Memo to EPA: Two more years and some flexibility on technology will make a $100 billion difference.
That’s the finding of multi-year Electric Power Research Institute study on the cumulative costs faced by coal generators to meet new Environmental Protection Agency requirements.
“Our objective was to analyze the pending requirements from the perspective of the utility manager,” said Francisco de la Chesnaye, Program Manager with EPRI’s Energy & Climate Group.
Utilities Must Play by All the Rules
While EPA analyzes the impact of each rule individually, plant owners must consider the whole picture when deciding whether to retrofit or replace a generating plant. He said the study looked at every coal plant and analyzed its situation within its region.
EPA rules considered were: the Mercury and Air Toxics Standards (MATS), Clean Water Act cooling water intake requirements, possible reclassification of coal ash as hazardous waste, and 2013 updates of the National Ambient Air Quality Standards (NAAQS).
The study found EPA willingness to extend its compliance schedule for MATS from three to five years, allow time flexibility in meeting NAAQS changes, and accept technologies other than cooling towers to meet water intake rules would mean 86 more gigawatts of coal capacity retrofit to meet standards. Some 36 fewer GW would be converted to natural gas or biomass, or shut down.
The total retrofit/replacement cost would raise electric bills an average of 8% by 2015 without EPA flexibility, and 4.5% with it, EPRI said.
De la Chesnaye said EPRI’s analysis projects the savings with a hard five-year MATS deadline, with no further extensions. Now, the deadline is three years with provisions for limited extensions to a fourth and, under restricted circumstances, a fifth year.
Flexibility Means Cost Savings for Numerous Stakeholders
He said the extra two years will let plant owners consider emerging technologies, particularly dry sorbent injection, that could reduce costs.
The extra time will also allow equipment and service suppliers to catch up at lower cost. De la Chesnaye said utilities now getting bids on retrofits are finding prices rising because of the MATS-driven demand surge.
Mercury abatement technologies also affect sulfur and nitrogen oxides, so advanced technologies and EPA time flexibility will lower the cost of compliance with NAAQS.
Environmental advocates have backed EPA’s stance that the three-year MATS compliance period is feasible, noting some utilities already comply and saying the hardest-hit companies will be those that chose to delay backfits.
De la Chesnaye said EPRI has briefed EPA officials on the study’s findings. He said the pollution reductions actually achieved in the two approaches are identical after 2018, so the extra $100 billion in spending produces lower pollution only for two years.
The other key cost difference is for cooling water intakes. When the study began, it appeared EPA would demand construction of costly cooling towers at older coal and nuclear plants, but by late last year, EPA indicated it would accept other technologies, depending on circumstances.
The Fate of Significant Generating Capacity is Unclear
The EPRI study is based on coal generation operating in 2010, some 1,073 units with 316 GW capacity. Since January 2010, shutdown plans have been announced for more than 100 units representing about 40 GW, for a variety of reasons.
The study found that 202 of 316 coal GW would be economic to retrofit and 61 GW would be shut or refueled if EPA rules proceeded as assumed, with the fate of 54 GW economically unclear. With EPA flexibility, the study says, 288 GW is economic to retrofit, 25 shut, and 4 GW uncertain.
The dominant factor driving decisions, after EPA, is the anticipated price of natural gas. Higher prices will mean more coal retrofits, while lower prices mean more retirements and conversions, EPRI says.