Southern Company (SO -0.91%) is a giant U.S. utility. Like most other electric players, it's been shifting toward natural gas in recent years. However, that doesn't mean it's given up on old reliable: coal. Right now it's building, at great expense, the model for a coal future. It isn't going as well as planned.

No quitters here
Southern isn't the only company to build a new coal-fired power plant in recent years. For example, competitor Duke Energy (DUK -1.04%) just got its Edwardsport coal plant up and running, though it's not up to full speed just yet.

Duke got about 40% of its power on the regulated front from coal in 2013. That's a notable sum, and adding Edwardsport shows a commitment to keeping coal in the mix. Duke's new plant uses the latest coal technology, including gasification. As is, the cost of the plant nearly doubled from initial cost estimates. What Duke didn't want to take on was capturing the plant's carbon emissions.

(Source: Cdtew, via Wikimedia Commons)

That's the technology causing such a fuss at Southern's Kemper plant. In fact, U.S. Energy Secretary Ernest Moniz called Kemper "a plant of the future" because of carbon capture. That's how important the technology is. In fact, he went so far as to say, "We're going to need not 10 maybe 100 more of these plants across the country in the future."

That's why everyone is watching Southern's Kemper plant, and few got excited about Duke building a new coal plant. What's unfortunate is that Duke's decision to stick with proven technology is looking pretty good right now.

Expensive for everyone
That's because Southern started off expecting a bill of around $2 billion for the plant, but costs have now more than doubled. In fact, 2013 earnings were lower by $0.83 a share because of write-offs. So far 2014 isn't starting off well, either, with another $0.27 a share write-off in the first quarter. And the facility still isn't up and running. The goal is to have it on hand to help with the summer peak season.

(Source: U.S. House Subcommittee on Energy and Natural Resources)

Coal is supposed to be among the cheapest energy alternatives, but once completed Kemper will cost more per megawatt to build than a nuclear plant—among the most expensive to build. That doesn't sound like such a good deal anymore. It means that customers will be paying more, the write-offs mean that it's costing shareholders more, and, with good reason, no one appears to be lining up to build the second generation of carbon capture.

Natural gas is next
But that doesn't diminish the importance of Southern's carbon capture dreams. In fact, this plant may be more important than anyone can today imagine. That's because capturing carbon isn't unique to coal, the technology can be attached to just about any electric plant. Coal just happens to be the dirtiest fuel so it's getting the technology first.

That why it's important to remember as we build more and more natural gas plants, that burning natural gas is cleaner than coal—not clean. So while coal is the enemy of the environmentalist today, natural gas is the opponent of the future. Southern, for example, is now one of the largest consumers of natural gas in the country; gas generated roughly a third of the company's power in the first quarter. Every watt of energy gas produced released CO2.

So, Moniz is wrong: We don't need a hundred more plants like Southern's Kemper, we needs hundreds. But it isn't coal that's the important feature, it's carbon capture. That's why it's so important for Southern to get Kemper running, no matter what the cost. If the technology works as expected, the next step is to get another large-scale project on the drawing board. Number two should (cross your fingers) go more smoothly.

After Southern's delays and cost overruns, however, getting number two started might be more difficult than getting number one done. That will be a bigger problem for the environment than most people can imagine today. Southern is taking a giant leap of faith with taxpayer, ratepayer, and shareholder money. It isn't going well. However, we should all hope the utility eventually succeeds.