Exploring Hydrocarbon Depletion
Are large-scale coal gasification projects worth all the expense?
“If somebody makes a breakthrough technology it may be worthwhile, but so far it hasn’t made much financial sense,” said Dan Kish, senior vice president of policy at the Institute for Energy Research, a Washington, D.C.-based think tank that advocates for free-market solutions to energy issues.
“Coal gasification is not new. It’s been around at least 30 years,” said Alison Kerester, executive director at the Gasification Technologies Council, which advocates for the industry. “What’s new with Duke and Kemper is the scale … Anytime you’re going to scale up like that, you inevitably are going to have issues that come up during construction and initial operation that need to be resolved.”
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, Louisiana, 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 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.
Mississippi Power announced Monday it expects the Kemper energy facility to be operational with lignite coal by April 30.
Kemper plant cost rises $70M as start date pushed again
The company also upped the cost estimate by $70 million in its February report to the Mississippi Public Service Commission, which spokesman Jeff Shepard said will be paid by Mississippi Power and Southern Co. and not its customers.
The breakdown of costs is: $45 million related to extending the projected schedule through April 30, $15 million for start-up fuel and $10 million for outage work and operational maintenance and improvements.
In its January report, Mississippi Power reported leaks in tubes on one of the syngas coolers and estimated the start date at mid-March. The company said the leaks in the tubes made that date unattainable.
“The schedule adjustment is related to repairs of tube leaks and associated corrective actions in one of the project’s syngas coolers,” Shepard said. “The repairs have been completed and the new schedule reflects the time needed for restarting that portion of the plant and to achieve integrated operation of all plant systems.”
While one syngas system was down for repairs, he said the other system remained in operation and producing clean syngas for chemical product production and electric power generation.
Integrated operation will occur when both of the plant’s gasification systems, the gas cleanup and generation systems operate simultaneously, he said.
ROCKMAN wrote:The world's largest CO2 sequestration project only received about 10% of it's funding from the federal govt. It isn't President Obama's questionable CO2 sequestration project. It's NRG Energy et al questionable CO2 sequestration project.
Even if the sequestration side is a bust at least the US tax payers will get some return as a result of the additional oil recovery.
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