Federal Bureaucrats Keep Placing Green Energy Bets on the Wrong Horses

Many people lost a lot of money betting on Maximum Security to win the 2019 Kentucky Derby last weekend. The horse had been the favorite to win the 145th running of the Derby before the race, but was disqualified by track officials following its first-place finish, which vaulted the long shot Country Home into the winner’s circle in its place.

True, nobody could have predicted this particular outcome for the race and the circumstances under which it happened with any degree of confidence before it started, but for those who gambled on the horses running in the race, there was one certainty: the most they could lose by betting on the wrong horse to win was the amount of money they chose to bet. With that kind of certainty, most of the people who bet on the race gambled only money they could afford to lose if the outcome didn’t go their way.

Just ahead of the 2019 Derby weekend, news broke about the outcome of a very different kind of horse race, one where the people who did the gambling were not betting their own money, whose lawyers are now opening an investigation into why they lost millions. Megan Geuss of Ars Technica reports on a new investigation announced by the U.S. Department of Justice (DOJ) into green energy bets placed by the U.S. Department of Energy (DOE) and how it lost the money it bet:

Earlier this week, the Department of Justice (DOJ) notified Southern Company that it is opening an investigation “related to the Kemper County energy facility,” according to Southern’s most recent financial statement (PDF).

The Mississippi-based facility had received $387 million in federal grants to build a state-of-the-art coal gasification and carbon-capture power plant (otherwise known as an Integrated Gasification Combined Cycle, or IGCC, plant). But in 2017, Southern’s subsidiary, Mississippi Power, decided to scrap the cutting-edge tech and only use the power plant to burn cheaper natural gas, in a major blow to the proponents of carbon capture.

Kemper was a complicated project. It was located near a lignite coal mine, which was intended to serve Kemper exclusively. Lignite is a low-grade coal compared to the anthracite and bituminous coal that’s found in Wyoming and Montana, so Kemper planned to synthetically transform the plentiful local coal to gas. The plant would then burn the syngas in a turbine, strip the carbon dioxide (CO2) from the power plant’s flue, and send that CO2 through a pipeline to an oilfield where it would be used for enhanced oil recovery. (That is, CO2 is forced down into an oil well to increase the pressure of the well so more oil can be recovered.)

In theory, Kemper’s complicated process was supposed to help it compete with other nearby coal plants because it could use lower-grade local coal, and the captured carbon would be used to increase oil field returns.

But in practice, Kemper proved to be an expensive boondoggle. It came online just as natural gas prices were falling to a point when burning natural gas was simply cheaper than relying on any type of coal, local or not. The plant ran more than $4 billion over budget before the Mississippi Public Service Commission made clear to the company that Kemper would need to pursue a more affordable solution for Mississippi customers.

Gavin Bade of Utility Dive explains what that “more affordable solution” was back when it happened in 2017:

In response, Mississippi regulators last week directed Southern to work up a plan that would allow Kemper to run solely on natural gas. An analysis of the project’s economics by the Mississippi PSC indicated the project would only be economic if natural gas prices rose considerably.

That regulatory directive prompted Southern to throw in the towel, company officials said in a statement.

In effect, the DOE bet $387 million from 2010 through 2016 on what proved to be the wrong green energy horse. Had Mississippi state regulators not disqualified the subsidized carbon capture and sequestration technology, it is unlikely that the DOJ would now be involved trying to recover a portion of the millions of taxpayer dollars the DOE’s bureaucrats had gambled on it. An effort that itself will almost certainly cost millions of taxpayer dollars.

The DOE has a long history of making disastrously bad bets, particularly in recent years as so-called “green energy” initiatives have become popular among political leaders.

These costly failures keep happening because the bureaucrats are not betting their own money, and thus, they do not feel the pain of losing. I wonder if the cost to taxpayers of losing from their gambling would be as large if they were required to put their government pensions on the line when placing their bets in the first place.

Craig Eyermann is a Research Fellow at the Independent Institute.
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