4
Emission Sources and Technology Options

INTRODUCTION

The purpose of this chapter is to address the following key questions:

  • What source categories account for the greatest permitting activity pertaining to modifications under New Source Review (NSR)?

  • Are modifications an important part of all NSR permitting?

  • What kinds of repairs and replacements are most often done in these industries?

  • What are the typical technology options or considerations for these source categories?

The answers to these questions provide insight into the emissions, energy use, and other implications of technological choices regarding preventative measures, repairs, and replacements. In this chapter, we use language that implies the colloquial meaning, as opposed to the “legal” terminology of “maintenance” and “modification” as these terms are used in NSR permitting. It is common jargon in many industries to refer to repair and replacement activities as maintenance (in a nonlegal sense) and for maintenance costs to be considered a routine part of the annual operating cost of a facility. To avoid confusion with legal terminology, in this chapter we use the terms “repair” and “replacement” instead of maintenance and modification.



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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants 4 Emission Sources and Technology Options INTRODUCTION The purpose of this chapter is to address the following key questions: What source categories account for the greatest permitting activity pertaining to modifications under New Source Review (NSR)? Are modifications an important part of all NSR permitting? What kinds of repairs and replacements are most often done in these industries? What are the typical technology options or considerations for these source categories? The answers to these questions provide insight into the emissions, energy use, and other implications of technological choices regarding preventative measures, repairs, and replacements. In this chapter, we use language that implies the colloquial meaning, as opposed to the “legal” terminology of “maintenance” and “modification” as these terms are used in NSR permitting. It is common jargon in many industries to refer to repair and replacement activities as maintenance (in a nonlegal sense) and for maintenance costs to be considered a routine part of the annual operating cost of a facility. To avoid confusion with legal terminology, in this chapter we use the terms “repair” and “replacement” instead of maintenance and modification.

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants The main focus here in terms of pollutants is on criteria pollutants, especially sulfur dioxide (SO2) and oxides of nitrogen (NOx) but also including carbon monoxide (CO), particulate matter (PM) with an aerodynamic diameter smaller than about 10 micrometers (µm) (PM10), and PM with an aerodynamic diameter smaller than about 2.5 µm (PM2.5). An ozone precursor of volatile organic compounds (VOCs) is also included. With respect to identifying technology options, the focus here is on the current status of emission-source technologies and current options for repair and replacement. However, because technology changes over time, explicit consideration is given to the process of technology change and the implications for technology change in the future. Furthermore, we consider both pollution control and pollution prevention technologies. Typically, “pollution control” refers to “end-of-pipe” techniques for removing pollutants from an exhaust gas after the pollutants have been formed in an upstream process. For example, in a coal-fired power plant, pollutants such as NOx, SO2, and PM are formed during combustion. Postcombustion control technologies such as selective catalytic reduction, fuel gas desulfurization, and electrostatic precipitation, respectively, can be used to reduce or capture these pollutants. In contrast, pollution prevention approaches are aimed at reducing or eliminating sources of pollution, typically through feedstock substitutions or process alterations. For example, in the case of a coal-fired power plant, methods that more carefully control and stage mixing of fuel and air can prevent the formation of a portion of NOx that otherwise would have been created. As another example, evaporative VOC emissions can be prevented by substituting water-based solvents for VOC-based solvents used at a manufacturing facility. A way to evaluate the effect of pollution prevention measures is to compare emissions and energy use with those of a more traditional feedstock or facility design. In addition, cost is always a consideration when evaluating and choosing options for repair and replacement. Therefore, cost implications of alternatives for repair and replacement are summarized. OVERVIEW OF NSR PERMITS The purpose of this section is to identify and evaluate the frequency of NSR permitting activity with respect to industrial categories for the purpose of determining which emission sources represent the highest priority for assessment. However, a substantial challenge is that there is

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants not a readily available database that summarizes NSR permitting activity. For example, an EPA database1 (EPA2004q) containing case-specific information on best available control technology (BACT)/lowest achievable emission rate (LAER) does not readily distinguish among permits for new sources versus permits for modifications. In principle, such data could be obtained individually from each state. However, the availability of such data varies among states. Thus, the approach taken here, as a first step, was to request a summary of permitting data from the EPA (see Table 4-1) and to supplement the summary with data from several states. The data EPA has provided to the committee in this table are preliminary, unpublished, not subjected to review, and not distributed outside of EPA. These data are based on information collected internally by EPA from its regional offices, that were obtained from state and local permitting authorities. These data were summarized by EPA for the committee in terms of the NSR permitted emissions (in tons) by the two-digit Standard Industrial Classification (SIC) code, as well as by the number of permits. Permits were categorized as “greenfield,” new at existing sources, and modifications. The main focus here is on modifications. These data do not include information regarding facilities that made modifications but did not obtain permits via the NSR programs. Although the information presented in the table is sorted by pollutant, it is possible for a modification to involve more than one pollutant. For NOx, the largest share of modification permits is for SIC type 49 (electric, gas, and sanitary services), in terms of both the number of permits and the NSR permitted emissions. SIC type 49 includes utility power plants of all types, and most of the permits and permitted emissions were for SIC code 4911, electric utilities. SIC types 32 (stone, clay, and products) and 26 (paper and allied products) also had a significant share of the reported NSR permitted emissions for modifications, although the number of permits for these SIC types was substantially fewer than for SIC type 49. For SIC type 32, the most significant source category was SIC code 3241, hydraulic cement. Pulp mills (SIC code 2611) were the most commonly permitted source for modifications under SIC type 26. NOx emission sources at these types of facilities are typically industrial or utility furnaces but can include a variety of other combustion-based sources such as heaters, kilns, ovens, and others. 1   The database is referred to as the “RACT/BACT/LAER clearinghouse.” RACT means reasonably available control technology.

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants For SO2, the key emission-source category in terms of number of modification permits and NSR permitted emissions for modifications is SIC type 49 (electric, gas, and sanitary services), for which SIC code 4911 (electric utilities) was the most significant subcategory. However, other source categories with significant totals for NSR permitted emissions for modifications include SIC type 28 (chemicals and allied products, particularly industrial inorganic chemicals and phosphatic fertilizers), SIC type 32 (stone, clay, and products, particularly hydraulic cement), and SIC type 26 (paper and allied products, particularly pulp, paper, and paperboard mills). SO2 emissions typically are associated either with combustion of sulfur-bearing fuels or with processing of sulfur-bearing feedstocks or ores (e.g., crude oil, metal ores). For CO, the largest number of permits for modifications was issued to SIC type 49, which includes electric, gas, and sanitary services2, and SIC type 33, which includes primary metal industries. With respect to NSR permitted emissions for modifications, the largest categories (in descending order) were SIC type 26, paper and allied products (primarily paperboard mills); SIC type 32, stone, clay, and glass products (primarily hydraulic cement and concrete block and brick); SIC type 33, primary metal industries; SIC type 20, food and kindred products (primarily cane sugar); and SIC type 49, electric, gas, and sanitary services (primarily electric utilities). For PM, the highest frequency of NSR permits for modifications was for SIC types 49 (electric, gas, and sanitary services) and 33 (primary metal industries). Although both of these SIC types also contributed significantly to the NSR permitted emissions for modifications, these emissions are widely distributed among six categories. Other categories include SIC types 28 (chemical and allied products, primarily including carbon black, phosphatic fertilizers, and industrial organic chemicals), 26 (paper and allied products, primarily including paperboard mills, pulp mills, and coated and laminated paper), and 20 (food and kindred products, primarily cane sugar). For VOCs, the highest frequency of permits for modifications was for SIC types 49 (electric, gas, and sanitary services), 33 (primary metal 2   This group includes establishments primarily engaged in the generation, transmission, and/or distribution of electricity or gas or steam. It also includes irrigation systems and sanitary systems involved in the collection and disposal of garbage, sewage, and other wastes.

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants TABLE 4-1 Summary of Estimated Number of Permits and Permitted Emissions Under New Source Review for Greenfield Facilities, New Facilities at Existing Locations, and Modifications, During 1977-1999 SIC SIC Type Number of Permits Number of Permits by SIC NSR Permitted Emissions (tons) Greenfield New at Existing Location Modifications Greenfield New at Existing Location Modifications CO 10 Metal mining 0 2 0 2 — 1,831 - 12 Coal mining 0 0 2 2 — — 3,696 13 Oil and gas extraction 3 3 3 9 3,047 1,286 253 14 Nonmetallic minerals except fuels 0 4 0 4 — 2,020 — 20 Food and kindred products 1 7 6b 14 135 7,029 16,366 24 Lumber and wood products 0 3 6 9 0 797 2,953 26 Paper and allied products 1 10 7b 18 215 18,691 24,878 27 Printing and publishing 1 0 0 1 15 — — 28 Chemicals and allied products 0 12b 5 17 — 1,896 7,699

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants 29 Petroleum and coal products 0 4 5 9 — 1,070 2,033 32 Stone, clay, and glass products 3 16 6 25 15,198 19,456 18,001 33 Primary metal industries 2 11 17 30 3,880 16,987 17,084 49 Electric, gas, and sanitary services 114 96b 38b 248 88,743 51,365 15,890 51 Wholesale trade—nondurable goods 0 1 0 1 — 55 — 82 Educational services 0 1 0 1 — 170 — 96 National security and intl. affairs 0 1 0 1 — NA — Total tons 125 171 95 391 111,233 122,653 108,853 PM 10 Metal mining 0 1 0 1 0 35 0 12 Coal mining 0 0 3 3 0 0 505 13 Oil and gas extraction 2 2 0 4 423 45 0 14 Nonmetallic minerals except fuels 0 4 0 4 0 314 0 20 Food and kindred products 1 12b 8 21 41 2,171 2,204

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants SIC SIC Type Number of Permits Number of Permits by SIC NSR Permitted Emissions (tons) Greenfield New at Existing Location Modifications Greenfield New at Existing Location Modifications PM 24 Lumber and wood products 1 7 11 19 9 834 1,101 25 Furniture and fixtures 0 1 0 1 0 11 0 26 Paper and allied products 1 12 10b 24 46 2,121 3,047 27 Printing and publishing 1 0 0 1 14 0 0 28 Chemicals and allied products 1 18 12b 31 14 1,002 3,402 29 Petroleum and coal products 0 4 7 11 0 264 454 30 Rubber and misc. plastics products 0 0 1 1 0 0 6 32 Stone, clay, and glass products 3 23 8 34 1,278 4,899 2,569 33 Primary metal industries 2 16 24b 42 352 1,493 1,437

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants 34 Fabricated metal products 0 0 1 1 0 0 7 37 Transportation equipment 0 0 2 2 0 0 17 49 Electric, gas, and sanitary services 95 67b 30 192 17,548 9,659 2,580 51 Educational services 0 1 0 1 0 77 0 97 National security and intl. affairs 0 0 1 1 2 0 18 Total tons 107 168 118 393 19,727 22,925 17,347 NOx 10 Metal mining 0 2 1 3 0 26,179 4,765 12 Coal mining 0 2 0 2 0 0 1,506 13 Oil and gas extraction 3 3 3 9 5,959 3,861 60 14 Nonmetallic minerals except fuels 0 4 0 4 0 1,136 0 20 Food and kindred products 1 9 7b 14 75 6,706 2,028 24 Lumber and wood products 0 3 6 9 0 510 1,168 26 Paper and allied products 1 12 8 20 129 7,398 10,021

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants SIC SIC Type Number of Permits Number of Permits by SIC NSR Permitted Emissions (tons) Greenfield New at Existing Location Modifications Greenfield New at Existing Location Modifications NOx 27 Printing and publishing 0 0 1 1 90 0 0 28 Chemicals and allied products 1 17 7 26 186 3,841 1,776 29 Petroleum and coal products 0 7 6 13 0 2,381 2,989 30 Rubber and misc. plastics products 0 1 0 1 0 33 0 32 Stone, clay, and glass products 3 18 8 31 9,388 27,842 20,479 33 Primary metal industries 1 13 13b 26 406 5,031 2,842 36 Electronic and electric equipment 0 1 0 1 0 18 0 37 Transportation equipment 1 2 0 3 2 1,080 0 46 Pipelines except natural gas 1 0 0 1 353 0 0

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants 49 Electric, gas, and sanitary services 125 97b 46 299 91,280 28,496 26,228 51 Wholesale trade—nondurable goods 0 1 0 1 0 434 0 82 Educational services 0 1 0 1 0 88 0 97 National security and intl. affairs 0 0 1 1 0 0 650 Total (tons) 137 193 107 437 107,868 115,034 74,512 SO2 10 Metal mining 0 1 0 1 0 37 0 12 Coal mining 0 0 2 2 0 0 2,221 13 Oil and gas extraction 3 3 0 6 2,232 1,294 0 14 Nonmetallic minerals except fuels 0 2 0 2 0 640 0 20 Food and kindred products 2 8 6 16 80 26,272 5,494 24 Lumber and wood products 0 0 1 1 0 0 20 26 Paper and allied products 0 9 9 18 0 3,978 12,634 27 Printing and publishing 1 0 0 1 5 0 0

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants SIC SIC Type Number of Permits Number of Permits by SIC NSR Permitted Emissions (tons) Greenfield New at Existing Location Modifications Greenfield New at Existing Location Modifications SO2 28 Chemicals and allied products 0 9b 6 15 0 12,299 22,206 29 Petroleum and coal products 0 3 3 6 0 928 2,368 32 Stone, clay, and glass products 3 17 7 27 3,155 8,104 20,290 33 Primary metal industries 0 8 8 16 791 3,580 1,224 37 Transportation equipment 0 1 0 1 0 40 0 49 Electric, gas, and sanitary services 57 47 19 123 29,116 4,012 24,541 51 Wholesale trade—nondurable goods 0 1 0 1 0 787 0 82 Educational services 0 1 0 1 0 37 122 97 National security and intl. affairs 0 0 1 1 0 0 0 Total tons 66 110 62 238 35,379 62,008 91,120

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants chips to a soluble phase containing the lignin and an insoluble phase (the brown pulp) that is further processed into paper. The soluble and insoluble phases are separated in the blow tanks. Processing the Pulp The pulp that emanates from the blow tanks is subjected to additional processing to remove spent digesting liquids (black liquor), improve the quality of the pulp, and, depending on the final product, bleach the pulp. The brownstock washers are used to remove spent digestion liquids from the pulp material. The diluted black liquor that exits the brownstock washers is collected for further chemical treatment. Washed pulp (brownstock) is also passed through screens to remove excessively large (partially undigested materials) or small pieces of the pulp. A proper pulp size is needed to ensure the strength and quality of the final product. Certain kraft mills also use a bleaching process to convert the brown pulp to a white (bleached) pulp. This bleaching process involves using of a chlorinated compound such as chlorine dioxide to remove any residual lignin from the pulp, which results in a brightening or bleaching of the digested raw material. Pulp is introduced into a bleaching tower, bleached, and then washed to remove excess bleaching liquid. Drying and Preparing the Product The washed (and perhaps bleached) pulp is processed into a final product through a series of blending and drying processes. Blending of softwoods and hardwoods changes the ultimate strength and characteristics (e.g., softness) of the final product. It is important to note that different wood types are processed in the digesters separately to ensure that proper digestion times as well as recovery techniques are used. (As an example, softwoods contain high concentrations of terpenes. Thus, after the digestion process, gases emanating from the digester and blow tanks used for softwood processing are condensed and recovered to form turpentine.) To achieve the desired final product characteristics, softwood pulp and hardwood pulp must be blended. Once the appropriate pulp blends are achieved, the pulp is sprayed onto large pressing and drying rollers where the paper product is formed.

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants Chemical Recovery A critical component of a kraft mill is the chemical recovery process. The black liquor generated in the digester is captured in the blow-tanks and washer sections of a typical mill. This liquor is then passed through a recovery boiler to recover Na2S. The molten smelt that is generated is further reacted to ultimately recover NaOH. The recovered Na2S and NaOH form the basis of the white liquor that is fed into the digesters as wood chips are processed. Typical Emissions and Control Equipment The primary emissions from a kraft mill consist of VOCs, SO2, NOx, CO, and PM. Variations in the emission rates of each of the pollutants can exist based on the wood products used (softwood versus hardwood) as well as the final product that is produced by the mill (Someshwar 2003; Davis 2000). The National Council for Air and Stream Improvement as well as EPA have conducted studies to determine the typical emissions from specific mill processes (Someshwar 2003; NCASI, in press). Table 4-5 provides data on the types of compounds emanating from the major sections of a typical kraft mill as well as the typical air pollution control devices that are used to reduce emissions (Someshwar 2003; NCASI in press; Witkowski and Wyles 2004; Springer 2000; Davis 2000). It is important to note that the composition of emissions from the power boilers will vary depending on the type of fuel that is used. Typical fuels and the percentage of mills using the specified fuel in steam-generating power boilers are as follows: natural gas, approximately 33%; wood, approximately 33%; coal, approximately 26%; and oil/miscellaneous fuels, approximately 8% (NCASI in press). Although the use of waste bark may be an efficient use of resources, the combustion of bark typically generates excessively high levels of CO compared with the combustion of other fuels in a typical steam-generating power boiler (NCASI in press). Mill Repair and Replacement Activities Numerous repair and replacement activities are periodically undertaken to ensure safe and optimal mill performance. For existing kraft mills, these types of activities have the potential to trigger NSR. There-

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants TABLE 4-5 Typical Air Pollutant Compositions and Emission-Control Equipment Used in Each Subprocess in a Kraft Mill Subprocess Typical Air Pollutants Typical Emission Control Digester VOCs, sulfur compounds Combustion Blow tanks VOCs, sulfur compounds Combustion Brown stock washing VOCs, sulfur compounds Combustion Bleaching Halogenated compounds (particularly chlorine dioxide and chloroform), CO Alkaline scrubber Chemical recovery boilers PM ESP Smelt dissolving tanks PM Scrubbers Slaker/causticizing tanks PM Scrubbers Limn kiln PM, sulfur compounds Scrubber or ESP Drying VOCs, sulfur compounds Combustion   Source: Data from Witkowski and Wyles 2004. fore, any effort to assess the impact on kraft mills of operational changes to the NSR program depends on the nature of these activities. Table D-3 in Appendix D lists repair and replacement and other activities specific to kraft mills that are periodically undertaken. The quality and variety of the fuel types used in the pulp and paper industry may result in repair or replacement activities for facility components that are different from those that occur in industrial sectors relying on one fuel type. TECHNOLOGICAL CHANGE The stringency and form of environmental regulation can influence the nature and speed of technological change for pollution control equipment and have important implications for the cost and performance characteristics of that equipment. Technological advances can lead to lower costs of installing pollution control devices, lower costs of operating those devices, improved emission reduction performance, or some combination of those improvements. Understanding the relationship between regulation and technological change is important to accurately assess the costs and, in some cases, the benefits of environmental regulations into the future, including the changes to NSR rules being considered in this report.

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants Regulatory stringency and applicability have a direct relationship to the size of the potential market for a particular control technology and the incentive of a developer to improve that technology. Greater certainty about future regulatory requirements also provides for a more accurate assessment of the potential market for a particular technology and may increase incentives for improving that technology. The potential for being designated NSPS, BACT, or LAER, in theory, could provide an incentive for technology developers to devise a better technology for reducing or even preventing emissions, but there are no empirical studies of the effects of these regulations on new technology development. The form of environmental regulations—be they technology standards, emission rate standards, or cap-and-trade programs—will also affect incentives for different forms of innovation. In particular, emissions cap-and-trade regulations impose an opportunity cost in the form of the price of an emission allowance on every ton of pollutant emitted and thereby potentially create a stronger incentive to improve emission-control efficiencies of particular technologies than would exist with either technology standards or emission-rate standards (Keohane 2002). To illustrate the relationship between environmental regulation and the development of emission-control technologies, two examples of such technologies are considered: FGD technology used to reduce emissions of SO2 and SCR technology used to reduce NOx emissions from fossil-fuel-fired boilers used to generate electricity. Flue Gas Desulfurization FGD technology is of particular interest because it must be installed for compliance with new source performance standards for SO2 emission reduction at new pulverized coal electricity-generating units. The recent settlements of EPA NSR enforcement cases against several utilities (see Chapter 2) included agreements to install FGD scrubbers at one or more coal-fired units. FGD units were also an important part of utility compliance strategies with the SO2 cap-and-trade provisions of Title IV of the 1990 Clean Air Act Amendments. Sixteen utilities installed retrofit FGD units in at least one of their existing coal-fired generators to comply with Phase I of Title IV (Swift 2001). Approximately eight scrubbers were installed after stricter caps were put in place under Phase II of the program, which took effect in 2000 (Burtraw and Palmer 2004). Studies of the effect of NSPS and Title IV on innovation in scrubber technology suggest that both forms of regulation helped spur techno-

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants logical advances, but of different types. Taylor et al. (2003) found that patents relevant to SO2 control technology grew dramatically in the early 1970s and have remained high through the mid-1990s relative to earlier time periods. Popp (2003) found that SO2 removal patent counts peaked in the early 1980s, substantially above post-1990 levels. He suggested that this pattern indicates that stricter NSPS rules issued in the late 1970s contributed to increased patenting in the early 1980s. The subsequent decline in patenting activity could be due to a combination of factors, including lower-than-expected SO2 allowance prices, the drop in construction of new coal-fired generators, and a declining propensity to patent in general. Several authors find that the move toward a more flexible cap-and-trade approach to SO2 regulation contributed to new forms of innovation. Burtraw (1996, 2000) found that the flexibility associated with permit trading allowed generators to make changes in institutional behavior that helped to lower costs and that by creating a form of competition with scrubbing helped to provide incentives to reduce scrubbing costs. Popp (2003) found that although capital and operating costs of scrubbers declined during the period since first implementation of NSPS, the move to cap-and-trade regulation for SO2 in the late 1990s was accompanied by an improvement in the SO2 removal efficiency of FGD units. This improvement is seen as a direct result of the stronger incentive to continually reduce emissions associated with a need to hold SO2 allowances to cover all emissions. Keohane (2002) also found that FGD equipment costs did not decline during Phase I of Title IV but that the operating efficiency of scrubbers did increase and brought about large declines in operating costs per ton of SO2 removed. Recent vintages of FGD units reduce potential stack emissions of SO2 by 95% or more, whereas the median emission reduction before the revised NSPS for SO2 in the late 1970s was closer to 80% (Popp 2003; Taylor et al. 2003). Today’s systems are also much more reliable than were the FGD systems installed in the 1980s, and the increased reliability contributes to higher total SO2 removal (Taylor et al. 2003). Improvements in reliability and in the removal efficiency of FGDs are linked to some extent. As noted by de Nevers (2000), the electric utility industry endured problems associated with the early adoption of systems such as limestone scrubbers in the 1970s and early 1980s. Examples of problems encountered included higher than anticipated corrosion of metals; deposits of solids, as well as scaling and plugging, in the FGD system itself; entrainment of slurry droplets and downstream deposition of solids; underutilization of reagent; and problems with the sepa-

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants ration of water from the waste products. Solutions to these problems have included better control of pH in the slurry, better control of the composition of the slurry to avoid scaling and plugging problems, improved design for key components such as entrainment separators, and increased slurry holding times and oxidation. Learning by doing also has helped to bring down the costs of operating FGD units. Taylor (2001) showed that the operating costs of FGD units have fallen by 17% for every doubling of installed capacity. Capital costs of a wet limestone scrubber designed to reduce emissions of 3.5% sulfur coal by 90% at a 500-MW unit have fallen by roughly 50% over 20 years, and the bulk of those declines occurred before the beginning of the cap-and-trade program (Taylor et al. 2003, Figure 6). Selective Catalytic Reduction SCR technology is of interest because it is a very effective means of reducing NOx emissions at utility boilers that has the potential to reduce emissions by between 70% and 90%. SCR generally is assumed to be necessary to meet NSPS requirements for NOx reductions at new pulverized-coal facilities. SCR is also the technology typically selected to control NOx in settlements of NSR enforcement cases brought against large electricity producers by EPA in recent years. SCR is one of many ways to control NOx emissions, and it is a relatively capital-intensive and expensive method compared with other approaches (Swift 2001) that have proven sufficient to achieve compliance with recent NOx regulations. Before the 1990 CAA Amendments, many existing coal-fired generators faced no restrictions on emissions of NOx. Title IV of the 1990 CAA Amendments imposed an annual average emission-rate cap on NOx emissions for coal-fired generators in the United States. The emission-rate limit was based on the use of low-NOx burners, and the standard varied by boiler type (Swift 2001). Most units complied with the regulation by installing low-NOx burners, although flexibility provisions in the law, such as emission-rate averaging across units at a plant, encouraged firms to reduce emissions through other means, such as changing air/fuel mixtures and adjusting boiler temperatures to reduce NOx emissions before investing in control technology (Swift 2001). The linking of these standards to the degree of reduction achievable with low-NOx burner technology provided limited incentive for U.S. coal-fired generators to adopt the more expensive SCR technol-

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants ogy. However, in several states, such as California, SCR was applied starting in the 1980s on gas turbine combined cycle facilities. Demand for SCR to reduce NOx emissions was expected to grow somewhat when the Ozone Transport Commission (OTC) program for capping summertime NOx emissions from electricity generators in nine northeastern states took effect in 1999. This cap began in Phase II of the OTC program, which ran from 1999 through 2002, mandating a 55% reduction in summertime NOx emissions from affected sources below 1990 levels. Despite the large reductions sought, most of the regulated units were able to achieve a large fraction of the required reductions in NOx emissions through operational changes, and thus the role for SCR was much smaller than expected (Swift 2001). Beginning in summer of 2003, this cap was tightened to roughly 70% below the 1990 level (Burtraw and Evans 2004). The geographically more expansive multistate NOx caps under EPA’s NOx State Implementation Plan Call, which covers 19 states and the District of Columbia and took effect in the summer of 2004, greatly increased installations of SCR technology. Also, coal-fired power plants in a number of states have retrofitted combustion and postcombustion NOx controls (for example, low-NOx burners and SCR) in response to state implementation plan (SIP) requirements for attaining National Ambient Air Quality Standards. The United States was a relatively late adopter of SCR. In Japan, it was used as early as the late 1970s but at much lower removal rates than are common today, typically at a rate of 60%. These lower removal rates meant that there was less of an issue with ammonia slip because utilization of ammonia is more complete under these conditions. German coal-fired boilers adopted SCR in the late 1980s and early 1990s in combination with environmental regulations. During the 1980s, improvements in catalyst formulation, as well as injection grids and control systems, enabled achievement of the 80-90% removal efficiencies with less ammonia slip for a wider variety of flue gas compositions. One barrier, in addition to high costs and relatively low regulatory stringency, to adoption of SCR in the United States during the 1980s was the perception that SCR could not be used in U.S. coal plants because the alkali content of U.S. coal was higher than that from coal used in Japan (or Germany) and that this difference could be a potential cause of catalyst plugging or poisoning. However, experience has shown that, with appropriate catalyst formulation, different coal chemistry is not a problem. Other potential problems with the application of SCR, such as ammonium salt deposition on downstream equipment, are apparently

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants reduced or eliminated by controlling ammonia slip and by selecting appropriate materials and surfaces for such equipment (e.g., an air preheater). Ongoing work by Taylor (2004) finds that SCR emission removal efficiencies have improved dramatically coincident with the spread of regulations requiring or spurring their use from Japan in the late 1970s to early 1980s, to Germany in the late 1980s to early 1990s, and then to the United States more recently. Increased SCR use in the United States has come about only recently, largely in response to the regional summertime NOx emissions cap-and-trade programs in the northeastern states and to NSR requirements. Currently, removal efficiencies of 90% and beyond are feasible, and typically 90% removal is guaranteed by vendors (Culligan and Krolewski 2001). Operating costs of SCR units have also declined by 50% in 10 years (Taylor 2004). NSR Modifications and Incentives for Technological Change Several economic researchers have raised the question as to whether NSR regulations inhibit technological change. Anecdotal evidence and a small amount of empirical evidence, discussed in Chapter 5, suggest that differentiated regulation of new sources slows capital turnover and that differentiated regulation of modified sources reduces investment in modifications and upgrades at existing plants. To the extent that these technological modifications would have promoted new technologies, the evidence of reduced investment at existing plants could be consistent with dampened diffusion of new technology and reduced technological change more broadly. However, no empirical studies have explored this relationship directly (Jaffe et al. 2003). Not addressed here is the issue of the implications of tighter controls on new sources versus keeping older sources online longer. The dearth of literature on NSR and technological change makes it difficult to offer much in the way of informed judgment about how the recent NSR rule changes are likely to affect innovation, let alone any direct evidence on the issue. To the extent that the regulation reduces applicability of NSPS, BACT, and LAER to existing sources, it could reduce demand for pollution control retrofits and thereby reduce innovation by technology developers. However, if the very endogeneity of the original rules (the fact that NSR applies only when major modifications actually take place) limited investment activity in the first place, then this effect is likely to be small.

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants An argument can be made that by expanding the use of flexibility measures such as plant-wide applicability limitations (PALs), the new rules could increase incentives for innovation and for adopting new technologies. PALs represent a form of intrafacility emissions trading, and emission trading has been shown to provide a stronger incentive for innovation than uniform emission standards. However, most of the research on this issue has focused on broader-scale interfacility emissions trading and the incentive effects of the more narrowly defined PALs program are likely to be smaller. Because the PAL applies for 10 years, firms typically emit below the PAL level in the earlier years to allow some headroom to accommodate anticipated demand growth over the 10-year period (EPA 2002a). The emissions cap created as a result of a PAL could provide an incentive to become more efficient in order to increase the firm’s production of marketable goods. However, under a PAL, firms have little incentive to seek ways to reduce ultimate emission levels below the PAL. An exception would be if a particular pollutant were also covered by a broader cap-and-trade program such as the summer cap-and-trade program for NOx in the eastern states or the Title IV national cap-and-trade program for SO2. In both of these cases, a firm has a direct incentive in the form of the emission allowance price to reduce emissions beyond the PAL. Most of the NSR modifications such as changes in methodology for estimating emissions effects and baseline emissions, PALs, exemptions for pollution control, and the expenditure threshold definition of routine maintenance limit the possibility that a particular investment or expenditure at an existing facility will trigger NSR. Those favoring the NSR rule changes have asserted that concerns over triggering NSR reduced investments at existing plants and, at the same time, reduced markets for new technologies (see Box 4-1). They also have asserted that limiting its applicability could increase the adoption of new technologies, which in turn could spur technological innovation. Whether this hypothesized effect would occur remains an open question. SUMMARY The key conclusions of this chapter are as follows: There is significant NSR permitting activity pertaining to modifications. On the basis of preliminary data, which are subject to

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants BOX 4-1 Example of an Emerging Technology: IGCC An example of an emerging technology is integrated gasification combined cycle (IGCC). IGCC features the gasification, rather than combustion, of fuels. For example, coal (or a wide variety of other fuels, including waste fuels) is partially combusted by using an oxidant (typically 95% pure oxygen from a dedicated air-separation plant), and steam or water is added. The partial combustion of the fuel supplies thermal energy for endothermic gasification reactions that lead to the formation of a synthesis gas containing CO, H2, and other compounds. The bulk of noncombustible material in the fuel is removed via the bottom of the gasifier as a vitrified “slag” that typically is less leachable than the bottom ash of a conventional furnace. The “syngas” goes through gas cooling, scrubbing, and acid gas separation to remove particles, H2S, and carbonyl sulfide (COS). The sulfur is recovered in elemental, solid form and can be used as a by-product. The synthesis gas can be used as a fuel in a gas-turbine combined cycle to generate power. Alternatively, the synthesis gas can be used as a feedstock for the production of chemicals, such as hydrogen, ammonia, and methanol. Gasification can be the cornerstone of a “polygeneration” system or “coal refinery” that creates a mix of multiple products. For power-generation applications, NOx emissions can be prevented or minimized via saturation of the syngas with moisture and/or injection of nitrogen from the air-separation plant. IGCC systems are generally more efficient than the combustion-based systems and have lower water usage, lower air pollutant emissions, and greater fuel flexibility. Although IGCC technology has been shown to be technically feasible in several large-scale demonstration plants, IGCC has not yet been cost competitive in the United States. However, American Electric Power has recently announced its intentions to construct the first commercial IGCC plant in the United States sometime in the next 5 to 6 years. various limitations, the reported permits for modifications compose 25-48% of the reported total amount of permitted emissions among all NSR permits, depending on the pollutant. NSR permits for modifications have been issued for a wide variety of emission-source categories but primarily in the following industries, whether measured by number of permits or amounts of permitted emissions: electric utilities; stone, clay, and glass products; paper and allied products; chemicals and allied products; and food and kindred products.

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Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants Although the mix of industries appears to be diverse, their emission processes are often similar. For example, many industries use common unit operations such as industrial furnaces to generate steam for process use, whereas others use combustion sources, such as tunnel or rotary kilns. A review of common repair and replacement practices for selected types of process facilities showed that such activities can vary considerably in frequency and cost4. Likewise, for a given emission source, such as a utility boiler, a wide range of pollution prevention and control options can vary in effectiveness and cost. Emission sources, pollution prevention techniques, and pollution control technology are expected to change over time, and regulations such as the ones considered here can be part of the motivating factors for such change. However, the effects of regulations can vary greatly, depending on the specifics of the programs. 4   The committee takes no position on whether these repair and replacement activities are “routine” within the meaning of EPA’s old or new regulations.