Tuesday, June 5, 2012

Electric Power Research Institute (EPRI) Assesses Implementation Options of EPA's Environmental Rules on Electric Industry and the Economy - Results Show Technology and Innovation Could Dramatically Reduce Costs

Providing electric utilities with flexibility in installing new pollution control technology to comply with current and pending U.S. Environmental Protection Agency (EPA) regulations could save approximately $100 billion in future expenditures, according to a new assessment released today by the Electric Power Research Institute (EPRI).

The results are based on two potential pathways for compliance, one based on the "current course" and the other on an "alternative flexible path." The analysis found that installing a suite of new emissions controls would cost the U.S. economy up to $275 billion, between 2010 and 2035 in present value terms, if the current course is followed. By providing for a flexible path overall cost could be reduced by $100 billion while achieving the same level of compliance.

"This assessment is the first to take a regional approach in examining how current and pending emissions requirements will impact the U.S. generation portfolio and the overall economy," said Bryan Hannegan., vice president of Environment and Renewables at EPRI. "It should be a useful tool to inform the discussion as we pursue innovation and technologies aimed at achieving a lower emissions generation portfolio."

Key findings of the assessment include:
  • On the "current course" approximately 202 GW of existing coal-fired capacity would remain financially viable with costs for required environmental investment being recouped in less than 5 years.
  • Another 61 GW of coal capacity – primarily older, smaller, and less efficient units – could not be profitably retrofitted and would be retired.
  • The remaining 54 GW would either be retired or retrofitted depending on market-specific factors, such as: whether regulatory frameworks provide for cost recovery, cost and performance of competing generation, changes in power prices, trends in demand, and natural gas prices.
  • In the alternative "flexible path" case, approximately 288 GW would remain financially viable, only 25 GW would be retired, and only 4 GW would either be retired or retrofitted depending on market-specific factors.
For this PRISM 2.0 project, EPRI used its US-REGEN model of the U.S. economy, which calculates the impact of pollution control costs on the power sector in terms of changes in the generation portfolio, generation capacity, expenditures, and electricity prices. It estimates broader economic impacts, including natural gas prices and a decrease in economic output due primarily to higher energy prices and the required additional expenditures in the power sector.

EPRI examined the potential impact of current and pending environmental regulations on the existing generation fleet designed to meet the following current or EPA rules:
  • Mercury and Air Toxics Standard (MATS) Rule with compliance by 2015.
  • Clean Water Act (CWA) 316(b) for Cooling Water Intake Structures with compliance by 2018. This was modeled as requiring closed-cycle cooling on facilities with intake flow of greater than 125 million gallons of water a day.
  • Resource Conservation and Recovery Act (RCRA) regulation on Coal Combustion Residuals (CCRs) with compliance by 2020. This rule was modeled under subtitle D of RCRA or as non-hazardous wastes.
  • Updated National Ambient Air Quality Standards (NAAQS) on SO2 and NOx by 2018.
From previous EPRI studies, a range of retrofit costs were estimated for each course (in dollars per kilowatt). These estimates reflect the potential for technological innovation, efficient and well-implemented control systems, and a phased implementation:
  • The current course assumes the standard compliance periods for environmental regulations, limited flexibility to choose low-cost technologies, and higher costs due to competing demand for equipment and installation in a comparatively short time.
  • The flexible approach assumes an additional two years to phase in compliance with nitrogen oxide and air toxics regulations. Analysis results reflect improved technological performance due to innovation, the ability to optimize systems as they are installed, less overlapping demand for equipment and installation resulting in lower cost escalation, and, all while achieving the same level of overall compliance.
  • Among the technologies included in the analysis were dry sorbent injection systems and lime spray drying for SO2 controls; selective catalytic reduction systems for NOx; integrated mercury removal processes; and lower cost options for aquatic ecosystem impingement & entrainment protection.
Although not included in this analysis, EPRI's view is that additional advanced pollution control technologies can be made commercially available in the near term as part of an accelerated demonstration and deployment effort. These include advanced selective catalytic reduction systems that have a greater nitrogen oxide removal rate; advanced coal cleaning, a process that removes pyrites, ash, trace metals, and other pollutants, prior to combustion; and, a sorbent activation process that enables the more efficient and less-costly removal of mercury.

Another critical factor is the price of natural gas. With a projected price in 2020 of $4/million Btu slightly more than 100 GW of coal-fired generation (one-third of the existing fleet) could be retired. A flexible path for compliance strategies, with lower fixed costs, would still reduce this impact.

This project is the first of three phases of work planned under EPRI's "PRISM 2.0" project. Future projects will focus on the economic impacts and technology options under a proposed Clean Energy Standard as well as a New Source Performance Standard for new fossil generation. Both projects are expected to be completed by the end of 2012.

An executive summary and detailed presentation of the first phase results are available on EPRI's website. Additional climate-related research results also are available at www.epri.com/globalclimate/results_and_publications.html.

Electric Power Research Institute (EPRI) www.EPRI.com 

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