Comparison to EPA Clear Skies Analysis

While there are differences, the EIA and EPA analyses of the impacts of Clear Skies are similar in many respects. In terms of overall annual costs, EPA finds that Clear Skies would cost $4.3 billion in 2010, $4.4 billion in 2015, and $6.3 billion in 2020. EIA finds similar values, $4.2 billion in 2010, $5.0 billion in 2015 and $5.9 billion in 2020.18 The results for emissions control retrofits are also similar. For example, EPA finds that Clear Skies will lead to approximately 200 gigawatts of coal capacity having SCRs to remove N Ox by 2020, while EIA finds 179 gigawatts of capacity will have them. EPA finds that just over 200 gigawatts of coal capacity will have SO2 scrubbers by 2020, while EIA finds that 171 gigawat ts will have them. For supplemental fabric filters and activated c arbon to remove mercury, EPA finds that only a few gigawatts of capacity will add them by 2020 while EIA finds that nearly 6 gigawatts will have them. In addition, both EPA and EIA find that the mercury safety valve in Clear Skies will be triggered and that mercury emissions will remain above the emissions cap throughout the projections, reaching 22 tons in EPA’s analysis and 28 tons in EIA’s analysis in 2020.

The key differences between the EPA and EIA analysis are in the amount of mercury that will be r emoved by the co-benefits associated with NOx and SO2 removal and allowance prices for NOx in the East and West. EPA projects that mercury emissions will fall from about 50 tons of emissions in 2001to 45 tons in 2010 in its Reference case, and 34 tons in a Clear Skies case without the mercury emissions cap. On the other hand, EIA projects that, because of increasing coal use, mercury emissions will increase to 53 tons by 2010 in its Reference case and 45 tons in a Clear Skies case without the mercury emissions cap. Differences in relative electricity demand growth, relative fuel prices, and coal mix (i.e., bituminous, subbituminous, and lignite) appear to be the key drivers in this divergence. EIA’s results show stronger electricity demand growth, higher natural gas prices, and greater use of coal, particularly western subbituminous coal, than EPA’s results.

EIA projects higher NOx allowance prices than does EPA. For example, EIA projects that NOx allowance prices in the East will be over $2400 per ton in 2020 while EPA projects they will be $1500 per ton. The key factor in this divergence is different assumptions about the cost of new SCRs. EPA assumes that it will cost approximately $65 per kilowatt to retrofit an SCR to a 500-megawatt plant, while EIA assumes it will cost just under $100 per kilowatt.¹⁹ EPA’s costs are in line with equipment vendor estimates, but actual realized costs for recently added units have shown much higher costs. Department of Energy experts believe that the costs for a 500-megawatt unit are actually closer to $120 per kilowatt than to $100 per kilowatt.