Nearly all of the coal in the Appalachian and Illinois basins has an HCl content of less than 0.2 lb/MMBtu, and greater than 0.02 lb/MMBtu, making it suitable for units that are scrubbed, but not suitable for use in plants using DSI. However, most PRB coal has an HCL content of less than 0.02 lb/MMBtu, which means that units choosing to use DSI, will need to use a large percentage of PRB coal in their burn mix. The Rockies and Southwest basins also have substantial quantities of low HCl content coal; however, rising transportation costs will limit their use.
Approximately two-thirds of coal-fueled capacity, or over 200 GW, has scrubbers installed or plans to install them in the next few years. The remaining 110 GW of uncontrolled coal plants tend to be smaller units that are at least 30 years old. The owners of these older uncontrolled units have difficult choices to make due to the uncertainty of the pending regulations and only the relative certainty in the CSAPR and the HAPs MACT rule, as these units face substantial control costs.
Based on ICF’s analysis of EPA’s new and proposed rules, approximately 50 GW of coal-fueled capacity is expected to retire by 2016. These units tend to be smaller, older and less efficient, as illustrated by the fact that 80 percent of the units are 250 MW or smaller, the median age is 54 years in 2016, and the median heat rate is 11,250 Btu/kWh. The coal plant retirements are expected to be concentrated in the following NERC regions: SERC, RFC, and MRO. The retirements in these three regions account for 80 percent of the expected retirements. Provided enough time, PJM has indicated that the expected coal plant retirements will not affect reliability; however, if the timelines for compliance are not extended in some cases, reliability issues may arise.
While retirement is one compliance option, other plants will choose to retrofit with either a scrubber or with DSI. In ICF’s analysis, approximately 54 GW of coal-fueled capacity retrofits with DSI by 2016. Because the primary source of low chlorine content coal is the PRB, only those plants currently burning, or designed to burn sub-bituminous coal will install DSI. One practical question regarding the large amount of coal capacity retrofitting with DSI, is whether enough sorbent can be mined and transported to meet the needs of these plants. Traditional sorbents are sodium based; however, work is being done to develop calcium based sorbents, the combination of which might provide enough sorbent for 54 GW of DSI fitted coal capacity. Another question is whether there is enough engineering and construction capacity to install DSI at 54 GW of coal-fueled capacity in the next five years.
ICF also conducted several sensitivities where the natural gas prices and the capital and operating costs of DSI were varied. The results of these sensitivities indicate that the cost of DSI primarily affects whether units choose to retrofit with DSI or with scrubbers, as there was no change in retirements when only the DSI costs were adjusted. A 30 percent increase in variable operating costs led to a 14 percent drop in capacity retrofitted with DSI. An increase in capital costs of 20 percent, on top of the variable cost increase, led to an additional 19 percent drop in capacity retrofitted with DSI. Although the capital costs of DSI are close to one tenth the capital cost of a scrubber, the choice to retrofit with DSI or a scrubber is quite sensitive to the capital cost of DSI due to the higher variable operating costs. The sensitivities varying the natural gas prices show that the gas price primarily drives the amount of coal units that retire, although higher gas prices also lead more units to choose to retrofit with scrubbers than with DSI.
There is no doubt that the impending EPA regulations will have a significant impact on the economics for individual plants, especially those that are smaller, older, and unscrubbed. In the short term, while the rules are being finalized, and litigated in the case of CSAPR, smaller coal plants can keep their options open, while still remaining in compliance, by burning ultra-low sulfur coal, and if applicable, running scrubbers more frequently. During this period plant owners would do well to analyze each unit on a long term basis that includes CSAPR and all three of the proposed EPA regulations, as well as expectations of natural gas and power prices.
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