Appendix E: EPA’s evaluation of cost of Selective Catalytic Reduction (SCR) controls

Nebraska Public Power District (NPPD) Gerald Gentlemen Station (GGS), Units 1 and 2

We received a number of comments stating that NPPD and the State failed to properly 

cost the GGS SCR system. The following is an analysis of the cost effectiveness of the GGS 

BART analysis for SCR that addresses the points made in those comments. We adjust a number 

of cost items because NPPD’s usage of them does not comport with EPA’s Control Cost Manual. 

These include engineering, procurement, and construction; the capital recovery factor; 

contingency; escalation; and allowance for funds used during construction. We note that as with 

our dry scrubber cost analysis, there are some cost line items that we did not adjust that could 

have impacted the cost. These include a number of capital costs that were apparently not based 

on vendor quotes, or otherwise properly documented. Also, although we calculate the SCR costs

using NPPD’s assumed NOx control level of 0.08 lbs/MMBtu, we further adjust the SCR cost 

estimate to account for a NOx control level of 0.05 lbs/MMBtu. 

1. Engineering Procurement and Construction

NPPD assumes an Engineering Procurement and Construction (EPC) fee of 20% of the 

total cost, but does not provide any discussion or explanation for this cost. In our proposal, we 

recalculated the EPC fee for dry scrubbers to be 6.5% of the cost items that are not supported by 

vendor quotes. NPPD submitted a comment on this subject, which we address in our response to 

comments. As we noted, in our response to comments, we received no information from NPPD 

that caused us to conclude our methodology was incorrect. Therefore, we have adopted the same 

methodology here. In costing the SCR installations, NPPD notes that only the costs for the urea 

to ammonia system and the booster fans are supported by vendor quotes. Thus, we have revised 

our EPC costs to be 6.5% of the capital costs, except for the urea to ammonia system and the 

booster fans. This calculation appears in line 25 of Appendix D (SCR cost spreadsheet). 

2. Capital Recovery Factor

NPPD does not include its calculation of a Capital Recovery Factor (CRF), which is 

necessary to calculate annualized (levelized) costs. However, unlike NPPD’s dry scrubber cost 

analysis, we cannot duplicate NPPD’s SCR annualized cost, even using the same real interest 

rate of 5.25% (which again we adopt, but on which we form no opinion here), and its 

amortization life of 20 years. As with its dry scrubber cost analysis, the CRF should be 

approximately 0.08195.1 We suspect NPPD has made an error in its SCR annualized cost 

calculations, since the spread in the annualized costs it calculates for the different booster fan 

scenarios is too great for the difference in capital costs. For instance, the capital costs are 

$483,411,000 and $478,151,000 for the booster fan scenarios, yet the annualized costs are 

$42,305,000 and $38,755,000, respectively. We calculate that these annualized costs should be 

$39,617,000 and $39,186,000, respectively.

Similar to our dry scrubber cost analysis, we take issue with NPPD’s assumption of a 20 

year amortization life, which equates to an assumption that the SCR has an operational life of 

only 20 years. The same references we cited to the Control Cost Manual regarding control 

 

1

 CRF = (0.0525*(1.0525^20))/(1.0525^20-1) = 0.08195. Levelized Capital Cost = CRF*Total Capital Cost.
2

equipment life apply here. We note that the Control Cost Manual does have a section that treats 

the SCR cost estimation, which assumes a 20 year life.

2

 However, we are mindful of the 

requirement in the BART Guidelines to incorporate site specific information into the cost 

analysis:

In order to maintain and improve consistency, cost estimates should be based on the 

OAQPS Control Cost Manual, where possible.3 The Control Cost Manual addresses 

most control technologies in sufficient detail for a BART analysis. The cost analysis 

should also take into account any site-specific design or other conditions identified above 

that affect the cost of a particular BART technology option.

As directed by the BART Guidelines, here we provide site-specific information 

concerning the projected operational life of the SCR system. This information was discussed in

our response to comment for our New Mexico FIP regarding the San Juan Generating Station:

The lifetime of an SCR, which is a metal frame packed with catalyst modules, is equal to 

the lifetime of the boiler, which might easily be over 60 years. The lifetime of a retrofit 

SCR is generally set equal to the remaining useful life of the facility ... Further, as 

previously noted, there are many SCRs that were installed in Europe in the 1980s that are 

still in operation today. Many utilities routinely specify 30+ year lifetimes in requests for 

proposal and to evaluate proposals. A study of the economic risks from SCR operation at 

the Detroit Edison Monroe power plant, for example, used 30 years as the anticipated 

lifetime4 ... And finally, Sargent & Lundy assumed a design life of 30 years5for the 

nearby Navajo Generating Station which burns a similar coal. We conclude there is 

nothing in the record to support a 20 year lifetime for the SCR and believe a 30 year 

lifetime is justified.

Similarly, as with its dry scrubber cost analysis, NPPD has not offered to execute an 

enforceable commitment to shut down after 20 years. Thus, we adopt a SCR operational life 

here of 30 years in our calculation of the CRF, which again equates to approximately 0.06691.6 

We use this CRF in our recalculation of NPPD’s levelized costs. This calculation appears in line 

39 of Appendix D. 

3. Escalation

NPPD incorporates an escalation cost of $60,482,000, which it states on page 7 of the 

GGS revised BART analysis Appendix C, was estimated on the basis of 5.0% for Equipment, 

7.0% for Material, 4.0% for Labor and 6.0% for Indirects. We have excluded this cost from our 

 

2

 Air Pollution Control Cost Manual, Sixth Edition, EPA/452/B-02-001, January 2002 , Section 4.2, Chapter 2, 

Selective Catalytic Reduction, pdf 490..

3

 70 FR 39166 (BART Guidelines): You should include documentation for any additional information you used for 

the cost calculations, including any information supplied by vendors that affects your assumptions regarding 

purchased equipment costs, equipment life, replacement of major components, and any other element of the 

calculation that differs from the Control Cost Manual.

4

 S.D. Unwin and others, Selective Catalytic Reduction (SCR) System Design and Operations: Quantitative Risk

Analysis of Options, Presented at CCPS 17th Annual International Conference: Risk, Reliability, and Security, p. 3.

Available here: http://www.unwin-co.com/files%5CSCR-Risk-Paper,CCPS-RRS2002.pdf.

5

 8/17/10 Salt River Project Navajo Generating Station Units 1, 2, 3 SCR and Baghouse Capital Cost Estimate

Report (S&L Navajo Cost Analysis), Appendix A, p. 6, Sec. 1.7.

6

 CRF = (0.0525*(1.0525^30))/(1.0525^30-1) = 0.06691.
3

SCR BART cost analysis for the same reasons we discussed in our dry scrubber cost analysis. 

This revision appears in line 30 of Appendix D.

4. Contingency

NPPD incorporates a contingency cost of $72,779,000, which it states on page 7 of 

Appendix C, was estimated at 20% of equipment, material, labor and indirect costs. No 

information was provided to justify the need for this calculation. Unlike dry scrubbers, the 

Control Cost Manual does have a specific section that treats SCR cost estimation. The Control 

Cost Manual indicates that contingencies should be calculated as a process contingency, 

calculated as 5% of the total direct capital costs, and a project contingency, calculated as 15% of 

the sum of the total direct and indirect costs.7 Because NPPD did not support this cost, we use 

the Control Cost Manual methodology. This calculation appears in line 32 of Appendix D. 

5. Allowance for Funds Used During Construction

GGS incorporates an Allowance for Funds Used During Construction (AFUDC) cost of 

$41,150,000, in the “Other Cost” category, which it states on page 7 of Appendix C as being 

estimated to be 5% from 2009. We have excluded this cost from our SCR BART cost analysis 

for the same reasons we discussed in our dry scrubber cost analysis. This revision appears in line 

33 of Appendix D.

6. NOx Level of Control

NPPD assumes a NOx level of control of 0.08 lbs/MMBtu, based on a 30-day rolling 

average. However, the BART Guidelines require that the most stringent level of control be 

evaluated:

It is important, however, that in analyzing the technology you take into 

account the most stringent emission control level that the technology is 

capable of achieving. You should consider recent regulatory decisions and 

performance data (e.g., manufacturer’s data, engineering estimates and the

experience of other sources) when identifying an emissions performance 

level or levels to evaluate. 

In assessing the capability of the control alternative, latitude exists to 

consider special circumstances pertinent to the specific source under 

review, or regarding the prior application of the control alternative. 

However, you should explain the basis for choosing the alternate level (or 

range) of control in the BART analysis. Without a showing of differences 

between the source and other sources that have achieved more stringent 

emissions limits, you should conclude that the level being achieved by

those other sources is representative of the achievable level for the source 

being analyzed.8

 

7

 Control Cost Manual, pdf 486.

8

 70 FR 39104, 39166.
4

In our New Mexico FIP, we found that an SCR level of control of 0.05 lbs/MMBtu, 

based on a 30 boiler operating day average was appropriate for the San Juan Generating Station.9 

As we explain in our New Mexico FIP, the BART level of 0.05 lb/MMBtu was selected based on 

an examination of continuous emission monitoring systems (CEMS) data for existing units

operating with retrofit SCRs. Contrasting the two facilities, we see no reason that GGS Units 1 

and 2 cannot achieve the same level of control. Assuming a NOx baseline of 0.23 lbs/MMBtu, a 

NOx emission limit of 0.05 lbs/MMBtu represents a level of control of approximately 78%. As 

other commenters discuss, this level of control is well within the range of control that is 

commonly achievable for a modern SCR system. Therefore, we consider this level of control in 

our NOx BART cost analysis. Various adjustments are made to the cost in response to this NOx 

control level.

7. Effect of NOx Removal Efficiency Assumption on Cost

GGS employs a levelized fixed O&M cost of $1,466,000 and a levelized variable O&M 

cost of $13,049,000. Although GGS does not document the individual cost items contained in 

the fixed O&M cost, we can duplicate both the fixed and variable O&M costs by using the 

information contained in the financial model cases on pages 4 and 5 of the revised NPPD BART 

Analysis – Appendix C. The variable O&M cost include charges for urea, catalyst, water, an 

auxiliary power energy charge, and an auxiliary power capacity charge.

Of these charges, those for urea, water, and catalyst, will vary due to the assumed level of 

control. Certain other capital costs will also vary. For instance, NPPD assumes a NOx control 

level with the aforementioned combustion controls and SCR to be 0.08 lbs/MMBtu based on a 

30 day rolling average. However, achieving a NOx emission limit of 0.05 lbs/MMBtu will 

require increases in the costs for urea, water, and catalyst. Lacking the engineering calculations 

NPPD employed in order to calculate these items, we provide an EPA cost estimate of these 

increases. We perform this estimation using an SCR cost model developed by Sargent & Lundy 

for the EPA IPM model.10 This model’s algorithms were converted to a spreadsheet, which we 

present in Appendix D. Here we calculate the capital and O&M costs for two NOx control 

scenarios: NPPD’s NOx control of 0.08 lbs/MMBtu, and a lower NOx control of 0.05 

lbs/MMBtu. Although this cost model does not follow the Control Cost Manual methodology in 

several areas, it is useful for our purposes of simply contrasting the difference in costs due to 

changing the level of NOx control. The following table contrasts those cost items that exhibited 

a change:

Cost Category

NOx Controlled

to 0.08 

lbs/MMBtu

NOx Controlled

to 0.05 

lbs/MMBtu

Percent

Increase

SCR $58,104,000 $60,265,000 3.59

Reagent Preparation $2,178,000 $2,280,000 4.47

Engineering and construction management $6,569,000 $6,796,000 3.34

 

9

 76 FR 52388.

10

 IPM Model – Revisions to Cost and Performance for APC Technologies, SCR Cost Development Methodology, 

Final, August 2010, Project 12301-007, Perrin Quarles Associates, Inc., Prepared by Sargent & Lundy. 
5

Labor adjustment for 6 X 10 shifts, per 

diem, etc. $6,569,000 $6,796,000 3.34

Contractor profit and fees $6,569,000 $6,796,000 3.34

Total capital, engineering, 

and construction $85,400,000 $88,344,000 3.33

Total project $95,050,000 $98,327,000 3.33

Variable O&M urea ($/MWh) $0.318 $0.382 16.75

Variable O&M catalyst ($/MWh) $0.239 $0.272 12.13

Total variable O&M ($/MWh) $0.794 $0.891 10.89

Thus, we see that modest increases to the capital costs, and moderate increases to the 

variable O&M costs are necessary to adjust the cost from a NOx control level of 0.08 

lbs/MMBtu to a NOx control level of 0.05 lbs/MMBtu. In order to be conservative and for the 

ease of calculation, we simply increase the total capital cost by 4%, and the total variable O&M 

cost by 11%, in order to account for the increased NOx control level of 0.05 lbs/MMBtu.

8. SCR Cost Effectiveness

NPPD calculates the incremental cost effectiveness of installing SCR on Units 1 and 2 of 

the GGS to be $5,445/ton of NOx removed. This assumes a NOx control of 0.08 lbs/MMBtu 

based on a 30 day calendar average. Having made the cost adjustments described above, we find 

that the cost effectiveness of SCR for Units 1 and 2 of the GGS facility should range between 

$3,662/ton and $3,243/ton, assuming NOx control levels of 0.08 lbs/MMBtu and 0.05 

lbs/MMBtu, respectively.