DATE: July 11, 2015

SUBJECT: History of Flue Gas Desulfurization Use in United S tates- 1970-1976

FROM: Mike Laney, RTI International

TO: Rulemaking Docket ID: EPA-HQ-OAR-2013-0495

The purpose of this memorandum is to present backgr ound information on the use of flue gas desulfurization (FGD) scrubbers by the electric uti lity industry in the early 1970s in the U.S. and to describe the influence that environmental legisl ation and regulations had on their use. The information in this memorandum is excerpted from a 2001 doctoral student dissertation. 1

Pre 1970 Clean Air Act Amendments

The earliest FGD device used by an electric power p lant was installed in 1926 at the Battersea Power Station in London, England. The alkaline wate r from the Thames River provided most of the reagent for the device. Lime/limestone scrubbin g emerged in the United States in the 1950s when the Tennessee Valley Authority (TVA) conducted small-scale and limited pilot-plant studies. The first major plant work in the United S tates appears to have been that of Universal Oil Products (UOP) at a Wisconsin utility installat ion beginning in 1965. In 1966, Combustion Engineering, in conjunction with National Dust Coll ector Riley Environeering, tested a system involving boiler injection of limestone, followed b y scrubbing, in a pilot unit at a Detroit Edison power plant. The first commercial installations of this process in boilers larger than 100 MW occurred in St. Louis, Missouri, and Lawrence, Kans as, in 1968. The pilot installation of this process demonstrated SO 2 removal of 98 percent at a stoichiometric limeston e-to-SO 2 ratio of 1.1 to 1. Initial designs revealed a number of prob lems, including pluggage, and the design was then changed so that limestone was no longer introd uced directly into the boiler but rather into slurry recycle tanks. This change improved the reli ability of the system, although it resulted in

lower SO 2 removal efficiencies. (McIlvaine, 1990)

Although the U.S. FGD equipment and services indust ry had its start in the years before 1970, significant growth did not occur in this industry u ntil after 1970. By the late 1960s, however, there was enough interest in FGD technology that th e first SO 2 Control Symposium was held in 1969. This conference continued to convene regularl y and became a major agent of knowledge

transfer in the SO 2 industrial-environmental innovation complex.

1970 Clean Air Act Amendments

The 1970 Clean Air Act Amendments (1970 CAA), signe d on December 31, 1970, divided the

sources of SO 2 emissions into two categories – existing and new – and directed the newly created

1 Margaret R. Taylor, The Influence of Government Ac tions on Innovative Activities in the Development o f Environmental Technologies to Control Sulfur Dioxid e Emissions from Stationary Sources, A dissertation submitted to the Carnegie Institute of Technology, Carnegie M ellon University in partial fulfillment of the requ irements for the degree of Doctor of Philosophy in Engineering and P ublic Policy, Pittsburgh, PA, January 2001.Environmental Protection Agency (EPA) to set Nation al Ambient Air Quality Standards

(NAAQS) for criteria air pollutants, including SO 2 . The EPA promulgated NAAQS on the first five criteria air pollutants in April 1971. The NAA QS for SO 2 were set at values of 0.14 parts per million (ppm) averaged over one day, and 0.03 ppm a veraged over a year.

The 1970 CAA required that, within nine months of t he promulgation of a NAAQS, each state submit to the EPA a State Implementation Plan (SIP) setting out how the state would achieve and maintain the NAAQS for existing sources. Upon appro val of a SIP by EPA, it became enforceable as both state and federal law, with pen alties up to $25,000 per day and up to one year in prison for each SIP provision violation (Bryner, 1995, p.101; Findley and Farber, 1992, p. 103). Under the SIP program, SO 2 emissions from existing sources that contributed t o violations of primary NAAQSs were to be eliminated by 1975-77. Thus, the SIP program became an important regulatory force for reducing SO 2 emissions from existing power plants and other

sources.

For new sources, the 1970 CAA directed the EPA to s et nationally unified performance standards for major categories of stationary source s including fossil-fuel fired steam electric generators. Section 111 of the 1970 CAA required th e EPA to set new source performance standards (NSPS) based on “best system of emission reduction which (taking into account the costs of achieving such reduction), the Administrat or determines has been adequately demonstrated (Ackerman and Hassler, 1981, p. 11).” In December 1971, the EPA set performance standards for SO 2 emissions from new and modified steam generators w ith a heat input greater than 250 million British Thermal Unit s (MBTU) per hour. The NSPS for SO 2 set a maximum allowable emission rate of 1.2 pounds of SO 2 per MBTU of heat input. This standard

was based on an SO 2 removal efficiency of 70 % when combusting the hig h-sulfur eastern coals, which had a sulfur content of about 4 pounds of SO 2 per MBTU heat input. Alternatively, plants could burn low-sulfur coals (about 0.7% sulfur or l ess) and still achieve the NSPS emission level. However, such low-sulfur coals were generall y available only in the western U.S. and not readily available to most coal-fired power plants a t the time.

In addition to the 1970 CAA, two other important le gislative developments occurred in 1970-76 period that had implications for SO 2 control. First, in response to the Arab oil embarg o of October 1973 and the resulting U.S. energy crisis, the Energy Supply and Environmental Coordination Act (ESECA) was passed in June 1974 to promote the use of domestic coal over foreign oil. It reauthorized the 1970 CAA for anoth er year while allowing suspensions of final clean air standards until January 1, 1979, provided that primary NAAQS would not be violated (Bailey, 1998, p. 182). The second important develo pment arose from court challenges to the 1970 CAA. In one of these cases, Fri v. Sierra Club 412 US 541 (1973), the Supreme Court agreed with environmentalists that the EPA could no t approve SIPs that permitted the degradation of areas of air that were cleaner than the 1970 CAA minimum standards. In response to this decision, in 1974 the EPA issued “preventio n of significant deterioration” (PSD) regulations that divided all clean air areas of the country into three categories based on their levels of industrial development.

While multiple options were available to utilities for SO 2 compliance in the 1970-76 time period, EPA promoted scrubbing in part due to perceived dif ficulties associated with the alternativeoptions of switching to low-sulfur western coal, ch emical coal cleaning, fluidized bed

combustion (FBC), solvent refined coal, and low-BTU gasification. However, in addition to scrubbing for SO 2 control, EPA continued to support technologies suc h as physical coal cleaning and the blending of low- and high-sulfur coals, whi ch were considered sufficient control methods for plants facing modest reductions. In addition, b etween 1973 and 1976 the EPA removed their support for tall stacks and other supplemental cont rol systems that primarily dispersed SO 2 (Gage, 1976; Quarles Jr. et. al., 1974; Train, 1976 ).

In support of FGD technology, the EPA engaged in mu ltiple research, development, demonstration, and technology facilitation activiti es during this time period, including the following:

• Funding the TVA to prepare cost estimates of variou s FGD processes. Because 80 percent of TVA’s generation came from a number of h igh-sulfur coal burning steam plants first constructed in the late 1940s, it had a strong interest in SO 2 control strategies (McCraw, 1976; Durant, 1985).

• Establishing the Shawnee test facility in April 197 2. In cooperation with TVA and the engineering firm Bechtel, this facility, equipped w ith three 10 MW boilers, provided invaluable operating data on scrubbing, beginning w ith lime/limestone systems (Quarles Jr. et. al., 1974).

• Beginning its financial commitment to the SO 2 Control Symposium, a technical conference that continues today.

• Contracting with PEDCo-Environmental Consultants, I nc. to evaluate the status of FGD technology in the U.S. These FGD evaluations contin ued into the late 1980s (Devitt, Isaacs, and Laseke, 1976).

• Engaging in cooperative research and demonstration activities with utility/vendor teams. In 1975, the EPA signed a Memorandum of Understandi ng with the Electric Power Research Institute (EPRI, founded in 1973) to facil itate sharing of technical information and cooperation of R&D project (Gage, 1976).

• Conducting SO 2 control research in the late 1970s as a result of the 1974 Federal Nonnuclear Energy Research and Development Act that provided the legislative authorization for the EPA’s energy/environmental co ntrol technology program (Zimmerman et. al., 1980).

Growth in FGD Market

The 1970 CAA and the 1971 NSPS were flexible regard ing the technological alternatives for attainment for both existing and new sources of SO 2 , and a number of technological strategies were pursued during this time. The stringency of th e NSPS and the limited availability of coal emitting less than 1.2 pounds of SO 2 per MBTU, however, provided a particularly strong incentive for the development of FGD technology. Th e tight deadline for attainment of primary

SO 2 emissions standards – May 31, 1975 – also provided a profit incentive for FGD vendors to expand their commercial capabilities.

By the time of the promulgation of the SO 2 NSPS in 1971, only three commercial scrubber units were operating on power plants in the United States . The next five years, however, saw the total number of commercial scrubber units grow by a facto r of ten. In order to understand the marketforces operating on the SO 2 industrial-environmental innovation complex, it is important to keep

in mind the 1970 CAA division of sources into the c ategories of “existing” and “new and modified.” In general, “new” FGD units accompany th e construction of new coal-fired utility boilers, while “retrofit” FGD units are constructed on existing boilers. Figure 1 shows the number of new utility-operated coal-fired steam tur bine units brought online between 1970 and 1976. This is the market background for new FGD uni ts, particularly after the 1971 NSPS. Figure 2 shows the total number of commercial FGD u nits brought online between 1973 and 1976, broken down into the categories of new and re trofit construction. By comparing the two datasets underlying these figures, it appears that 10% of the new coal-fired boilers brought online

between 1973 and 1976 had new FGD units. Retrofit F GD technology accounted for 72% of

total FGD unit installation between 1973 and 1976 a nd was thus the driver of the utility FGD market. This is despite the construction of signifi cant numbers of new coal-fired boilers after the 1971 NSPS and despite the fact that retrofit techno logy was generally 25 - 30% more expensive than new technology during the 1970 - 76 period (Ac kerman and Hassler, 1981, p. 135).

Figure 1. Number of new utility-operated coal-fired steam turbine units in 1970-76.

Source: Adapted from Energy Information Administrat ion (1996)

Notes: The year of commercial operation is the year that control of the unit was turned over to the dispatcher. Includes all units active since 197 0.

Figure 2. U.S. scrubber market, 1973-76 Source: Adapted from Soud (1994)

The predominant type of FGD technology in 1970-76 w as lime/limestone wet scrubber, but some utilities had begun to investigate less expensive s pray dryers. In addition, a few commercialregenerable processes were installed in the early 1 970s (Devitt, Isaacs, and Laseke, 1976;

McIlvaine, 1990). According to a 1976 overview of F GD technology by PEDCo- Environmental Consultants, Inc., SO 2 removal efficiencies ranged from 40 to 90% during the 1970 to 1976 period. FGD technology had been installed during th is period on units varying both in size –

from 30 MW to 800 MW – and in the sulfur content ofcoals consumed. The PEDCoEnvironmental Consultants, Inc. overview also noted that (1) more systems were being installed to meet state standards that are more stringent tha n NSPS levels, and (2) more systems are being installed on low sulfur coal vs. high sulfur coal a pplications.

The number of vendors of scrubbers increased greatl y during the 1970-76 period and throughout the 1970s. In 1971, only one scrubber vendor was in the utility FGD market. By the end of the 1970s, sixteen U.S. firms supplied FGD systems to u tilities, as did the U.S. government agencies of TVA and the Department of Interior’s Bureau of M ines. Several foreign firms also served the U.S. utility FGD market by the end of the 1970s.

Scrubber Operational Issues

The R&D being conducted by SO 2 industrial-environmental innovation complex in the 1970-76 period focused in large part on the reliability pro blems experienced by scrubber users. Table 1 summarizes the major reliability problems of scrubb ers operating during this period, as detailed in an important EPA hearing on power plant complian ce with SO 2 air pollution regulations. In addition to the problems listed in the table, sludg e disposal was widely recognized as a significant problem (Quarles Jr. et. al., 1974, p. 51).

TABLE 1. Observed Technical Problems in Early Scrub bers

Source: Testimony at hearing on power plant complia nce with SO 2 regulations conducted between October 18, 1973 and November 2, 1973 by th e EPA (Quarles Jr. et. al., 1974, p. 35)According to PEDCo-Environmental Consultants, Inc., by 1976, performance of units had

improved to the point that the average operability of scrubber units ranged from about 80 - 95% depending upon the system and the averaging period (Devitt, Isaacs, and Laseke, 1976, p.24). Other technological improvements were in increased limestone utilization and sludge oxidation for more effective waste disposal. The TVA reported in 1976 on some of the lime and limestone technological developments that had recently occurr ed. These changes included sludge fixation; a growing tendency for utilities to increase scrubb er redundancy and sparing as insurance for reliability problems; the use of spray towers in pl ace of mobile-bed scrubbing devices; and measures to promote increased operating reliability (McGlamery et. al., 1976, p. 88).

Besides changes in scrubber design, EPRI, which had started its own R&D program for FGD in 1974, called on the utility industry to institute c hanges in scrubber operations. To maximize reliability, EPRI stated that “utilities must assum e responsibility to make the scrubber system work.” According to EPRI, assuming responsibility m eant having a qualified staff of “chemists as well as mechanical and chemical engineers,” not depending on process guarantees and fixedcost contracts, and giving “the scrubber operating and maintenance priority equal to all other power station systems (Nannen and Yeager, 1976, p. 112).”

In summary, the 1970-76 period was one of great act ivity in the SO 2 industrial-environmental innovation complex. As the SO 2 control market grew rapidly, many firms either ente red the utility FGD market or acquired existing entrants. F GD vendors, as well as utilities – particularly through EPRI – initiated R&D efforts during this ti me period. The technological successes of both public and private R&D helped to improve equip ment reliability, limestone utilization, and waste disposal in the 1970-76 period. Still, a cons iderable amount of progress in FGD technology was to occur. Despite initial reliabilit y problems and low SO 2 removal efficiencies, Figure 3 and Figure 4, demonstrate how quickly SO 2 control technologies diffused and improved

as a result of innovative activities that occurred inside the black box of the SO 2 industrialenvironmental innovation complex, as supported and spurred on by government actions.

FIGURE 3. Improvements in SO 2 Removal Efficiency of Commercial FGD systems as a Function of Cumulative Installed FGD Capacity in th e U.S.Source: Based on data from Soud (1994), Energy Info rmation Administration (1999)

Figure 4 provides an estimate of FGD capital cost r eductions as a function of FGD GWe capacity (based on Soud, 1994; McGlamery et. al., 1980; Lase ke, Jr. et. al., 1982; Keeth, Ireland, and Moser, 1986; Keeth, Ireland, and Radcliffe, 1990; a nd Keeth, Ireland, and Radcliffe, 1991. Capital cost reductions were minimal in the 1976 to 1980 time period during which SO2 removal efficiencies improved rapidly. Steeper improvements in capital costs occurred only after steep improvements in SO2 removal efficiencies (capital c osts improved greatly between 1980 and 1990, while removal efficiencies improved rapidly b etween 1976 and 1980). Capital costs leveled out in the 1990s, although to a lesser exte nt than removal efficiencies.

FIGURE 4. Reductions in Capital Cost of a New Wet L imestone FGD System for a Standardized Coal-fired Power Plant (500 MWe, 3.5% sulfur coal, 90% SO 2 removal)

Source: Based on Soud, 1994; McGlamery et. al., 1980; Lasek e, Jr. et. al., 1982; Keeth, Ireland, and Moser, 1986; Keeth, Ireland, an d Radcliffe, 1990; and Keeth, Ireland, and Radcliffe, 1991.

Patent Analysis

In the previous sections, the innovation in SO 2 control technologies in the early 1970s and the improvements that took place in these years with re spect to SO 2 removal efficiencies and capital costs were described. Patent activity as an indicat or of inventive activity and innovation, can be used to demonstrate the influence of government act ion on the SO 2 industrial-environmental innovation complex. Patenting activity as a measure of inventive activity has not only been used by many studies to gauge inventive activity, but al so speaks to the marketing strategies of firms that can lead to adoption and diffusion (for publis hed reviews of patent research, see Archibugi and Pianta, 1996; Basberg, 1987; Griliches, 1990; P akes and Simpson, 1989; Pavitt, 1985; Schankerman, 1989).Two different analyses of patent datasets support p atenting activity as an indicator of the

influence of regulation on inventive activity. One analysis, using a subclass-based dataset approach, demonstrated that, despite the existence of government legislation dating back to 1955 that authorized research into air pollution abateme nt methods, patent activity in SO 2 control was limited until after the introduction of a regulator y regime. Patent activity levels in this analysis can be portrayed as a step-function divided into tw o main periods by the 1970 CAA and its associated 1971 NSPS for power plants (which effect ively mandated the existence of a national market for FGD in the U.S.). In the period before t he 1970 CAA, no more than four patents were filed in a given year, while in the second period, 1971 to 1996, patenting activity never fell below a minimum activity threshold of seventy-six p atents per year. Figure 5 displays the number of patents filed over time in SO 2 control technologies. The more than ten-fold increa se in patenting activity between 1967 and 1971 is the typ e of sudden large burst in patenting activity that suggests is certain to indicate a change in ex ternal events relevant to the patented technology. The analysis also demonstrated that pa tent activity in the 1971 to 1996 period peaked in the years 1978, 1979, 1988, and 1992. Thi s pattern of peaks was also exhibited in the second, abstract-based patent dataset, analysis. Th ese analyses as well as interview with subject matter experts support the idea that inventive acti vity, as measured by patents, is spurred temporarily by the existence and anticipation of go vernment regulatory actions.

FIGURE 5. U.S. Patents Relevant to SO 2 Control Technology as Identified with the

Patent Subclass Method

Policy Implications

This work has shown that the existence of national government regulation for SO 2 emissions control stimulated innovation. The patent analysis in this dissertation shows that national regulation is a more effective stimulant of inventi ve activity than national legislation in support of air pollution abatement research alone, with no regulatory requirements. A second policy implication of this work is that regulatory stringe ncy appears to be particularly important as a driver of innovation, both in terms of inventive ac tivity and in terms of the communication processes involved in knowledge transfer and diffus ion.Increased regulatory stringency may have helped sti mulate the formation of communication

channels important to knowledge transfer in the dif fusion of SO 2 control technology. The 1979 NSPS, which was more stringent and affected a large r number of utilities than the 1971 NSPS, thereby creating a larger market for FGD in the U.S ., coincided with the growth in crossaffiliation paper co-authorship in the conferences held between 1979 and 1995. In addition, it corresponded with the beginning of a major increase in the number of papers that were presented and the number of organizations and authors that pr esented at the SO 2 Symposium. All of these findings about the effects of regulatory stringency on innovation appear to be related to the finding in the mainstream innovation literature tha t demand is a major driver of innovation. The findings in this dissertation about regulatory stri ngency and innovation may be especially relevant to policymakers considering a new national regulatory regime for a pollutant for which a dominant environmental control technology has not b een established. (The history of the development of environmental controls for mercury e missions from coal-fired power plants are a great example of this relationship between regulato ry stringency and innovation.)

A third policy implication of this work is that inv entive activity, as captured by patents, is spurred temporarily by the existence and anticipati on of government regulatory actions. This temporary spurt in inventive activity thus provides a brief burst in the stock of the public good of knowledge from which new discoveries and innovation s (especially in SO 2 control technology)

draw.

A second stand-alone finding of this work that is r elevant to policy-makers is the determination that as electric power generation doubles, the oper ating and maintenance costs of FGD systems decline to 83% of their original level. This findin g, which is very much in line with progress ratios determined in other industries, shows that q uantifiable technological improvements can be shown to occur solely on the basis of the experienc e of operating an environmental control technology forced into being by government actions.

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