Coal Plant Retirement in Light of New EPA Regulations

By Jeff Archibald, ICF International

The U.S. Environmental Protection Agency (EPA) is currently developing a range of new regulations under the Clean Air Act, Clean Water Act and Resource Conservation and Recovery Act (RCRA). These new federal regulations, as they are made final over the next year, are likely to result in substantial capital investments for many coal-fueled generators, and retirement for others. ICF projects that these potential investments could lead to the retirement of 10 to 20 percent of total coal-fueled capacity in the U.S. However, significant uncertainty remains around the timing and compliance options for these regulations as even the “final” Cross-State Air Pollution Rule (CSAPR) has been modified by EPA and reopened to comment, while it continues to be litigated by numerous parties.

The actual amount of coal capacity retired is dependent upon whether capital investments required by the regulations can be covered by the going-forward revenues minus expenses. To a large degree, the extent and timing of these retirements will depend on the effectiveness and applicability of dry sorbent injection for control of acid gases, the balance struck between reliability needs and regulatory timing, and expectations about greenhouse gas (GHG) regulation.

The key new environmental regulations facing generators today include:

• Regulations on SO₂ and NOX emissions in 28 states under EPA’s Cross-State Air Pollution Rule (CSAPR)
• Regulations on hazardous air pollutants (HAPs) including HCl, Hg, and PM under EPA’s Proposed Air Toxics Rule (HAPs MACT)
• Regulation of CO₂ under EPA’s New Source Performance Standards (NSPS), or the potential for legislation of CO₂ emissions in the future
• Regulations on cooling water intake structures under section 316(b) of the Clean Water Act (CWA)
• Regulations on ash handling and disposal under EPA’s Resource Conservation and Recovery Act (RCRA)

To evaluate the impacts on coal-fueled generating assets, ICF analyzed a scenario that includes representations of EPA’s four major rules mentioned above, as well as carbon regulations starting in 2020. There is still quite a bit of uncertainty associated with the three proposed rules as they work their way through the regulatory, legal and political process. For example, it is unclear how states will enforce water intake standards, or whether coal ash will be considered hazardous or not. The focus of this article is the impact on smaller coal-fueled units from the proposed HAPs MACT rule, as this rule is the single largest contributor to estimated compliance costs for these smaller units, which tend not to be scrubbed.

The HAPs MACT proposed rule uses hydrogen chloride (HCl) emissions as a surrogate for acid gas emissions that include SO2. The emissions level for HCl is set at 0.002 lb/MMBtu in the proposed rule. Based on information in EPA’s 1999 Information Collection Request, only a very small fraction of coal produced in the U.S. can meet this emissions level without controls. Thus to meet this emissions target, coal-fueled plants will need to use wet or dry scrubbers or dry sorbent injection. As scrubbers can achieve a 99 percent removal rate, scrubbed plants can theoretically use coal that has HCl content up to 0.2 lb/MMBtu. Dry sorbent injection (DSI) combined with a fabric filter has a maximum removal rate of about 90 percent, thus plants using DSI could theoretically use coal that has an HCl content of up to 0.02 lb/MMBtu. DSI has lower capital requirements than scrubbers, making it the option of choice for smaller plant; however, it does have a higher variable cost of operation.