The Mississippi Public Service Commission unanimously determined in 2009 that Mississippi Power would need additional baseload electric power generation to meet consumer demand in 2014. Baseload generation provides electricity that’s needed every hour of every day, 365 days a year.
By 2014 with increasing demand for electricity and no additional baseload generation, Mississippi Power customers would face volatile and high costs of electricity purchased from the open market or experience blackouts. Those prospects were not options.
Mississippi Power needed new baseload generation of electricity from fuel that was abundant, environmentally clean and available to deliver 40+ years of affordable, reliable power and economic opportunity.
Mississippi Power chose the Kemper County energy facility, which will achieve these goals through Mississippi lignite as the fuel and 21st century generation technology providing a win on energy, the environment and economic development.
Opponents of the Kemper facility led by the Sierra Club criticize the $2.88-billion project capital cost suggesting that a combined-cycle natural gas plant would have been cheaper to build and fuel with today’s low cost natural gas. But that fails to recognize that Mississippi lignite is cheaper than natural gas. The Kemper facility’s fuel savings, plus sales from captured carbon dioxide ($50 million each year) and rate stability over 40 years, will more than compensate for the capital cost and provide better long-term value to customers.
The Kemper County energy facility is a wise decision for the following reasons.
1. Fuel Diversity — The Public Service Commission stated, “Fuel diversity matters because fuel stability matters.” By bringing online the 582MW Mississippi lignite-fueled Kemper facility in 2014, Mississippi Power is on track to 25 percent lignite, 25 percent coal and 50 percent natural gas energy mix in 2020. Mississippi Power’s current energy mix is 75 percent natural gas and 25 percent coal. A balanced energy mix protects customers from dramatic increases in fuel cost like the natural gas price spike five years ago.
Today, thanks to abundant supplies of natural gas produced through shale to gas, hydro fracturing and horizontal drilling, the price of natural gas is in the $3.50 MMBtu range. However in 2008, U.S. natural gas prices exceeded $12.00MM Btu before falling to $2.27 MMBtu in 2012. The U.S. Department of Energy Information Administration forecasts natural gas in the U.S. to be $3.12 MM Btu in 2014, $4.13 MMBtu in 2020 and $5.40 MMBtu in 2030.
These forecasts do not assume change in U.S. energy trade policy which will likely happen. A 2012 Department of Energy report determined that exporting liquefied natural gas (LNG) would benefit the U.S. through increased income, jobs and energy security. A shift in U.S. policy to export LNG would increase domestic natural gas prices while reducing natural gas cost for our trade allies such as the U.K. and Japan where natural gas prices are $10 and $15 MMBtu, respectfully.
Compared to natural gas, Mississippi lignite coal prices are lower and more stable. The variable cost of lignite coal today is $1-$1.25 MMBtu. The Kemper facility fueled by lignite coal purchased under long-term contracts will benefit ratepayers from stable, low-cost fuel prices over the next 40 years.
2. Clean Air and Water — The Kemper facility is the nation’s model for “clean coal” technology. Through converting lignite coal to synthesis gas, 95 percent of pollutants are removed. The facility will be a “zero liquid discharge” plant protecting neighboring streams. At least 65 percent of carbon dioxide produced in the gasification process will be captured and sold for enhanced oil recovery.
3. Power for Customers — The 582 MW’s of clean, reliable baseload electricity generated by the Kemper facility can power more than 37,000 homes in an affordable way for the next 40 years, meeting the mandate of baseload electricity called for by the Public Service Commission.
4. Jobs for Mississippians — Currently, 270 Mississippi companies work on the Kemper facility. Nearly 12,000 direct and indirect jobs will be generated and 3,000 men and women have good jobs on site today. Once in operation, more than 1,000 people will have direct and indirect jobs supporting the facility.
5. Expanding the tax base — During the current construction phase, the Kemper facility is contributing nearly $75 million in local and state taxes. Once in operation, the facility will pay $30 million in taxes each year for more than forty years.
6. Making Mississippi and America energy secure — The Kemper facility uses Mississippi lignite coal mined by Mississippians. The carbon dioxide captured from the gasification process will be sold for use in enhanced oil recovery, increasing U.S. oil production by 2 million barrels each year reducing our dependence on foreign oil.
Through fuel diversity and affordable electricity, making use of Mississippi lignite, innovative technologies for clean air and water, thousands of good jobs for Mississippians and expanding the tax base: the Kemper County energy facility is a win for customers, the environment and Mississippi’s economy.
Glenn McCullough, Jr. is the former chairman of the Tennessee Valley Authority and a past mayor of Tupelo. He is chairman of Advance Mississippi, a coalition advocating for sound energy policies that will benefit consumers, the environment and economy.