Home » OPINION » Columns » BILL CRAWFORD: Fuel diversification real lignite plant issue for PSC
A look at the Kemper County Coal Plant from the top. The plant will be tasked with mining lignite coal a few hundred yards away from the plant. That coal is moved through a process that will convert it to syngas. The syngas is then used to drive the energy output of the plant, and the resulting electricity is then moved into the grid.

BILL CRAWFORD: Fuel diversification real lignite plant issue for PSC

BILL CRAWFORD

What will natural gas prices look like over the next 40 years?

 
Well, over the past 20 years, prices recorded at the dominant Henry Hub distribution center in Erath, LA, ranged from a low of $1.05 per million Btu to a high of $18.48. Over the past 10 years prices ranged from $1.46 to $13.31. 
 
The current price is $2.60. Forecasts show prices rising over the next two decades, but they vary in pace and amount. The U.S. Energy Administration projects natural gas prices through 2040 using multiple scenarios that encompass demand, supply, exports, and various consumption projections. Its latest forecasts indicate prices may remain below $4.50 or jump as high as $9.20.  
 
The only knowable thing about natural gas prices is they are volatile.
 
When Mississippi Power Company proposed its Kemper lignite plant to the Public Service Commission (PSC) over a decade ago, traditional coal-fired plants were under attack by environmentalists and EPA and natural gas prices were high, averaging $7.81 at Henry Hub from 2005 through 2008. The company and the commission deemed it prudent for Mississippi Power to pursue an alternative fuel source for its next baseload power plant. The alternatives were nuclear and clean coal. Given Mississippi’s vast, cheap lignite deposits, the clean coal alternative was chosen.
 
All know what happened next. Shale oil discoveries dramatically ramped up gas supplies, driving down prices. And the costs to build the lignite plant skyrocketed.
 
Over the next several months, PSC commissioners will be tempted, and politically pressured, to gaze into a crystal ball and guess what natural gas prices will be over the next 40 years. That’s because the lignite plant will soon come fully online and the commission has linked the “viability” of the plant to natural gas prices. 
 
Yes, the technology works. Syngas produced from lignite coal has powered electricity generation which has been delivered to Mississippi Power customers for weeks now. Carbon dioxide has been sequestered, sulfuric acid produced, and both delivered to downstream users.
 
The final hurdle for the plant to come fully online is for both syngas turbines to operate simultaneously for a specified period of time. 
 
When it does, the company will ask commissioners to approve rates to allow recovery of costs for building and operating the multi-function facility. Building costs for the power plant were capped at $2.8 billion. Another $1.4 billion was authorized for the CO2 pipeline, the coal mining operation, and limited other items. Allowable operating costs have yet to be determined.
 
How much cost to allow Mississippi Power to recover from ratepayers will be the great challenge for our elected commissioners. Politicians tend to focus on the moment. Utility companies must focus on multiple decades. That’s why major power generators have diversified baseload fuel supplies. History has shown reliance on a single fuel source over time to be imprudent. 
 
So, the real analysis facing commissioners is not what natural gas prices may do, but how much rate payers should invest to provide Mississippi Power necessary and prudent fuel diversification. 
 
 
» Bill Crawford is a syndicated columnist from Meridian (crawfolk@gmail.com)

About Bill Crawford

One comment

  1. ” That’s because the lignite plant will soon come fully online and the commission has linked the “viability” of the plant to natural gas prices. ” How soon ? Are you sure ? How many times have we been told this ? $25 to $35 million added to cost for every deadline missed. Why should we, the rate payers of the poorest state in the nation, have to pay for this failed science project ? Original estimate was $1.2 billion. It is now over $7 billion. Was this capacity ever needed ?

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