Diversity, Stability Key to State’s Energy Future

Diversity, Stability Key to State’s Energy Future

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An Opinion Editorial by MEI President Patrick Sullivan that ran in the Clarion Ledger on February 8, 2013.

One year ago in this column, I wrote about the difficulty of building large infrastructure projects and developing energy in America today. At the time, the Keystone Pipeline project, which would supply our country with more oil, as well as offshore energy expansion in Mississippi waters, was the subject of debate.

If we want our economy to grow, infrastructure expansion and energy development are absolutely necessary, and many of these projects – like power plants, ports, pipelines, sewer systems, and highways – are rather large and capital-intensive. They are projects that require a great deal of coordination and broad support from the people and their elected officials. That is why it is so discouraging to see organizations with no real answers for energy in our state attempt to block important projects, hurting our competitiveness, raising expenses, and potentially costing jobs. Mississippi Power’s lignite gasification electric power plant in Kemper County is the latest target of this build-nothing-anywhere movement in America.

For those confused by the arguments for or against this project, looking at a previous real-life example may help. In the mid-1970s, Entergy set out with plans to construct a large-scale nuclear power plant at Grand Gulf in Claiborne County. The debate then was quite similar – in fact, almost identical – to today’s debate on the Kemper County plant. Back then, opponents said the Grand Gulf plant would cost too much, while proponents said it was the right long-term decision. We now have the benefit of 30 years of experience to judge the performance of that project and to determine the merits of those arguments, especially those of the nay-sayers. Today, Entergy’s Grand Gulf plant is the lowest cost supplier of electric power in Mississippi with a long life ahead. The opponents were wrong, just as they are today.

Were the initial capital costs for construction high, requiring rate increases in the 1980s? Of course, but the guiding policy principle then is still the same 30 years later. That is, in electric power generation, avoiding over-reliance on one energy resource is too risky, considering the life of projects is a minimum of 40 years. It is better to diversify.

Diversity isn’t just a political buzzword; it has real financial benefit to consumers. The capital cost of power generation projects is high, and that cost of capital is critically important to Mississippi ratepayers. Therefore, when investors in energy projects are able to look at Mississippi as a more predictable and safer place to invest, rates will be lower and large projects will cost Mississippi energy consumers less.

Having diversity in energy and producing more of our own energy should be major guiding policy principles for our state. It makes sense both financially and from an energy security perspective. Innovative financing and, importantly, certainty to encourage investment are key components to keeping rates down when we have to build a new power plant. And make no mistake about it, experts and public officials agree that a new base load power plant is needed by 2014.

Getting down to it, we have three main fuel options for base load power production today – natural gas, nuclear, and coal. Today, natural gas is abundantly available and favorably priced, and natural gas power plants are relatively inexpensive. However, about 65% of electricity in Mississippi is made with natural gas, meaning that the future for Mississippi energy consumers is already heavily leveraged on the future of natural gas prices, and the price of fuel makes up the biggest part of power bills. Both coal and nuclear are considerably more costly during construction but have much lower and more stable fuel costs over the decades of operations. A healthy mix of all three energy sources is in the best interest of reliability and risk management, and that’s exactly what a coal gasification plant helps achieve. By approving the Kemper County project, the Mississippi Public Service Commission has taken an important step toward long-term energy security for our state.

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