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6 Assessing Potential Effects on the Electricity-Generating Sector
Pages 158-208

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From page 158...
... In this chapter, we use the electricitysector model referred to as the Integrated Planning Model (IPM) to bound some of the possible effects of the NSR equipment replacement provision (ERP)
From page 159...
... Furthermore, unlike the EPA analysis, which was prepared before the Clean Air Interstate Rule (CAIR) and the Clean Air Mercury Rule (CAMR)
From page 160...
... in Group of Boilers in Group Large ( 100 MW) generating units None None 126,640 45% 432 56% None Dry scrubber 9,574 3% 28 4% None Wet scrubber 54,259 19% 123 16% SCR None 54,146 19% 105 14% SCR Dry scrubber 2,002 1% 6 1% SCR Wet scrubber 27,066 10% 45 6% SNCR None 7,232 3% 29 4% SNCR Dry scrubber 248 0% 1 0% SNCR Wet scrubber 1,461 1% 6 1% Total for large units 282,628 100% 775 100% Small (< 100 MW)
From page 161...
... For the prerevision NSR rules, two general variants are defined: (1) "avoid," in which generators by and large are able to avoid triggering NSR but at the cost of worsening performance (that is consistent with the assumptions of the RIA of EPA [2003c]
From page 162...
... . 4Pre-1978 refers to generation units whose emission controls were permitted before the 1978 changes in new source performance standards.
From page 163...
... We distinguish between NSR-triggered retrofits and allowance-triggered retrofits resulting from CAIR or (in the absence of the CAIR) Title IV, enacted as part of the 1990 Clean Air Act amend 5Because IPM simulates only the discrete years 2007, 2010, 2015, 2020, and 2026, the constraint actually applies only in those years.
From page 164...
... But we can imagine a rate of NSR-triggered retrofits that would be great enough to overtake the CAIR rule (or, in its absence, Title IV and the SIP call) , in which case some difference in aggregate national emissions might be attributable to the change in the NSR rules.
From page 165...
... If there would be many more allowances surrendered under prerevision NSR rules, the NOx and SO2 constraints under the SIP call, Title IV, and CAIR would effectively be tighter, and national emissions probably lower. However, it is uncertain whether and how many additional allowance surrenders would have occurred under the prerevision RMRR, and thus, it would be speculative for the committee to estimate how many more would have occurred under different policies.
From page 166...
... Furthermore, individual states can choose to opt out, although their share of emission reductions (based on Section VII of the preamble to the final CAIR, 70 Fed.
From page 167...
... of states. However, the emission differences between the prerevision NSR rule and the "increased maintenance" cases were 1% or less for most of the cases and years considered because the emission caps are always binding.
From page 168...
... base cases, which assume that under the new rule no further settlements that result in mandatory retrofit of FGD-SCR are made under NSR rules beyond settlements that were in place as of March 2004.10 Those base cases include both non-CAIR-CAMR and CAIR-CAMR scenarios. These are compared with the IPM R/R/R runs (next to last row)
From page 169...
... RIA IPM runs are based on an earlier set of economic and technological assumptions. Dimension 3: Alternative Economic, Market, and Technology Scenarios It was not possible to conduct a thorough set of sensitivity analyses of the cases in Table 6-4 with respect to an array of economic and technology assumptions.
From page 170...
... RESULTS Comparison of Emissions In Table 6-5, we summarize the simulated SO2 and NOx emissions effects of each prerevision NSR RMRR variant ("avoid" and three R/R/R cases) relative to the ERP.
From page 171...
... aNegative number for SO2 or NOx indicates that estimated prerevision NSR RMRR emissions are less than ERP emissions; positive number indicates that prerevision NSR RMRR emissions are more. the Title IV/NOx SIP call and CAIR-CAMR systems of caps.12 For reference, Figures 6-1 and 6-2 also show the historical SO2 and NOx emissions by U.S.
From page 172...
... in its RIA, and by other national modeling studies.13 The basic conclusion of EPA's analysis, summarized earlier 13Two other national analyses of the ERP change have been undertaken that also assume that electricity-generating facilities adopt the "avoid" strategy under the old NSR rule. Both used the National Energy Modeling System (NEMS)
From page 173...
... 6-2b however; the existence of emission caps dampens or eliminates any national emission effect. The Title IV cap implies that SO2 emissions are changed slightly, if at all, and NOx emissions vary somewhat because the SIP call cap is geographically and seasonally limited.
From page 174...
... ­1400 "High" R/R/R (7.5%) ­1600 ­1800 ­2000 Year FIGURE 6-3 Difference in national SO2 and NOx emissions under Title IV NOx SIP call emission caps (comparison of prerevision NSR RMRR with the ERP base case in Figure 6-1)
From page 175...
... ­700 ­800 Year FIGURE 6-4 Difference in national SO2 and NOx emissions under CAIR-CAMR emission caps (comparison of prerevision NSR RMRR with the ERP base case in Figure 6-2)
From page 176...
... That is, EPA's prerevision NSR RMRR policy is estimated to have some effects on national emissions under scenarios in which a minimum of 2-7.5% per year of the nonscrubbed coal capacity in 2004 chooses to R/R/R, assuming no tightening of emission caps. The effects are important for the 2%/year and 5%/year scenarios only for NOx.
From page 177...
... By that year, nearly all coal capacity is scrubbed, and SO2 emissions fall to 41% of the base case value. Meanwhile, NOx emissions in that year are 54% of the base case values.
From page 178...
... (0%) 2% 5% 7.5% National emissions SO2 (million short tons)
From page 179...
... POTENTIAL EFFECTS ON THE ELECTRICITY-GENERATING SECTOR 1 CAIR-CAMR-BART ERP Prerevision NSR Prerevision NSR Prerevision NSR (0%) "Low" 2% "Middle" 5% "High" 7.5% 8,75 8,172 8,173 8,279 6 3,613 3,613 3,623 3,629 2,369 2,370 2,374 2,380 47.4 47.4 47.5 49.2 300 300 301 302 110 110 110 110 100 100 100 100 387 387 387 387 12 12 12 12 13 13 13 13 922 922 923 924 2,127 2,128 2,134 2,144 292 292 293 295 785 785 785 785 685 685 680 670 68 68 68 68 54 54 54 54 4,011 4,012 4,014 4,016 8.0 8.0 8.0 8.0 17.1 17.1 17.9 18.8 0.2 0.2 0.2 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.2 4.1 3.1 2.3 40.6 40.5 40.5 40.5 44.8 44.6 43.6 42.8 299 299 303 312 138 138 140 142 628 628 625 617 1,065 1,065 1,068 1,071 82.3 82.3 82.3 81.8
From page 180...
... (0%) 2% "Middle" 5% "High" 7.5% National emissions SO2 (million short tons)
From page 181...
... POTENTIAL EFFECTS ON THE ELECTRICITY-GENERATING SECTOR 181 CAIR-CAMR-BART ERP Prerevision NSR Prerevision NSR Prerevision NSR (0%) "Low" 2% "Middle" 5% "High" 7.5% 6,344 6,344 6,343 6,967 2,439 2,439 2,438 2,438 2,445 2,445 2,447 2,453 35.3 35.3 35.5 36.7 300 300 301 302 110 110 110 110 101 101 101 101 394 394 394 394 12 12 12 12 13 13 13 13 930 930 931 932 2,160 2,160 2,162 2,173 290 290 290 291 799 799 799 799 812 812 810 800 71 71 71 71 56 56 56 56 4,188 4,188 4,188 4,190 46.4 46.4 47.0 39.6 41.1 41.2 42.2 43.7 0.2 0.2 0.2 0.2 2.2 2.2 1.8 1.7 0.9 0.9 0.9 0.9 0.1 0.1 0.1 0.1 4.7 4.6 3.6 2.4 41.2 41.1 40.9 41.1 46.9 46.7 45.5 44.5 303 303 305 315 169 169 169 164 589 589 587 587 1,061 1,061 1,062 1,066 88.2 88.2 88.3 87.9
From page 182...
... (0%) "Low" 2% "Middle" 5% "High" 7.5% National emissions SO2 (million short tons)
From page 183...
... POTENTIAL EFFECTS ON THE ELECTRICITY-GENERATING SECTOR 183 CCAIR-CAMR-BART Prerevision NSR Prerevision NSR Prerevision NSR ERP (0%) "Low" 2% "Middle" 5% "High" 7.5% 4,992 4,994 5,119 4742 1,994 1,994 1,994 1850 2,569 2,568 2,575 2,590 31.9 31.9 32.3 29.9 299 299 300 301 110 110 110 110 102 102 102 102 426 426 425 425 12 12 12 12 14 14 14 14 963 963 963 964 2,194 2,194 2,202 2,222 294 293 294 296 811 811 811 811 1,072 1,072 1,064 1,046 67 67 67 67 61 61 61 61 4,499 4,498 4,499 4,503 88.3 88.1 86.6 110.3 70.6 70.6 74.0 110.8 0.3 0.3 0.2 0.2 2.7 2.7 2.4 2.4 0.9 0.9 0.9 0.9 0.1 0.1 0.1 0.1 4.7 4.6 3.6 2.4 41.2 41.1 40.9 41.1 46.9 46.7 45.5 44.5 310 309 312 341 194 194 194 224 568 568 570 514 1,072 1,071 1,076 1,079 100.4 100.4 100.3 101.5
From page 184...
... (0%) 2% 5% 7.5% National emissions SO2 (million short tons)
From page 185...
... POTENTIAL EFFECTS ON THE ELECTRICITY-GENERATING SECTOR 18 CAIR-CAMR-BART ERP Prerevision NSR Prerevision NSR Prerevision NSR (0%) "Low" 2% "Middle" 5% "High" 7.5% 4,282 4,279 4,126 3,399 2,002 2,002 1,763 1,312 2,758 2,758 2,772 2,789 28.7 28.7 27.6 26.8 321 321 320 320 110 110 110 110 103 103 103 103 472 472 472 473 12 12 12 12 14 14 14 14 1,032 1,032 1,031 1,032 2,358 2,357 2,373 2,375 292 292 294 295 809 809 809 809 1,272 1,273 1,258 1,257 54 54 54 54 61 61 61 61 4,846 4,846 4,849 4,851 107.9 108.1 120.3 181 72.9 72.9 120.9 181.3 0.5 0.5 0.2 0.2 11.1 11.1 5 4.7 0.9 0.9 0.9 0.9 0.1 0.1 0.1 0.1 4.7 4.6 3.9 2.4 41.2 41.1 40.9 41.1 46.9 46.7 45.8 44.5 330 330 343 398 225 226 246 286 568 568 536 463 1,123 1,124 1,125 1,147 115.6 115.5 116.3 120.5
From page 186...
... As mentioned, the committee regards the "high" case as an unlikely high level of emission-control retrofit, so it does not regard the 2020 SO2 reductions in that scenario as being likely outcomes of the prerevision NSR rule. However, because NOx reductions occur under a less extreme "middle" scenario, we regard the possibility of NOx increases associated with the ERP as being plausible, given the present Title IV and NOx SIP call caps.17 The different conclusions concerning national NOx and SO2 emissions are due in part to the greater flexibility that generators have in ways to adjust (either reduce or increase)
From page 187...
... Although the committee has determined that the "high" scenario is an unlikely outcome of the prerevision NSR EPA RMRR policy, it does illustrate some interesting interactions of this type of rule with emission caps. In particular, what is surprising is that the SO2 decrease in 2015 and 2020 in the "high" scenario (given CAMR-CAIR)
From page 188...
... Thus, in the bounding case where nearly every coal-fired generator is assumed to be compelled by settlement or economics to be R/R/R by 2020 and there is assumed to be no change in the CAIR caps, there are NOx emission benefits of the prerevision NSR rules relative to the ERP. Those benefits largely or completely disappear if what this committee considers to be more likely rates of R/R/R occur (0%, 2% "low," or 5%/yr "middle")
From page 189...
... . SO2 emissions fall by about 3% in 2020, although the total 2007-2015 SO2 emissions are essentially unchanged, as are 2007-2020 NOx emissions.
From page 190...
... Repower to CC R/R/R "high" 0.0 0.9 0.9 0.9 Low capital 0.0 0.9 0.9 0.9 Low capital-gas 0.0 0.9 0.9 0.9 Repower to IGCC R/R/R "high" 0.0 0.1 0.1 0.1 Low capital 0.0 0.1 0.1 0.1 Low capital-gas 0.0 0.0 0.1 0.1 Coal retired R/R/R "high" 2.3 2.4 2.4 2.4 Low capital 3.0 3.1 3.1 4.4 Low capital-gas 7.2 8.4 9.0 9.4 Oil/gas retired R/R/R "high" 40.5 41.1 41.1 41.1 Low capital 40.5 41.0 41.0 41.0 Low capital-gas 33.2 33.4 33.4 33.4 Energy generation (thousand GWh) Coal R/R/R "high" 2,144 2,173 2,222 2,375 Low capital 2,142 2,171 2,253 2,475 Low capital-gas 2,134 2,118 2,161 2,189 Oil/natural gas R/R/R "high" 670 800 1,046 1,257 Low capital 670 800 1,007 1,149 Low capital-gas 679 852 1,107 1,441
From page 191...
... That is, given a set of emission caps, what is the cost per ton of emission reduction? For simplicity, the reductions include both the NOx and SO2 effects, assuming that they get equal weight in the calculation.
From page 192...
... 12 NEW SOURCE REVIEW FOR STATIONARY SOURCES OF AIR POLLUTION TABLE 6-8 Cost Effectiveness of Emission Reductions for Various Cases Compared to Base Cases Undiscounted Emission Analysis Undiscounted Undiscounted Total SO2 Emissions, NOx Emissions, Discounted 2007-2020 2007-2020 Cost Cost (thousands of (thousands of (billion of Effectiveness Case tons) tons)
From page 193...
... POTENTIAL EFFECTS ON THE ELECTRICITY-GENERATING SECTOR 13 Discounted Emissions Analysis Discounted SO2 Discounted NOx Total Cost Emissions, 2007-2020 Emissions, 2007-2020 Discounted Cost Effectiveness, (thousands of tons) (thousands of tons)
From page 194...
... 24The emission reductions are not precisely the same because of modeling approximations; the minimal cost solution has about 10% less NOx emission in 2010 and 1.5% more SO2 emission in 2020. We did not allow banking of the national cap allowances in our minimal cost solution.
From page 195...
... POTENTIAL EFFECTS ON THE ELECTRICITY-GENERATING SECTOR 1 TABLE 6-9 Comparison of R/R/R "High" Solution (prerevision NSR RMRR) with Minimal-Cost Solution That Achieves Same Emissions Year Solution 2007 2010 2015 2020 National emissions SO2 (thousand tons)
From page 196...
... , and it would be more expensive to achieve the same national emission reductions. MOdEL ASSUMPTIONS ANd LIMITATIONS This modeling exercise uses Version 2.1.9 of the ICF IPM released in 2004.27 As mentioned in Chapter 4, IPM is a deterministic model of the electricity sector that uses linear programming techniques to find a lowest 25In reality, because of frictions in the market and the effects of public electricity-generating facility regulation on generator behavior, the actual costs of a trading program are likely to be higher than the costs predicted by the model.
From page 197...
... EPA has subjected IPM's input assumptions to extensive stakeholder and peer review and has conducted validation tests of IPM short-term outputs. EPA reports that these indicate that IPM can closely approximate electricity-generating sector operations.28 In reading our discussion of individual assumptions and limitations, we ask the reader to keep in mind the adage that "all models are wrong, but some are useful." Models are generally a simplification of reality, but they can still provide useful insights about the general response of a system (in this case, the power sector's response to a change in NSR rules under alternativepolicy backdrops)
From page 198...
... to model NSR constraints explicitly Generating plants aggregated to representative Limits ability to represent model plants heterogeneity of full fleet of generators Operations and capital investments chosen to Assumes that average-cost-based minimize cost subject to policy, technical, and regulation or deregulation do not demand constraints result in systematic biases away from cost-minimizing decisions Long-term contracts assumed to be no barrier to Could overstate flexibility and fuel switching therefore attractiveness of fuel switching as an abatement option Parameters Fuel prices and supply schedules for coal and Gas-price assumption varied in natural gas sensitivity analysis Heat content and sulfur and mercury content of different types of coal Heat rates of existing generators Varied in "avoid" variant of ERP Capacity of existing generators Varied in "avoid" variant of ERP Forecasts of electricity demand Shape of load-duration curves Interregional transmission constraints Capital costs for new generating units Varied in sensitivity analysis Operating and maintenance costs at existing units Varied in "avoid" variant of ERP Costs and performance of pollution-control retrofits Regional reserve-margin requirements Policy assumptions Federal environmental constraints Varied in sensitivity analysis State pollution-control policies Policies to promote renewables Past NSR settlements and allowance surrenders aFor this reason and because of generic cost and technology characterizations, IPM is not generally appropriate for modeling changes in outputs from individual generating units.
From page 199...
... . As a result, it is difficult to analyze directly the effects of NSR rule changes on these types of investments, and we must do it through the scenario-based approach described above and summarized in Table 6-4.
From page 200...
... Examples include criteria based on size, age, or emission rates of units; selective targeting of units whose emissions would affect the greatest number of people; or a prioritizing of units having the largest effect on nonattainment regions. Because time limitations meant that it was not possible to generate such R/R/R scenarios, the committee cannot determine whether alternative assumptions concerning which units would be first subject to R/R/R would significantly affect the spatial distribution of emissions or even the total emissions.
From page 201...
... As would be expected, regional differences were larger on a percentage basis than national differences, but were relatively smaller in the eastern United States than in the West. NOx emissions perhaps showed the largest variations, for instance with Table B2 showing 2015 NOx emissions in the East Central Area Reliability Coordination Agreement (ECAR)
From page 202...
... As discussed above, we considered a sensitivity analysis to examine the potential effects of varying the costs of natural gas and the costs of new renewable technologies on our results. However, other assumptions regarding, for example, the cost and performance of pollution-control technologies could affect both the cost and emission reductions under the R/R/R cases.
From page 203...
... We found that, subject to the caveats we identify, the use of a sectoral simulation model has been helpful in providing some quantification of interactions of NSR with emission caps.32 32The effect of imposing market-consistency conditions on the emission projections is evident if one compares the methods and conclusions of this chapter's analysis with studies that quantify potential emission increase at power plants on a facility basis. An example is NESCAUM 2004, which focused, like this chapter, on the EPR.
From page 204...
... , other parties in the NSR controversy have argued for the plausibility of such a consequence of the prerevision NSR rules. Depending on the stringency of emission caps, the committee's analysis shows that changing assumptions concerning industry response can alter the conclusions of a comparison of the two sets of rules.
From page 205...
... The results come from the RIA, which did not consider the tighter emission caps under CAIR, but the conclusion that national emissions would stay roughly at the caps would also hold for the CAIR case. In contrast, all three of the R/R/R variants under the prerevision NSR rules typically yield some emission changes when only Title IV and NOx SIP call caps are in place.
From page 206...
... That increase occurs because widespread installation of scrubbers lowers the value of SO2 allowances in the later years and thus weakens the incentive for generators to bank allowances for future use, and this causes emissions to be higher in the near term. As a result, total SO2 emissions under CAIR for the entire 2007-2020 period are the same with the prerevision NSR rules and the ERP even if all capacity is scrubbed under the prerevision NSR rules (Table 6-8)
From page 207...
... That conclusion was the result of an IPM solution obtained by imposing national emission caps equal to the emissions resulting from the most extreme retrofit scenario under the prerevision NSR rules. Thus, we conclude that from the standpoint of limiting national and regional emissions -- a goal, but far from the only one, of NSR -- a tighter emission cap would likely be a cheaper method of limiting national and regional emissions than NSR.
From page 208...
... The third way we suggest for improving future analyses is to undertake detailed empirical studies of the costs and effectiveness of maintenance and life-extension alternatives for various classes of power generators to increase understanding of the costs and benefits of undergoing NSR from the plant owner's point of view. Such a study would contribute to more realistic characterizations within IPM of the alternatives available to generation owners.


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