1 

### MEMORANDUM

**Tetra Tech, Inc. 10306 Eaton Place, Suite 340**  **Fairfax, VA 22030 phone**  **703 -**  **385 -**  **6000 fax**  **703 -**  **385 -**  **6007** TO : Paul Shriner and Lisa Biddle, EPA FROM : John Sunda, Tetra Tech DATE: June 24 , 201 3 SUBJECT **:** Evaluation of American Chemistry Council Cost Estimate for Closed Cycle

Cooling Retrofit Costs Submitted Proposal Comment (2207 - A1) The American Chemistry Council (ACC) (Comment 2207 - A1) provided in an appendix to their comments on the Proposed Rule which provides a somewhat detailed estimate of capital and O&M costs for closed - cycle cooling sy stems at manufacturing plants. Costs are provided for small (5,000 gpm), medium (20,000 gpm) and large (100,000 gpm) sy stems . This document presents a comparison of the ACC cost estimates to the EPA cost estimates for the three sizes of sy stems presented by

ACC. The comparable EPA capital and O&M costs are scaled by size but use a linear approach applying the same unit costs for all size sy stems. The ty pical individual cooling tower cell s 1 that are used b y power plants are usual ly designed to cool from 12,000 to 15,000 gpm/cell and a single cell would represent the smallest unit . Thus, the EPA costs s hould be compar able to the 20,000 and 100,000 gpm ACC estimates. Capital Costs In applying the EPRImodel costs to manufacturing facilities, EPA recogniz ed that closed cycle retrofits for non - contact cooling water at manufacturing plants would tend to be more costl y due to both the more numerous and smaller sized units , and the higher potential for greater complexity

and difficulty in the design and installation . EPA therefore, chose to use the “difficult” capital cost factor from the three EPRI difficulty categories 2 for estimating cost for non - power generation manufacturing uni ts. Th e capital cost factor selected by EPA was equal to

1 Each cooling tower is typically comprised of multiple side - by - side 50 ft x 50 ft cells with the number of cells determined by the total d esign cooling flow requirement. 2 In 2007 EPRI provided EPA a cost worksheet (DCN 10 - 6930A) including capital cost fac tors for “easy,” “average,” and “difficult” retrofit scenarios. EPA adopted the EPRI cost methodology in developing compliance costs for closed cycle cooling.2

$423/gpm cooling water in 2010 dollars 3

. A similar unit cost can be derived for the ACC estimates by

dividing the total capital costs by the cooling water flow rate . Table 1 shows a comparison of the EPA and ACC $/gpm capital cost values. Figure 1 (attached) shows a graphical presentation of the ACC and EPA capital costs bas ed on the unit costs in Table 1. **Table 1 Comparison of ACC and EPA Unit Capital Costs**  **Flow ACC Estimate**  **EPA**

**Capital Cost Unit Cost**  **Unit Cost gpm**  **Dollars $/gpm**  **$/gpm** 5,000 $3,400,000 $680 $424 20,000 $9,900,000 $495 $424 100,000 $39,500,000 $395 $424 Fourth quarter 2010 dollars The EPA cost estimates are similar in magnitude for both the medium and large s ys t ems with the EPA estimate slightly higher for the large sy stem , and with the differences being we l l within the range of expected variation for preliminary engineering cost estimates of this ty pe . However, the ACC capital cost for 5,000 gpm s ys tem s is over 50% higher than EPA’s estimate . EPA identified three primary reasons for this discrepancy . The first difference between the ACC and EPA capital costs are that the EPA cost approach uses a linear equation that does not account well for econ omies of scale for very small sy stems . Second, the detailed cost estimates include components that should already be present at an existing plant. Therefore the costs are not incremental costs. The ACC estimate includes costs for:

• Intake structure and screens • Intake line • Intake pumps • Clarifier • Makeup water tank • Feed pumps • Chemical treatment • Cooling tower and basin • Circulating pumps These cost s appear to represent a new stand - alone CWI S sy stem in which all of the components listed above would be constructed ind ependently of any existing cooling water equipment. In m ost circumstances the non - cooling tower components ( such as the intake structure, pumps, and screens ) are not necessary since the facility

already has sufficient existing intake screening and pumping capacity to operate the plant. These existing cost components comprise approximately 11% of the ACC costs for the small sy stem. These first two factors also affect the medium and
3 Adjusted for inflation using ENR CCI from $411 in February 2009 dollars to $423 in 2010 dollars .3

large ACC facility

costs. Thus, based on these first two factors, the ACC costs are likely overstated. Third , in some cases the make - up source water is assumed to require additional clarification equipment . This comprises 19% of the small s ys tem costs. EPA notes that since the CCRS sy stem at a manufacturing facility is designed to operate at a fairly high cycle of concentration (approaching 5.0) the need for clarified make - up water might be justified. These factors combined result in ACC’s capital cost estimates for medium and high f low facilities as being higher than EPA’s , the low flow units as being lower than EPA’s costs, and overall the ACC costs are comparable to EPA’s cost estimates. O&M Costs Table 2 shows the ACC O&M costs from Tables 4 - 3, 4 - 5, and 4 - 7 (Comment 2 207) plus the comparable EPA O&M costs. The EPA cost estimates shown are derived us ing the same cooling flow values, auxiliary energy costs, and capacity

utilization rate assumptions used in the ACC estimates. As can be seen, the ACC O&M cost estimates were muc h higher than EPA’s estimates , even for the large s ys tem . After examining the ACC cost data EPA has identified two major differences :
 ACC labor costs which are cited at $262,800/yr for all three s ys tems regardless of size . EPA notes n o detail was provided regarding the basis of this cost item . The labor costs are overstated in comparison to EPRI’s cost estimates.  The ACC use of total fan and pump energy required does not subtract out existing energy requirements . The EPA estimate is ba sed on the net increase in ene rgy required taking into account existing once - through pumping . The EPA cost estimates are based on the net increase in costs f or retrofit applications . The e xisting once - through cooling s ys tem already requires both labor and pumping energy to operate . When the once - through is replaced by closed - cycle, the flow requirements are reduced by more than 90 percent. The correlating 90 percent reduction in costs will offse t a significant portion of the new closed cycle sy stem operating costs. Adjustments to compensate for these differences are described below and the adjusted ACC O&M costs are also presented in Table 2 . Additional labor will be required to maintain and operate the cooling tower and clarifier . The circulating pumps labor will be similar to the intake pumps but the size and operation of the existing intake screens will be scaled back requiring less O&M labor. N either the cooling tower nor clarifier will require a full time operator. Therefore EPA fi nds that a net increase would be labor of about 0.5, 1.0, and 1.5 full time equivalents (FTE) for small, medium and large cooling sy stems, respectivel y, plus an additional 10% of hours for a supervisor. Table 2 presents the estimated labor costs based on the FTE estimates and a loaded hourly wage of $45/hr for laborer and $98/hr for a supervisor. The adjusted ACC O&M costs are derived by deducting the $262,000 cost and substituting the estimated net labor cost shown in Table 2. Besides labor , one of the primary component s of the ACC O&M costs are for the energy requirements of the fans and pumps. In particular, the recirculating pump energy requirement is4

based on electricity costs for a pumping head of 160 ft. It is not clear why this value was selected because Figure 4 - 1 in the comment show s a pumping head of 100 ft. This 160 ft pumping head is assumed to include both the process s ys tem static and dy namic head losses plus those for the tower. A typical pumping head for just the cooling tower portion would be 25 to 35 ft. Assuming the existing once - through pumping head would be equal to the total head , minus the tower component, the once - thro ugh pumping head in the ACC sy stem design ( for which operating costs are already expended for the existing once - through s ys tem) is assumed to be 125 ft (160 ft

– 35 ft). The ACC O&M are adjusted to reflect the net pump energy increase by

deducting the associated costs of once - through pumping at a head of 125 ft shown in Table 2 . Figure 2 (attache d) shows a graphical presentation of the ACC adjusted and unadjusted O&M costs along with the EPA O&M costs . As the figure shows, the EPA estimated O &M costs are similar in magnitude and somewhat lower than the adjusted ACC O&M costs and are within 10% of ACC estimates for larger s ys tems. The EPA O&M costs are based on estimates prov ided by EPRI with some additional costs included for chemical treatment of blowdown . The ACC costs include a chemical treatment component that is more than 4 times greater than the EPA a dditions and may reflect the fact that the design cycle of concentration for the ACC sy stem was a fairl y high value of 5 , as noted above . **Table 2 Comparison of Estimated Annual Closed Cycle O&M Costs derived Using EPA Cost Equations**  **to ACC**

**O&M Estimates and ACC Estimates with Adjustments to Labor and Energy Costs** Flow Rate (gpm) ACC O&M Once through Pumps at 125 ft Labor

FTE Net Labor Costs 1 Adjusted

ACC O&M 2 EPA

Estimated O&M 5,000 $500,000 $88,230 0.5 $56,992 $206,000 $ 8 9 , 0 00 20,000 $1,080,000 $352,921 1 $113,984 $578,300 $ 356,0 00 100,000 $3,820,000 $1,764,604 2 $227,968 $2,020,600 $ 1,779,0 00 1 Based on worker loaded hourly wage of $45 plus 10% of hours for supervisor at $98/hr 2 Deducts once - through pumping and replaces labor cost of $262,800 with value shown. Conclusion This analy sis confirms that EPA’s capital and O&M costs are mostly in agreement with the ACC estimates. Infact, EPA’s capital costs are slightl y higher for the large s ys tem . The same is not true for smaller s ys tems and the differences suggest that the EPRI(and EPA) approach using linear cost equations may have limitations when estimating costs for the smallest flow sy stems where the effects of economies of scale are more pronounced . For manufacturing intakes currentl y operating as once - through an estimated 80% of total industry- wide manufacturing facility non - contact cooling water flow is associated with sy stems with a non - contact cooling flow over 20,00 0 gpm. For purposes of estimating national industry- wide level costs, since the5

larger s ys tems comprise the majority of the total non - contact cooling water flow, this difference in costs is not significant. For purposes of estimating annual costs, EPA evaluated a 30 year amortization at a 9 percent interest rate (giving an annualization factor of 9.7). EPA finds that for the large model, both annualized cost estimates are in strong agreement (within 1 percent). For the medium and small models, the annualiz ed cost estimates using the adjusted ACC O&M rates are within 30 percent. As noted, EPA finds the ACC costs are overstated with respect to incremental costs and O&M costs, and is likely

further overstated for manufacturing facilities that do not require cl arification of make - up water. After considering that the ACC costs do not represent incremental (net) costs, include costs not required by all facilities, and include labor rates not documented by the commenter, EPA finds the Agency ’s costs are reasonable. EPA further notes that it may have overestimated closed cycle retrofit cooling technology costs for Proposal Options 2 and 3 for manufacturing facilities on an industry- wide basis. The reason for this is EPA estimated non - contact cooling water flow rates based the proportion of DIF that is non - contact cooling water. This likely represent s an overestimation of the flow that would be subject to the rule and thus ultimately would have been included in the retrofit to closed cycle . EPA notes that manufacturin g facilities have opportunities to reduce all or a portion of the volume of cooling water flow by reusing the non - contact cooling water as process water . This reuse of water for multiple purposes poses a s ignificantly lower overall cost . This option is gen erall y not available to power plants which use a much smaller quantity of process w ater compared to cooling water.

. $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000

0 20,000 40,000 60,000 80,000 100,000 120,000 **Cooling Water Flow (gpm) Figure 1. EP** 

**A and ACC Estimated Capital Costs**

ACC Capital Cost EPA Capital Costs6 $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000

0 20,000 40,000 60,000 80,000 100,000 **Cooling Water Flow (gpm) Figure 2. EP** 

**A and ACC Estimated O&M Costs**

Adjusted ACC O&M ACC O&M EPA Estimated O&M