Report Contents
Report#:SR/OIAF/2000-05

Preface

Executive Summary

Analysis of Strategies for Reducing Multiple Emissions from Power Plants:
Sulfur Dioxide, Nitrogen Oxides, and Carbon Dioxide

FOOTNOTES

Executive Summary

[1]  Reports by Burtraw, Chestnut, and the EPA cited in the bibliography of this report include discussions of health benefits.

[2] Energy Information Administration, Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity, SR/OIAF/98-03 (Washington, DC, October 1998); and Analysis of the Impacts of an Early Start for Compliance with the Kyoto Protocol, SR/OIAF/99-02 (Washington, DC, July 1999).

Chapters 1 through 6

[1] The letters requesting this study are included in Appendix J.

[2] Reports by Burtraw, Chestnut, and the EPA cited in the bibliography of this report include discussions of health benefits.

[3] Energy Information Administration, Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity, SR/OIAF/98-03 (Washington, DC, October 1998); and Analysis of the Impacts of an Early Start for Compliance with the Kyoto Protocol, SR/OIAF/99-02 (Washington, DC, July 1999).

[4]  The Kyoto Protocol requires the United States to reduce its greenhouse gas emissions to 7 percent below the 1990 level on average between 2008 and 2012. Requirements for the post-2012 period have not been set. As requested by the Subcommittee, this analysis assumes that the CO₂ cap does not change after 2012.

[5]  For a summary of the AEO2001 assumptions, see web site www.eia.doe.gov/oiaf/assumption/.

[6]  For a more detailed overview of NEMS, see Energy Information Administration, The National Energy Modeling System: An Overview 2000 (Washington, DC, March 2000), web site www.eia.doe.gov/oiaf/aeo/overview/index.html.

[7]  The capacity planning algorithm determines the appropriate reserve margins in each region by weighing the probability of blackouts (loss of load) and consumers’ willingness to pay to avoid them against the cost of building new capacity.

[8]  See Appendix K for control costs.

[9]  The EMM represents coal- and gas-fired generating technologies with carbon removal and sequestration equipment, but the technologies are not cost-effective in the time frame of this analysis.

[10]  Competitive prices are applicable only to the generation sector of the electricity market. Prices for transmission and distribution services are assumed to continue to be based on cost-of-service regulation.

[11]  The Administration’s proposed Comprehensive Electricity Competition Act (CECA) limits the credit price to 1.5 cents per kilowatthour.

[12]  See Appendixes A-I for detailed tables of the results for each of the cases.

[13]  U.S. Environmental Protection Agency, Analyzing Electric Power Generators Under CAAA, web site www.epa.gov.

[14]  See Chapter 4 for a discussion of the specific renewables projected to be added.

[15]  The tendency of consumers to switch from electricity to natural gas is expected to be reduced somewhat by the increase in gas prices that would result from increased use of natural gas by electricity generators to meet the emission targets.

[16]  Dedicated biomass plants are facilities designed specifically to burn biomass as their primary fuel.

[17]  State renewable portfolio standards are variously defined relative to electricity generation or to sales.

[18]  This analysis uses the econometric forecasting model described in J. Kendell, “Employment Trends in Oil and Gas Extraction,” in Energy Information Administration, Issues in Midterm Analysis and Forecasting 1999, DOE/EIA-0607(99) (Washington, DC, August 1999).

[19]  R.E. Brinner and M.J. Lasky, “Model Overview: Theory and Properties of the DRI Model of the U.S. Economy,” in U.S. Quarterly Model Documentation, Version US97A.

[20]  Named in the lawsuits were American Electric Power (AEP), Cinergy, FirstEnergy, Illinois Power, Southern Indiana Gas & Electric Company, Southern Company, and Tampa Electric Company. U.S. Department of Justice, “U.S. Sues Electric Utilities in Unprecedented Action To Enforce the Clean Air Act,” Press Release No. 524 (November 3, 1999).

[21]  For the full text of the Clean Air Act (42 U.S.C. s/s 7401 et seq. (1970)), see U.S. Environmental Protection Agency, web site www.epa.gov/oar/caa/contents.html. Section 109 establishes the NAAQS, Part C sets forth the requirements for the prevention of significant deterioration, Parts C and D define modifications, Section 165 defines major emitting facilities, and Section 113(b)(2) prescribes civil penalties.

[22]  Section 111(a) of the Clean Air Act, 42 U.S.C. § 7411(a).

[23]  40 CFR Section 52.21(b) (2) (iii) (a). For an analysis of utility maintenance strategies, see, J.L. Golden, Tennessee Valley Authority, “Routine Maintenance of Electric Generating Stations.”

[24]  For example, Unit 6 at the Conesville plant, a 444-megawatt unit, was completed in 1978 at an estimated real capital cost of $197 million. See M. McCabe, An Empirical Analysis of Measurement Errors: Power Plant Construction Costs. Master’s thesis, Massachusetts Institute of Technology (Cambridge, MA, June 1986), Table 1, p. 15.

[25]  U.S. Environmental Protection Agency, Notice of Violation, EPA-CAA-2000-04-0007.

[26]  Consent Decree, Civil Action No. 99-2524 CIV-T-23F.

[27]  “Dominion Virginia Power Reaches Major Agreement with EPA,” Electric News Release (November 15, 2000), web site www.dom.com/news/elec2000/pr1115.html.

[28]  “Cinergy, EPA, Other Parties Reach Agreement on Power Plant Lawsuit,” Cinergy Press Release, web  site http://biz.yahoo.com/ bw/001221/oh_cinergy_2.html; “Cinergy Agrees to Pay $1.4 Billion to Settle Federal Pollution Lawsuit,” Wall Street Journal On-Line, web site http://public.wsj.com/sn/y/SB977502597772054208.html.

[29]  For example, WEFA, Inc., Global Warming: The High Cost of the Kyoto Protocol, National and State Impacts (Eddystone, PA, 1998); H.D. Jacoby, R. Eckhaus, A.D. Ellerman, et al., “CO₂ Emission Limits: Economic Adjustments and the Distribution of Burdens,” Energy Journal, Vol. 18, No. 3 (1997), pp. 31-58; S. Bernow et al., America’s Global Warming Solutions (Washington, DC: World Wildlife Fund and Energy Foundation, August 1999); H. Geller, S. Bernow, and W. Dougherty, Meeting America’s Kyoto Protocol Target: Policies and Impacts (Washington, DC: American Council for an Energy-Efficient Economy, December 1999); Congressional Budget Office, Who Gains and Who Pays Under Carbon-Allowance Trading? The Distributional Effects of Alternative Policy Designs (Washington, DC, June 2000).

[30]  Other criteria pollutants include carbon monoxide, lead, particulate matter (PM₁₀), and volatile organic compounds.

[31]  D. Burtraw and E. Mansur, “Environmental Effects of SO₂ Trading and Banking,” Environmental Science & Technology, Vol. 33, No. 20 (October 15, 1999), p. 3489; K.K. Dhana, “A Market-Based Solution to Acid Rain: The Case of the Sulfur Dioxide (SO₂) Trading Program,” Journal of Public Policy & Marketing, Vol. 18, No. 2 (Fall 1999), pp. 258-265; R.D. Lile, D. Bohi, and D. Burtraw, An Assessment of the EPA’s SO₂ Emission Allowance Tracking System (Washington, DC: Resources for the Future, February 1997).

[32]  U.S. Environmental Protection Agency, Regulatory Impact Analysis for the Final Section 126 Petition Rule (Washington, DC, December 1999); D. Burtraw, K. Palmer, and A. Paul, The Welfare Impacts of Restructuring and Environmental Regulatory Reform in the Electric Power Sector (Washington, DC: Resources for the Future, October 1998), preliminary version; A. Krupnick, V. McConnell, M. Cannon, T. Stoessell, and M. Batz, Cost-Effective NO_x Control in the Eastern United States (Washington, DC: Resources for the Future, April 2000).

[33]  Interlaboratory Working Group, Scenarios for a Clean Energy Future, ORNL/CON-476 and LBNL-44029 (Oak Ridge, TN: Oak Ridge National Laboratory; Berkeley, CA: Lawrence Berkeley National Laboratory, November 2000); J. Koomey, R. Richey, S. Laitner, R. Markel, and C. Marnay, Technology and Greenhouse Gas Emissions: An Integrated Scenario Analysis Using the LBNL-NEMS Model, LBNL-42054 (Berkeley, CA: Lawrence Berkeley National Laboratory September 1998); Alliance to Save Energy, American Council for an Energy-Efficient Economy, Natural Resources Defense Council, Tellus Institute, and Union of Concerned Scientists, Energy Innovations 1997: A Prosperous Path to a Clean Environment (Washington, DC, June 1997). Modeling demand-side reductions in the end-use sectors can produce dramatic results. The Clean Energy Future report projects carbon reductions similar to those identified here, with a carbon allowance fee of $50 per ton and limited costs to consumers. Among the assumptions for the power sector necessary to achieve this result, however, are extension of the 1.5 cents per kilowatthour production tax credit through 2004 and capital costs for wind technology of $611 per kilowatt (as compared with $993 per kilowatt in EIA’s analysis). Further, other policies in the study serve to reduce projected energy demand, so that energy consumption in 2020 is projected to be about 95 quadrillion Btu, roughly equivalent to maintaining 1998 levels of consumption for the next 20 years.

[34]  U.S. Environmental Protection Agency, EPA’s Clean Air Power Initiative (Washington, DC, October 1996).

[35]  U.S. Environmental Protection Agency, Analysis of Emissions Reduction Options for the Electric Power Industry (Washington, DC, March 1999), web site www.epa.gov/capi/multipol/mercury.htm.

[36]  Electric Power Research Institute, Energy-Environment Policy Integration and Coordination Study, TR-1000097 (Palo Alto, CA, 2000).

[37]  Environmental Law Institute, Cleaner Power: The Benefits and Costs of Moving from Coal to Natural Gas Power Generation (Washington, DC, November 2000).

[38]  The NEMS model does not analyze or forecast health benefits. One recent estimate projected direct health benefits stemming from the Clean Air Act Amendments of $110 billion in 2010 (1999 dollars). See U.S. Environmental Protection Agency, The Benefits and Costs of the Clean Air Act 1990 to 2010, EPA-410-R-99-001 (Washington, DC, November 1999).

[39]  Selective catalytic or noncatalytic reduction.

[40]  The ELI study reduces CO₂ emissions indirectly by capping coal-fired generation.

[41]  In the EIA analysis cases, the SIP Call modeled applies to 19 States, because since it was first proposed, facilities in Wisconsin have been removed from the program, and the caps on facilities in Missouri and Georgia are under review.

[42]  The IPM calculates total cost as a total resource cost, thereby excluding allowance costs. EIA’s analysis in 2010 for the most stringent integrated case includes about $58 billion for purchases of emission allowances in the estimated total compliance cost of $86 billion (in 1999 dollars). Higher projected prices for natural gas account for much of the remaining difference between the EPA and EIA estimates of total compliance costs.

[43]  EPRI used the reference case from the EIA’s Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998), NEMS run AEO99B.D100198A. The case incorporated all environmental regulations in effect as of mid-1998, including Phase II of the Title IV Acid Rain program and EPA’s proposed SIP Call summer NO_x reductions for 22 States and the District of Columbia.

[44]  EPRI assumed that the remainder of the Kyoto Protocol CO₂ reductions would be met through international carbon permit trading and sequestration. The 9 percent above 1990 level implies CO₂ emissions of about 1,462 million metric tons carbon equivalent in 2010, of which about 409 million metric tons carbon equivalent would be attributable to the electricity generation sector.

[45]  H. Lee and S.K. Verma, “Coal or Gas: The Cost of Cleaner Power in the Midwest,” BCSIA Discussion Paper 2000-08, ENRP Discussion Paper E-2000-08 (Kennedy School of Government, Harvard University, June 2000).

[46]  The authors put the upper bound at 1.36 cents per kilowatthour and the lower bound at 0.68 cents per kilowatthour (in 1998 dollars).

[47]  Current coal capacity in East Central Area Reliability (ECAR) is about 84 gigawatts, suggesting a shift of about 56 gigawatts to gas.

[48]  The high and low sensitivities incorporated the respective assumptions regarding high and low costs of conventional pollution abatement.

[49]  In EIA’s analysis, some reductions are projected to be achieved by building new renewable sources of generation, a factor not addressed in the Cleaner Power studies.

[50]  Like NEMS, Haiku models some North American Electric Reliability Council regions as competitive; only in these regions are tradeable generation permits allowed.

[51]  Small amounts of additional wind capacity were also projected.

[52]  Reduced Hg levels were also projected in the ELI policy case, to 21 tons in 2010, or about a 75-percent reduction from the 1998 baseline of 80 tons.

[53]  The analysis also identified $26.4 billion in public health benefits from reductions in SO₂ and NO_x as a result of lower particulate concentrations.

[54]  In 1999, natural gas deliveries to electric utilities averaged 1,022 Btu per cubic foot; corresponding prices per thousand cubic feet would be about 2 percent lower.

[55]  The study by Lee and Verma was regional in scope, preventing national comparisons.

[56]  Includes generation from dual-fired facilities not otherwise specified.

[57]  EPA’s 1999 analysis does not report end-use prices.

[58]  Although it is not an integrated emission reduction scenario, ELI’s cap on coal-fired generation results in significant reductions in projected CO₂ emissions, from 671 million metric tons carbon equivalent to 499 in 2010.

[59]  ELI imposed a 50-percent reduction on coal-fired generation as the constraint.