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Can 1 Power Plant Clean Up Coal and Make Money?

The Kemper County Energy Facility will capture the CO2 that comes from gasifying coal
Kemper County power plant


Future of the coal industry? The ambitious and expensive carbon capture and sequestration power plant in Kemper County, Miss.
Credit: XTUV0010 via Wikimedia Commons

DEKALB, Miss.—The nation's first coal-fired power plant aiming to capture the majority of its carbon dioxide emissions rises like a silver city from a vast, cleared plot of Mississippi pine forests.

The Kemper County Energy Facility—which envisions grabbing 65 percent of the CO2 from a 582-megawatt gasification power plant here—is nearing completion, with hundreds of construction workers on-site. It has enough piping to stretch across much of the state, constructed conveyer belts as tall as buildings and an operating coal mine, where massive trucks ferry unearthed lignite coal to a storage dome.

In a tour last week, officials from Southern Co. and its subsidiary Mississippi Power, the developers of the $5.5 billion plant, said they are on track for a May 31, 2015, operation date and plan to begin capturing CO2 at the gasification plant this fall. The first fire of the gasifier is expected later this summer.

"The combustion turbines are already up and running and checked out on natural gas. The next step is to get them operating on syngas [made from coal]," explained John Huggins, vice president of generation development at Mississippi Power.

Like fossil fuel development or not, the Kemper plant is at the center of U.S. EPA's plans to regulate carbon dioxide from new power plants and at the center of global emissions, considering that "low-rank" coals like Mississippi lignite constitute half the world's coal supply.

Southern has said publicly that its new Transport Integrated Gasification (TRIG) technology being installed at Kemper—which gasifies lignite coal into synthesis gas, or syngas—could be useful for other countries like China with similar "low-rank" coals, a lighter, higher-moisture type of the fuel.

When operational with CO2 capture, the coal plant will have an emissions profile similar to that of natural gas, a first in power generation. The only other CCS coal plant with capture near Kemper's construction status is SaskPower's Boundary Dam in Canada. In releasing its draft rule in 2013 on carbon emissions from new power plants, EPA cited Kemper, along with three other proposed plants, as an example of the viability of CO2 capture technology.

Finding an economic niche
With coal slated to be a major player in the power sector globally for decades, analysts say Kemper could be key in lowering costs that have so far been prohibitive. It also is one of several U.S. proposals that demonstrate a viable financial model for capture technology, as the plant will produce byproducts ranging from CO2 to sulfuric acid worth as much as $50 to $100 million annually, analysts say. The captured CO2 from Kemper, for instance, will be piped about 60 miles and pumped into oil fields operated by Denbury Resources Inc. to release more crude.

However, there are some who think Kemper, and other proposed coal plants with capture, are sapping financial resources that could go to a cleaner—and fully tested—generation source. "It is dirty, expensive and unnecessary," Louie Miller, state director of Sierra Club Mississippi, said about the plant.

It also is unclear whether Kemper's capture experience will largely end in Mississippi or will truly build momentum for CO2 emission controls in other locations with similar types of coal.

For there to be a second Kemper-style power plant, it would need to be in a place that "has high natural gas prices, indigenous low-rank coals, a desire to control CO2 emissions and nearby oil fields," said Jeff Phillips of the Electric Power Research Institute.

Gas prices are too low right now in the United States for many places to meet that criterion, he said. And many other countries that have a similar type of coal that in theory could use Kemper's gasification technology may not have the financial resources to consider a similar facility, he said. The Southern Co. plant benefited from $270 million in Department of Energy funding.

Where TRIG—and capture technology like Kemper's—could come into play is in China, with its growing coal-to-chemicals and coal-to-liquids industry, Phillips said. Even as China continues to rely on traditional coal plants for power generation, it is turning to gasification of low-rank coals to build its middle class and to make products like fertilizer and plastics, he explained.

Currently, many of the plants doing so are releasing CO2 into the air, so capture technology installed on these industrial plants could make a difference with emissions if tied to oil fields for greenhouse gas storage, he said.

Potential uses in China and Poland
The TRIG technology, which was developed with KBR Inc., doesn't have to be installed on a power plant for it to work, he noted. The big question is whether China will turn to the capture component with gasification, or will just continue venting CO2, Phillips said. China has some fields for enhanced oil recovery, but not a lot, he added.

Southern signed a memorandum of understanding with state-owned Chinese company Shenhua Group earlier this year to collaborate on clean coal technologies, but the one licensing of TRIG on a Chinese facility so far is for the gasification technology only, minus the capture component, according to Southern officials.

The capture component at Kemper is separate from TRIG, using an antifreeze-like solvent called Selexol to strip off CO2. That raises the question of whether Kemper's technology might boost the burning of coal elsewhere, without consideration of carbon controls.

Yet John Thompson, director of the fossil transition project at the Clean Air Task Force, said Kemper still could open the door for CO2 capture with countries like Poland and India with low-rank coals, by lowering costs for the second generation of plants. If TRIG and its attached capture unit work well, it also could help similar plants "blossom in China," he said.

Despite the attention on overseas potential, Southern officials have said that Kemper should not be the basis for the proposed EPA carbon rule on new power plants, because Kemper's unique characteristics can't be "consistently replicated" on a national level.

Those unique characteristics include the fact that Mississippi Power needed new generation anyway—Kemper will be the first Mississippi Power baseload plant built in more than 30 years. The utility concluded that without the project, it would be 75 percent reliant on natural gas, raising concerns about future price volatility, Huggins said.

In addition, Mississippi is sitting on mounds of cheap lignite coal that will allow Southern to operate a mine on-site and hold fuel prices low over time. The state also just happens to have operating oil fields already taking CO2 from natural sources, so Kemper will just add more greenhouse gas to existing operations. The ability to sell CO2 to the oil industry made capture an option, along with awareness of looming carbon regulations, said Tim Leljedal, a Southern spokesman.

He noted that Southern also is developing another technology—TROC (Transport Oxy-Combustion)—that "is in its early stages" but may be able to capture CO2 at a higher percentage than Kemper's technology.

Yet Kemper has been plagued by cost overruns, rising from less than $3 billion to $5.5 billion today and putting pressure on Southern's stock. UBS released a note in May, for instance, downgrading Southern to "sell," noting ongoing discussions with Mississippi regulators on whether the plant's spending was prudent.

Extreme weather contributed to cost problem
Electricity rates have increased 18 percent because of Kemper, and the result of the prudency review before the Public Service Commission could force the utility to absorb more of the costs (ClimateWire, April 30). The sale of the CO2 and other byproducts will offset costs for ratepayers.

For critics like Miller, it doesn't make sense to build a plant that some claim won't be able to produce power and capture CO2 at planned rates. "Just because it's built doesn't mean it's going to work as planned," he said, citing an analysis by Element VI Consulting, a group co-founded by a former Sierra Club counsel. Other environmentalists also criticize the idea of reducing emissions from one fossil fuel to release more of another via oil recovery.

Phillips said, though, that enhanced oil recovery has an "incremental" effect on global emissions and that its main effect is displacing oil from elsewhere.

According to Thompson, the cost overruns partially resulted from a need to put a power plant inland after Hurricane Katrina. While it may have been a smart move in terms of storm protection, it helped raise the capital costs by requiring the transport of materials over long distances.

If the plant had been built on the coast, materials could have been barged in more cheaply, he said.

What is important to remember, according to Thompson, is that Kemper is just one of several capture power plants that are either under construction or moving to construction, that have made financing work without a carbon price in place.

That kind of model is going to be important not just for coal, but also for natural gas-fired power plants, in the sense that the country can't meet 2050 emission targets "with just natural gas and wind," he said. In places like Mississippi and Texas with oil fields, a capture unit tied to a natural gas plant already is cost-competitive with wind and some other types of generation, he said.

Other coal projects, meanwhile, are moving forward. Earlier this month, for instance, NRG Energy Inc. announced it was moving to construction on a $1 billion retrofit of an existing coal plant near Houston that would capture 90 percent of its emissions. The fact that NRG is in a competitive market, and can't rate-base cost overruns, likely means the company is "sufficiently confident about their costs," one analyst said.

Like Kemper, NRG's Petra Nova carbon capture project will pipe captured CO2 from a coal plant to oil fields, although in its case, NRG partnered with the oil field. So instead of selling CO2, it will benefit from the sale of oil directly.

"We're not doing this as an emissions control system. We are setting it up as a separate business that is attached to the host unit," said David Knox, a spokesman for NRG, which partnered with JX Nippon Oil & Gas Exploration Corp.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

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