### IPM Model – Revisions to Cost a nd Performance for APC Technologies

SCR Cost Development Methodology

FINAL

August 2010
Project 12301-007
Perrin Quarles Associates, Inc.

Prepared by

55 East Monroe Street • Ch icago, IL 60603 USA • 312-269-2000LEGAL NOTICE

This analysis ("Deliverable") was prepared by Sargent & Lundy, L.L.C. ("S&L"), expressly for the sole use of Perrin Quarles Associates, Inc. ("Client") in accordance with the agreement between S&L and Client. This Deliverable was prepared using the degree of skill and care ordinarily exercised by engineers practicing under similar circumstances. Client acknowledges: (1) S&L prepared this Deliverable subject to the particular scope limitations, budgetary and time constraints, and business objectives of the Client; (2) information and data provided by others may not have been independently verified by S&L; and (3) the information and data contained in this Deliverable are time sensitive and changes in the data, applicable codes, standards, and acceptable engineering practices may invalidate the findings of this Deliverable. Any use or reliance upon this Deliverable by third parties shall be at their sole risk.

This work was funded and reviewed by the U.S. Environmental Protection Agency under the supervision of William A. Stevens, Senior Advisor – Power Technologies. Additional input and review was provided by Dr. Jim Staudt, President of Andover Technology Partners.Project No. 12301-007 IPM Model – Revisions to Cost and Performance for APC Technologies August 20, 2010 SCR Cost Developmen t Methodology – Final

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### Establishment of Cost Basis The formulation of the SCR cost estimating mo del is based upon two data bases of actual SCR projects. The data bases used we re those of the 2004 to 2006 industry cost estimates for SCR units published in th e “ANALYSIS OF MOG AND LADCO’S FGD AND SCR CAPACITY AND COST ASSUMP TIONS IN THE EVALUATION OF PROPOSED EGU 1 AND EGU 2 EMISSI ON CONTROLS” report prepared for Midwest Ozone Group (MOG) and a Sargent & Lundy LLC (S&L) prop rietary in-house database. The available data was analyzed in detail regarding projec t specifics such as coal type, NOx reduction efficiency and ai r pre-heater requirements, and updated to include the cost of SCR projects av ailable with both data sets.

The data sets were escalated to update the MOG information to 2009 and all of the data was cross referenced with current 2009 proj ects. The MOG and S&L cost data were updated to reflect the changes in equipment a nd labor rates. The CEPCI index for power plants was used to escalate the costs. The Handy-Witman index was also used to escalate the project costs to account for regional e ffects; the results were compared with the CEPCI index and were within 2% for total project costs.

The comparison between the two sets of data was refined by fitting each data set with a least squares curve to obtain an average $/kW project cost as a function of unit size. The data set was then collectively used to generate an average least-squares curve fit. The curve fit indicated that both sets of data pr oduced similar average co sts (within 4%) at the 200 MW range, but deviate as the unit size in creases to approximately 11% at 600 MW and 13% at 900MW. The costs for retrofit ting a plant smaller than 100 MW increase rapidly due to the economy of size. The olde r units which comprise a large proportion of the plants in this range generally have more compact sites with very short flue gas ducts running from the boiler house to the chimney. Because of the limited space, the SCR reactor and new duct work can be expensive to design and install. Additionally, the plants might not have enough margins in the fans to overcome the pressure drop due to the duct work configuration and SCR reactor and theref ore new fans may be required.

The least squares curv e fit was based upon an average of the SCR retrofit projects. Retrofit difficulties associated with an SCR ma y result in capital co st increases of 30 to 50% over the base model. The least squa res curve fits were based upon the following assumptions:

• Retrofit Factor =1

• Gross Heat Rate = 9880

• SO 2 Rate = < 3 lb/MMBtu

• Type of Coal = Bituminous

• Project Execution = Multiple lump sum contractsProject No. 12301-007 IPM Model – Revisions to Cost and Performance for APC Technologies August 20, 2010 SCR Cost Developmen t Methodology – Final

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### Methodology Inputs To predict future SCR retrofit costs several i nput variables are required. The unit size in MW is the major variable for the capital cost estimation followed by the type of fuel (Bituminous, PRB, or Lignite) which will influe nce the flue gas quantities as a result of the moisture content. The fuel type also affects the air pre-heater costs if ammonium bisulfate or sulfuric acid depos ition poses a problem. The un it heat rate factors into the amount of flue gas generated and ultimately the size of the SCR reactor and reagent preparation. A retrofit factor th at equates to difficulty in c onstruction of the system must be defined. The NO x rate and removal efficiency will impact the amount of catalyst required and size of the reagent handling equipm ent. The elevation of the site must be considered separately and factored into the unit MW size accordingly due to its effects on the flue gas volume.

The inputs that impact the variable O&M co sts are based primarily on the plant capacity factor and the removal efficiency. The NOx removal efficiency specifically affects the SCR catalyst, reagent and steam costs. The lower level of NOx removal is recommended

as:

• 0.07 NOx lb/mmBtu – Bituminous

• 0.05 NOx lb/mmBtu – PRB

• 0.05 NOx lb/mmBtu – Lignite

Outputs Total Project Costs (TPC)
First the bare costs are calculated for each required module (BM). The bare module costs include:

• Equipment

• Installation

• Buildings

• Foundations

• Electrical

• Retrofit factor

The bare module costs do not include:

• Engineering and Construction Management

• Owner's cost

• AFUDCProject No. 12301-007 IPM Model – Revisions to Cost and Performance for APC Technologies August 20, 2010 SCR Cost Developmen t Methodology – Final

3 The modules are:

BMR = Base module SCR cost BMF = Base module reagent preparation cost BMA = Base module air pre-heater cost
BMB = Base module balance of plan costs in cluding: ID or booster fans, piping, etc...

BM = BMR + BMF + BMA + BMB

The total bare module cost (B M) is then increased by:

• Engineering and construction manageme nt costs at 10% of the BM cost.

• Labor adjustment for 6 x 10 hour shift pr emium, per diem, etc., at 10% of the BM cost.

• Contractor profit and fees at 10% of the BM cost.

A capital, engineering, and construction cost subt otal (CECC) is established as the sum of the BM and the additional engi neering and construction fees.

Additional costs and financing expenditures for the project are computed based on the CECC. Financing and additional project costs include:

• Owner's home office costs (owner's engineering, management, and procurement) at 5% of the CECC; and

• Allowance for Funds Used During C onstruction (AFUDC) at 6% of the CECC and owner's costs. The AFUDC is based on a two-year engineering and construction cycle.

The total project cost is ba sed on a multiple lump sum co ntract approach. Should a turnkey engineering procurement constructi on (EPC) contract be executed, the total project cost could be 10 to 15% higher than what is currently estimated.

Escalation is not included in the estimate. The total project cost (TPC) is the sum of the CECC and the additional costs and financing ex penditures. Table 1 contains an example of the capital cost estimation.

Fixed O&M (FOM) The fixed operating and maintenance cost is a function of the additi onal operations staff (FOMO) and maintenance labor and materi als (FOMM) associated with the SCR installation. The FOM is the su m of the FOMO and the FOMM.Project No. 12301-007 IPM Model – Revisions to Cost and Performance for APC Technologies August 20, 2010 SCR Cost Developmen t Methodology – Final

4 In general, 1 additional operator is required for all installati ons. The FOMO is based on the number of additional operations staff required.

The fixed maintenance materials and labor is a direct function of the bare module cost (BM) at a retrof it factor of 1.0.

Variable O&M (VOM) Variable O&M is a function of catalyst require d and disposal costs, reagent consumption, and steam consumption. All of the VOM costs must be adjusted for plant capacity factor.

The reagent consumption rate is a function of unit size, NO x feed rate and removal efficiency. The steam usage is based upon reagent consumption rate.

The power required for the SCR system was not included in the variable O&M costs. The power requirements include increased fa n power to overcome the added pressure drop across the catalyst and ductwor k and the reagent supply system.

The variables that contribut e to the overall VOM are:

VOMR = Variable O&M costs for urea reagent VOMW = Variable O&M costs for catalyst replacement & disposal

VOMM = Variable O&M costs for steam

VOM = VOMR + VOMW + VOMM.Project No. 12301-007IPM Model – Revisions to Cost and Performance for APCTechnologiesAugust 20, 2010SCR Cost Development Methodology – Final5Table 1. Example of the Capital Cost Estimate Work Sheet.Project No. 12301-007IPM Model – Revisions to Cost and Performance for APCTechnologiesAugust 20, 2010SCR Cost Development Methodology – Final6Table 2. Example of the Fixed andVariable O&M Estimate Work Sheet.