Disclosure regarding the $7.5bn Kemper plant in Mississippi throws further cloud over promise of clean coal energy

This article is more than 2 years old

This article is more than 2 years old

Executives at the world’s most ambitious “clean coal” plant knew for years about serious design flaws and budget problems but sought to withhold key information from regulators before their plans collapsed, according to documents obtained by the Guardian.

The Kemper plant in Mississippi – held up as the global model for a new generation of “clean coal” power plants – was the most expensive fossil fuel power plant in US history, with a $7.5bn price tag. Its owners, Southern Company, boasted it was “going to be the cleanest coal plant in the world”, in the words of the CEO, Tom Fanning.



But thousands of internal documents reviewed by the Guardian and a series of interviews with Kemper staff uncovered evidence that the company had information showing that the project would blow through state-imposed budget limits five years before the company decided to reverse course and become an exclusively gas-fired energy plant.



How America's clean coal dream unravelled Read more

Kemper’s failure could be a serious setback for global climate policy and plans to reach the Paris climate targets. International climate agreements rely heavily on developing practical carbon capture technologies that have so far largely proved elusive. Kemper was slated to be the largest coal carbon capture plant ever built, touted as potentially the first of many similar projects worldwide.



The documents show that Kemper’s design faced what proved to be an insurmountable issue: it required vastly more maintenance downtime than originally predicted, and according to one 2014 report would be offline 45% of its first five years rather than the 25% the company had publicly projected.



Those figures doomed Kemper’s “clean coal” plans by raising its lifetime costs dramatically. The company had this information three years before it told regulators it was reversing course and planned to run the plant on natural gas.



Southern nonetheless pushed forward, sinking nearly $3bn more into construction.



Experts have long warned that the biggest challenge for clean coal power is affordability – adding so-called carbon capture technology, which captures carbon dioxide emissions produced from the use of fossil fuels, requires expensive equipment and saps energy that could otherwise be sold to power customers.



Facebook Twitter Pinterest Rick Perry, Trump’s energy secretary, has been described as a ‘close friend’ of the Southern CEO, Tom Fanning. Photograph: Jim Lo Scalzo/EPA

For years, Kemper, built in America’s lowest-income state, was marketed as proof that American innovation could show the world that clean coal technology made economic sense.



Inside Southern, however, Kemper’s prospects looked very different.

Documents obtained by the Guardian show:



In 2010, before a shovel was turned, a top executive expressed doubts to his inner circle that Kemper could be built within limits demanded by Mississippi regulators.

The company knew in early 2012 that Kemper was headed far over budget limits. A top Kemper official sought to hide damaging projections from independent monitors, around the time that state officials had the opportunity to cancel the project.

Fanning, Southern’s CEO, reassured investors that he could come in under budget despite overwhelming evidence that the company would never make it.

In a 2013 earnings call, Fanning touted a huge coal storage dome as “in place” and a sign of “tremendous” construction progress. Company files show the dome had in fact started crumbling inside months earlier, ultimately opening up a hole in the ceiling the size of a small house – a problem so bad the dome had to be razed and rebuilt later that year.

Multiple forecasts showed that Kemper’s clean coal equipment could only be up and running a fraction of the time the company initially predicted. Repairs listed as taking four hours would actually shut coal power generation down for four weeks, a 2016 report warned.

Kemper, which received roughly $400m from taxpayers, managed to produce electricity from some of its clean coal equipment for “over 100 hours”, or roughly five days last June, before construction was shuttered for good amid further budget blowouts.



Q&A What is clean coal? Show Hide Coal is the dirtiest fuel on the planet and emissions from its use as a source of heat and energy make it historically the single largest threat to our climate. But it is also the largest source of electricity in the world, providing 41% of our electricity needs. Clean coal relies on a series of technologies known as carbon capture and storage (CCS). In 2015, the International Energy Agency calculated that CCS could help reduce global carbon emissions by 13%, delivering a huge chunk of reductions needed by 2050 to keep below a 2C rise. CCS technology aims to capture carbon dioxide generated at coal plants and store it underground in rock formations and aquifers. But so far no major coal power plant has managed to make CCS work on a grand scale. Costs have proved prohibitive - especially as low natural gas prices have made coal uncompetitive.

Before it ran aground, Kemper drew support from Obama and Trump administration figures alike. Trump has been particularly outspoken about his support of “clean coal”, which he praised as “beautiful” in this year’s State of the Union address.



Last August, the Department of Energy announced $50m in possible funding for projects to develop “transformational coal technologies”.



Southern, the country’s second-largest electrical utility, received over $380m from the Department of Energy on the condition that the project could generate affordable electricity, on schedule. But it does not appear to be under any immediate pressure to repay the money.



It maintains close ties to top Trump administration officials. Rick Perry, described by Bloomberg as an “old friend” of Fanning, now helms the energy department as it navigates calls to “claw back” federal funds spent on Kemper.



The US attorney general, Jeff Sessions, counts Southern and its law firm Balch and Bingham as his top two career donors, according to data from the Center for Responsive Politics. Sessions, the country’s top law enforcement officer, has previously rebuffed calls to recuse himself from other matters involving that law firm.



Southern’s other mega-project, the Vogtle nuclear power plant in Georgia, was offered $3.7bn in federal loan guarantees in September, despite being five years behind schedule and $10bn over budget, according to watchdog groups.



Late last year, the Securities and Exchange Commission (SEC) mothballed an investigation into allegations the company concealed schedule delays, uncovered by a New York Times investigation in 2016, without sanctioning the company or clearing it of wrongdoing, leaving the door open to further investigation.



The new materials offer evidence of a much broader range of potential misconduct than previously revealed. The SEC declined to comment.



Southern faces a continuing class action alleging the company failed to disclose “adverse information” in 2012 and 2013 and other lawsuits brought by shareholders and power customers over Kemper.



A Southern spokesman declined to comment on specific questions about Kemper, instead pointing to a settlement last month with state regulators and tax legislation, which he said would lower customers’ power bills. He also cited the “continued operation of Kemper’s efficient natural gas facility”.





