Tuesday, June 07, 2011

Kemper County IGCC plant "on schedule and budget"


Construction of Mississippi Power Co.'s Integrated Gasification Combined Cycle (IGCC) power plant in Kemper County is on schedule and on budget, the company's head says.

Last year, the Mississippi Public Service Commission approved the company's proposal for the project and in December, ground was broken.

As a result of a law the Mississippi Legislature passed in 2008, the cost of the plant will be passed on to ratepayers in stages while the project is being built. In its approval for the project, the PSC set a cap for the cost of the plant at $2.88 billion.

In a recent speech given by Mississippi Power chief executive Ed Day he said the company aims to keep the cost below the cap. The goal is to have the plant operating in 2014.

"Internally, we really only talk about $2.4 billion," Day said.

The plant has been fought by the Mississippi Sierra Club, which has concerns over environmental aspects of the project, along with the company's plans to pass construction costs on to ratepayers. The Sierra Club contends the plant is dirty, expensive and unnecessary and that natural gas would have been a better fuel source.

The company contends that the price of natural gas is much less predictable than that of lignite coal, which the plant will use. The company says lignite is abundant in Mississippi and represents the best option.

Day said there's a chance large fuel cost savings by using the coal could result if natural gas prices rise substantially over the next few years. Typically, about 50 percent of a ratepayer's power bill goes toward fuel costs.

"We know what (price) the coal will be mined at, within a small tight range, it's just now a matter of what will gas do, and how high will it go," Day said. "There's got to be a natural fuel savings to the customer over long periods of time. That's kind of what wins the day."

The increase on a customer's power bill could range from as much as 33 percent, according to the company, to as high as 48 percent, according to the Sierra Club.

Mississippi Power has said those increases could be phased in over 10 years.

Editor's note: At $2.4 billion, the nominal 600MW Kemper County plant will cost $4000/kW to build. A new natural gas fired combined cycle plant would cost less than one-quarter of that amount. For the total cost of energy (covering investment, fuel cost and other operating expenses) to be the same, natural gas price would have to climb from the current $4 per million Btu to about four times that level. Although those high prices are paid for natural gas today in places like Japan, plentiful supplies in the US are expected to keep the price low for the foreseeable future.

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