COST EFFECTIVENESS EVALUATION. A. Selective Catalytic Reduction System

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2 was installed with a Selective Catalytic Reduction (SCR) and is able to comply with a NOx emission limit of 9 ppmv when operating with natural gas and 13 ppmv when operating under diesel fuel. In addition, in 2008, the IID, Niland Generation Station, installed two stationary gas turbines. These units are equipped with SCR and are able to comply with a NOx emission limit of 2.5 ppmv. These turbines are only authorized to burn natural gas. Without the installation of additional technology, these emission units are currently in compliance with Rule emission limits. Therefore, no substantial change in the emissions inventory for these facilities due to implementation of this rule is anticipated. The IID, Brawley Generation Station, operates two turbines that were installed in 1962 and do not have installed NOx emission control equipment. These units will be exempted from compliance with Rule NOx emissions limits by restricting operation to no more than 400 hours per calendar year. The IID, Rockwood Generation Station, operates two turbines that were installed in 1979 and have installed water injection for NOx emission control. These units are able to comply with Rule NOx emissions limits of 42 ppmv for natural gas and 65 ppmv for diesel fuel. An analysis will be conducted in this Appendix to evaluate cost effectiveness for installation of SCR equipment to further reduce NOx emissions to 9 ppmv for natural gas and 15 ppmv for diesel fuel on these units. There is no federal policy that establishes maximum cost effectiveness values for NOx RACT. The San Joaquin Valley Air Pollution Control District (SJVAPCD) uses a BARCT threshold of $9, (California Air Resources Board, Report to the Legislature, Implications of Future Oxides of Nitrogen Controls from Seasonal Sources in the San Joaquin Valley, January 2002, Table 9, Comparison of BARCT Cost Effectiveness Thresholds). Therefore, for the purpose of this evaluation, the APCD will use a RACT cost effectiveness value of $8,000-$10,000/ton of NOx. The cost of control equipment is highly dependent on the size of the unit and the type of control selected. The total initial cost (capital cost and installation) for retrofitting the Rockwood turbines with a SCR system is approximately $4,400,000. In addition, the estimated annual operating cost for each turbine is $276,803. Therefore, the estimated cost effectiveness for Unit 1 when burning natural gas is $61,731 per ton of NOx reduced, while the estimated cost effectiveness for both units when burning diesel fuel is $44,839 per ton of NOx reduced. This evaluation indicates that the cost effectiveness to retrofit the Rockwood turbines with a SCR system is way higher than the recommended RACT cost effectiveness value of $8,000-$10,000/ton of NOx. Therefore, these units will not be required to install more efficient technology to reduce NOx emission. II. COST EFFECTIVENESS EVALUATION A. Selective Catalytic Reduction System The cost effectiveness analysis contained in this report was based upon cost estimates and methodology contained in the staff report for the SJVAPCD Rule 4703, Stationary Gas Turbines, Appendix C, as proposed August, 16, January 26, 2010

3 The cost of retrofitting units to comply with the proposed rule varies with the size of the unit and the type of controls used. ICAPCD staff analyzed the cost effectiveness of Rule which was based on the installation and operation of a SCR system on Rockwood Unit 1 and Unit 2 gas turbines. The Unit 1 and Unit 2 turbines currently have installed water injection as NOx controls and both turbines are restricted to operate a maximum of 1000 hours per calendar year (Authority to Construct and Title V permit conditions). Unit 1 has the capability to burn natural gas and diesel and Unit 2 has the capability to burn diesel only. Both turbines are identical with a 22MW capacity, MMBtu/hr when burning natural gas and MMBtu/hr when burning diesel fuel. 1. Estimated Annual NOx Emissions Reduction Equations The estimated Current and Potential Annual NOx Emissions were calculated using the following equation and assumptions: NOx = LF x MMBtu/hr x HR x EF / 2,000 lb/ton Where: NOx Emissions LF MMBtu/hr HR EF = Current Annual NOx Emissions or Potential Annual NOx = turbine load factor = heat input rating = annual hours of operation = NOx emission factor in pounds per MMBtu Estimated Annual NOx Emissions Reduction = Current Annual NOx Emissions Potential Annual NOx Emissions a) Unit 1 Estimated Potential Annual NOx Emissions when burning Natural Gas. A. Current Annual NOx Emissions 42 ppm Unit 1- Parameters: LF MMBtu/hr HR EF = 0.75 capacity factor = MMBtu/hr Natural Gas = 1,000 hour of operation per year = NOx emission Factor in ppm x lb/mmbtu per ppm NOx NOx = 0.75 x MMBtu/hr x 1,000 hr x (42 ppm x lb/mmbtu/ppm) / 2000 lb/ton NOx = tons B. Potential Annual NOx Emissions 9 ppm NOx = 0.75 x MMBtu/hr x 1,000 hr x (9 ppm x lb/mmbtu/ppm) / 2000 lb/ton 3 January 26, 2010

4 NOx = 3.75 tons C. Estimated Annual NOx Emissions Reductions The estimated Annual NOx Emissions Reduction was calculated using the following equation: NOx Emissions Reduction = Current Annual NOx Emissions Potential Annual NOx Emissions. NOx Emissions Reduction = = tons b) Unit 1 and Unit 2 Estimated Potential Annual NOx Emissions when burning Diesel. A. Current Annual NOx Emissions 65 ppm Units 1 and 2 - Parameters: LF MMBtu/hr HR EF = 0.75 capacity factor = MMBtu/hr Diesel = 1,000 hour of operation per year = NOx emission Factor in ppm x lb/mmbtu per ppm NOx NOx = 0.75 x MMBtu/hr x 1,000 hr x (65 ppm x lb/mmbtu/ppm) / 2000 lb/ton NOx = tons B. Potential Annual NOx Emissions 15 ppm NOx = 0.75 x MMBtu/hr x 1,000 hr x (15 ppm x lb/mmbtu/ppm) / 2000 lb/ton NOx = 5.68 tons C. Estimated Annual NOx Emissions Reductions The estimated Annual NOx Emissions Reduction was calculated using the following equation: NOx Emissions Reduction = Current Annual NOx Emissions Potential Annual NOx Emissions. NOx Emissions Reduction = = tons 4 January 26, 2010

5 2. Calculation of SCR Annual Costs As stated earlier, to estimate cost effectiveness, ICAPCD staff used cost information contained in the staff report for the SJVAPCD Rule 4703, Stationary Gas Turbines, Appendix C. The ICAPCD staff estimated the cost of retrofitting for the installation and operation of a SCR system of the Rockwood turbines. As per SJVAPCD report, a low cost estimate of $200/KW for retrofitting was assumed. This method also assumes a 10% interest rate and a useful life for the control equipment of 15 years. Table 2 provides a summary of cost to control NOx emissions, including direct capital cost and direct and indirect costs for operation. Table 2. SCR Annual Cost ITEM SOURCE COST Turbine Rating 22 MW SCR Cost/KW- Retrofitting $200.00/KW Operating Hours 1000 Direct Capital Cost Total Capital Investment (TCI) $4,400,000 Direct Annual Cost Operating Costs Operator 0.5 hr/shift, $25.00/hr OAQPS $16,859 Supervisor 15% of Operator $ 2,859 Maintenance Cost Labor 0.5 hr/shift, $25.00/hr OAQPS $16,859 Material 100% of labor cost OAQPS $16,859 Utility Cost Electricity Cost Variable $5,747 Cat. Replacement MHIA $5,621 Cat. Disposal OAQPS $ 211 Ammonia Variable $1,008 NH3 Inject Skid MHIA $2,916 Indirect Annual Cost Overhead 60% of O and M OAQPS $31,864 Administrative 0.02xTCI OAQPS $88,000 Insurance 0.01xTCI OAQPS $44,000 Property Tax 0.01xTCI OAQPS $44,000 Total Annual Costs $276,803 5 January 26, 2010

6 Table 3 summarizes the results of the cost effectiveness calculations for retrofitting of the Rockwood turbines. Cost effectiveness. The analysis includes two scenarios, the first analyzes cost effectiveness for Unit 1 while operating under natural gas, and a second includes an analysis for Units 1 and 2 while operating under diesel fuel. Table 3 Cost Effectiveness for Retrofitting Rockwood Turbines Item Unit 1 Natural Gas Units 1 and 2 Diesel MW MMBtu/hr NOx Reductions (tons/year) SCR Cost/MW $200 $200 Cost Installed Control $4,400,000 $4,400,000 Equipment Annualized $572,000 $572,000 Equipment Cost Annual Operation $276,803 $276,803 Cost Total Annual Cost $848,803 $848,803 Cost Effectiveness ($/ton) $61,731 $44,839 6 January 26, 2010