasible in China, where natural gas prices are significantly higher and in some other places, such as Poland. In this nation, Upper Plains states might become more accommodating for such a project sooner than the Southeast, he said.

Fanning’s reticence is understandable. Last week, Southern disclosed more delays in the project and hundreds of millions in new cost overruns. The project is now about $3.7 billion over the plant’s target budget and behind schedule, eating into the Atlanta utility giant’s profits. Officials have blamed the higher costs on a variety of factors, including underestimating how much and what kind of piping was needed, revamping the size of structures needed to support pipelines, struggles working in confined spaces and, more recently, costs tied to delays in the project.

As the coal project’s cost rose, the price of competing natural gas has remained relatively low, further challenging the economics of the Mississippi hopes.

Fanning said Southern’s regional focus will center largely on nuclear power, natural gas and solar energy. The company already has cut its reliance on coal sharply, though it still accounts for roughly a third of electricity generation in Georgia.

There had been no serious talk of Georgia having a coal gasification plant like the one in Mississippi, said Chuck Eaton, the chairman of the Georgia Public Service Commission, an elected body that regulates Georgia Power and some other utilities. Still, he said the Mississippi challenges could have a ripple effect on any Georgian who pays an electric bill.

“At least in the near-term future it makes new coal technology less feasible,” Eaton said. “It’s going to make us more dependent on fewer options … and more at risk of huge price swings” from natural gas.

The situation highlights the struggles of trying to keep coal as a major ingredient in the nation’s energy mix amid concerns about potentially costly damage from climate change.

“Had it worked well it would have been a game changer in many ways,” said Chris Knittel, a professor of energy economics and director of the Center for Energy & Environmental Policy Research at the Massachusetts Institute of Technology. “It probably takes plants like this off the list of potential ways of reducing greenhouse gas emissions” in the U.S.

Knittel said the technology, though, may make economic sense in places such as China and Europe, where natural gas prices tend to be many times higher than in the United States.

“In some respect, Southern Company has been a great service to the U.S. and the world in trying to push this technology closer,” he said.

The U.S. Environmental Protection Agency is in the process of creating rules to significantly tighten limits on carbon emissions from power plants. Critics label the effort as a war on coal, one that would send energy costs soaring. Supporters say other options, such as solar and wind energy and increased energy efficiency efforts, will be cheaper and better options in the long run.

So-called “clean coal” efforts were thought of as a way to keep using the nation’s abundant coal resources while addressing climate change concerns. In fact, the federal government gave Southern $245 million toward clean coal technology during the Mississippi plant’s construction.

But significantly cutting carbon from coal plants is a costly and difficult process. Southern’s project in Mississippi’s Kemper County included a number of layers along with complex technology. Low-quality coal would be mined nearby, then converted at the plant into a gas. Carbon dioxide would be stripped from the gas. The gas would be burned to generate electricity and the carbon would be pumped miles away to reservoirs and ultimately sold for use in recovering more oil from petroleum fields.

Southern had a $2.4 billion target price for the project and Mississippi regulators capped the cost the company could seek from the state’s ratepayers at $2.88 billion. While much of the project’s construction is complete and the plant is able to generate electricity, much of its newer technology is not yet in operation and isn’t expected to be in service until at least March of 2016.

Even if the economics had worked out better, the technology would have had limited applicability in Georgia, said Bobby Baker, a former member of the Georgia Public Service Commission.

The state doesn’t have significant coal reserves or big underground areas to store carbon dioxide or nearby oil fields where the carbon could be used, Baker said.

A frequent critic of the utility, he predicted the Mississippi plant’s problems will cause Southern to put even more focus on expanding nuclear energy in the state. The company already is building two multibillion-dollar nuclear units at Plant Vogtle near Augusta.

Baker said he hopes Georgia’s PSC will learn from the Mississippi experience and set a cap on how much the utility can charge consumers for the Vogtle work.

“We have no kind of risk-sharing mechanism here,” he said. “Anyone who uses electricity here in Georgia is going to be bearing the risk of any kind of cost overruns caused by delays.”

One of the biggest critics of Southern’s Mississippi project is the Sierra Club, which fought the plant and helped force regulators to set cost ceilings.

Seth Gunning, a Georgia representative of the environmental organization’s campaign against coal, said Southern held on to coal too long. He said he hopes the Mississippi experience will push the utility in Georgia to become more aggressive in its efforts to expand solar and wind production and become serious about energy efficiency programs.

“At this stage,” Gunning said, “I don’t think any investments in new coal make any economic sense for the company or their customers.”

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