SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Cost and Cost Effect iveness Analysis Oc tober 8, 2009



### APPENDIX C

COMPLIANCE COSTS AND COST EFFECTIVENESS ANALYSIS FOR

REVISED PROPOSED AMEN DMENTS TO RULE 4692

October 8, 2009

C-1 Final Staff Report with Appendices For Revised Proposed Amendments to Rule 4692SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Cost and Cost Effect iveness Analysis Oc tober 8, 2009

APPENDIX C

COMPLIANCE COSTS AND COST EFFECTIVENESS ANALYSIS

I. INTRODUCTION

The California Health and Safety Code 40 920.6(a) requires the San Joaquin Valley

Unified Air Pollution Contro l District (District) to c onduct both an "absolute" cost effectiveness analysis and an “incremental” co st effectiveness analysis of available emission control options prio r to adopting each Best Av ailable Retrofit Control Technology (BARCT) rule. The purpose of c onducting a cost effectiveness analysis is to compare the cost of emission reductions across source categories. The analysis also serves as a guideline in developing the contro l requirements of a rule. Absolute cost effectiveness of a control option is the added annua l cost, in dollars per year ($/year), of a control technology or technique, divided by the emission reduction achieved, in tons reduced per year. The costs include capital equipment costs, engi neering design costs,

labor and maintenance costs.

Incremental cost effectiveness (ICE) is intended to measure the change in costs (in $/year) and emissions reductions (in tons reduced/year) between two progressively more effective control options or technologies . ICE compares the differences in costs

and the differences in emissions reductions of candidate control options. ICE does not reveal the emission reduction pot ential of the control options . Unlike the absolute cost effectiveness analysis that identifies the c ontrol option with the greatest emission reduction, ICE does not present any correlati on between emissions reductions and cost effectiveness. Therefore, the relative va lues produced in the ICE analysis are not comparable and cannot be evaluat ed in the same way as absolute cost effectiveness

numbers.

II. SUMMARY

Determining the cost effectiveness of a cont rol technology involves two elements: the cost to install and operate an emission c ontrol system and the emission reductions

associated with the control devic e. The reduction in direct ly emitted PM2.5 emissions has been estimated by District staff in A ppendix B of this staff report, along with a

discussion of the emission r eduction calculations and under lying assumptions. Costs for the installation and operation of the control device are detaile d later in this appendix.

District staff estimates that the compliance costs are ab out $1,990 per year and the absolute cost effectiveness is about $19,800 per ton PM2.5 reduced.

C-2 Final Staff Report with Appendices For Revised Proposed Amendments to Rule 4692SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Cost and Cost Effect iveness Analysis Oc tober 8, 2009

III. ESTIMATED COMPLIANCE COSTS

When an operator considers equipment, t here are two parts to the costs – equipment/installation cost s and operating/maintenance co sts. Equipment and

installation costs are one-time costs. Operating and main tenance costs are on-going. For the compliance cost analysis, District st aff combines the capital costs and on-going costs into a single number so that options with differing capital and operating costs can be compared. Capital costs were conver ted to annualized costs using a five year equipment life and ten per cent (10%) interest and assuming that the equipment would have no salvage value at the end of its useful life. The annualized capital cost was added to the estimated annual operating and maintenance (O &M) costs.

Operators of chain-driven char broilers have a very straightforward way to comply with the rule requirements – the addition of a catal yst unit. Reconfigurat ion of the unit would most likely be minimal since units are sold wit h the catalyst chamber built into the unit. See Figure 1 for an example. Operators buy the catalyst insert, if r equired, or leave the chamber empty if the catalyst is not required. According to the Bay Area AQMD staff report, the catalyst costs about $4 ,700 and lasts for five years. Using a factor of 0.2638, the annualized capital cost of the catalyst is about $1,240 per year.

For this type of control device, maintenance consists of cooling the catalyst to room temperature, then soaking it in water for about one hour per month. Using a labor-andoverhead cost of $60 per hour and $2.50 per month for cleani ng products means a total annual O&M cost of $750 per year.

For the total annual cost of the control technology, the annual operating costs are added to the annualized capital cost. For catalytic oxidizer, the total annual cost of compliance is $1,240 (annualized capital cost ) plus $750 (annual operati ng cost) to yield a total annual cost of about $1,990 per year. While the rule allows operators to choose a control option that is not a catalyst, District staff does not believe that alternative control systems would be as inexpensive as a catalytic oxidizer.

C-3 Final Staff Report with Appendices For Revised Proposed Amendments to Rule 4692SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Cost and Cost Effect iveness Analysis Oc tober 8, 2009

Figure 1 – Example of Catalyst Installation

Source: BASF Charcat 900 Catalyst chamber integral to

chain-driven charbroiler Catalyst

IV. ABSOLUTE AND INCREMENTAL COST EFFECTIVENESS ANALYSIS

A. Absolute Cost Effectiveness Analysis

Absolute cost effectiveness is the expecte d annual cost of compliance divided by the estimated emission reduction in tons per y ear. District staff di vided the annualized compliance costs from Section IV above by the estimated annual emission reductions per-charbroiler as determined in Appendix B of this staff report to estimate the cost effectiveness of the control technology. The results of that calculation are shown in

Table 1 above.

B. Incremental Cost Effectiveness Analysis

As noted above, the District sta ff calculates the incremental cost effectiveness as the difference in the dollar costs divided by the difference in the emission reduction potentials between each progressively more st ringent control option as compared to the next less expensive control option. District staff believes that the provisions of Revised Proposed Rule 4692 meet Best Available Retrofit Control Technology as well as All

Feasible Control Measures fo r chain-driven charbroilers, and therefore there is no more

C-4 Final Staff Report with Appendices For Revised Proposed Amendments to Rule 4692SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Cost and Cost Effect iveness Analysis Oc tober 8, 2009

stringent option than the proposed provisions. For this reason, an incremental cost effectiveness analysis would serve no useful purpose because there is no more stringent option available.

Staff also assessed the cost effectiveness of particulate matter controls under-fired charbroilers as part of this project. For this analysis, staff considered the compliance

costs and the associated emission reductions on a per-restaurant basis. Capital costs were converted to annualized costs by assu ming a 10-year equipment life, a 10% rate of return, and that the equi pment has no salvage value at the end of its useful life.

Table 1 summarizes the compliance cost ca lculations and Table 2 summarizes the

incremental cost effectiveness. Based on this analysis, the incremental cost

effectiveness for under-fired charbroilers has a range of about $22,300 per additional ton to $58,200 per additional ton of PM2.5 removed.

Table 1 – Under-fired Charbr oiler Incremental Cost

One-time Cost ($) Ongoing Cost ($/yr) Total Annual Cost (ongoing plus annualized one-time) ($/yr)

Electrostatic Precipitator (Vendor 1)

Equipment $30,000

Installation ** $27,000

Operation & Maintenance $5,364.42

TOTAL ANNUAL COST ($/YR) $14,638.32

HEPA system (Vendor 2)

Equipment $54,611

Installation ** (new includes ductwork) $49,150

Operation & Maintenance $9,497.23

TOTAL ANNUAL COST ($/YR) $26,379.18

HEPA system (Vendor 3)

Equipment $38,900

Installation (retrofit) $7,100

Operation & Maintenance $8,664.00

TOTAL ANNUAL COST ($/YR) $16,148.20

Wet scrubber (multi-stage) (Vendor 4)

Equipment $32,350

Installation (retrofit) $5,090

Operation & Maintenance $4,017.00

TOTAL ANNUAL COST ($/YR) $10,108.49
** Assume that installation cost s are 90% of equipment costs

C-5 Final Staff Report with Appendices For Revised Proposed Amendments to Rule 4692SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Cost and Cost Effect iveness Analysis Oc tober 8, 2009

Table 2 – Under-Fired Charbroiler Incremental Cost Effectiveness

Control Technology Incremental

Annualized Cost ($/yr) Add’l PM 2.5 emission

reduction (add’l ton/yr/restaurant) Incremental Cost

Effectiveness

$/add’l ton

reduced

ESP Vendor 1 $14,638.32 $32,314.17

HEPA Vendor 2 $26,379.18 $58,232.19

HEPA Vendor 3 $16,148.20 $35,647.24

Wet Scrubber Vendor 4 $10,108.49 0.453

$22,314.54

V. REFERENCES

1. Bay Area Air Quality Management District – Staff Report for Regulation 6, Rule 2: Commercial Cooking Equipm ent, dated November 2007.

2. BASF Catalyst Division - http://www.catalysts.basf.com/Main/stati onary_emissions/stationary_sources/coo king_catalysts/charcat_catalysts.be

C-6 Final Staff Report with Appendices For Revised Proposed Amendments to Rule 4692