The US EPA's New Source Review rules for CO2 quietly went into effect last week. Many people believe this rule is focused on new plants and are waiting for the prescriptive standards to be published this July to gauge the impact of the EPA's Endangerment Finding on existing plants. A more careful look, however, suggests that the regulations that just went into effect have significant implications for existing plants.

With these regulations, modifications made to existing plants that result in a greater than 75,000 tons per year increase of CO2 will become subject to Permits of Significant Deterioration (PSD) and Title V. This 75,000 ton per year CO2 threshold that triggers an NSR for existing units is equivalent to a 1.4% heat rate degradation for a 600 MW coal-fired unit. If you think about the number of changes that could degrade heat rate -- low-NOx burners, SCRs or FGDs, fuel changes, tightened state CO limits, etc. -- you can see how valuable it could be to do everything possible to compensate for such degradation and avoid the costly litigation associated with being served with an NSR lawsuit.

One way this new addition to NSR triggers resembles those for SO2 and NOx is that the litigation will be time-consuming and costly.  The vast majority of plants served with NSR suits for NOx and SO2 ended up settling with the EPA and other parties (mostly environmental groups). I expect that the same incentives to settle will play out with CO2 NSR cases, simply because the associated litigation is so costly and disruptive.

What will differ however -- at least in the near-term -- will be the scope and nature of the remedies, whether agreed on through settlement with a consent decree or imposed through an EPA Best Available Control Technology (BACT) finding.  The reason is that currently the only commercially-available means of reducing CO2 emissions from fossil-fired generation are to either improve the efficiency of generation or curtail it.   
                 
Consistent with this reality, many observers believe that the only thing the EPA will politically and practically be able to impose through BACT will be measures that increase the efficiency of generation, or "Supply-Side Management."  The EPA has recently published several white papers that summarize readily available information on control techniques and measures to mitigate greenhouse gas (GHG) emissions from specific industrial sectors. These white papers are intended to provide basic information on GHG control technologies and reduction measures in order to assist States and local air pollution control agencies, tribal authorities, and regulated entities in implementing technologies or measures to reduce GHGs under the Clean Air Act. This particularly relates to permitting under the prevention of significant deterioration (PSD) program and the assessment of best available control technology (BACT).

The document focusing on coal-fired generation is entitled "Efficiency Improvement Technology Description and Reported Efficiency Increases for Existing Coal-Fired EGUs." As a testament to the limited commercially-available alternatives, the document describes just six potential mechanisms for remediation, including: 1) Combustion Control Optimization; 2) Cooling System Heat Loss Recovery; 3) Flue Gas Heat Recovery; 4) Low-rank Coal Drying; 5) Sootblower Optimization; and 6) Steam Turbine Design.

As a provider of Combustion and Sootblower optimization software, I am clearly pleased to see the inclusion of those two methods of remediation.  I have seen over and over again during the past dozen years the impact these technologies can have on reducing heat rate through improved boiler efficiency, improved temperature control, improved consistency of operations and reduced steam wastage. Other advantages of these software-based approaches are the substantial co-benefits that can be achieved, such as reduced sootblower-related tube leaks, improved emissions control, better ramping, improved SCR operations, etc.

There is still much to be learned about the impact of the new CO2 regulations in the months ahead as EPA both begins enforcing the new NSR revisions for plants making modifications with heat rate implications and promulgating the new prescriptive standards for all existing plants. But there is little wonder why I’ve already been observing an increased emphasis on heat rate improvement in my recent travels – both at the plant and corporate levels.

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