SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix C: Cost Effectiveness Analysis September 20, 2007 

Final Staff Report with Appendices for 

Revised Proposed Amendments to Rule 4703

APPENDIX C 

Cost Effectiveness Analysis for Revised 

Proposed Amendments to Rule 4703 (Stationary Gas Turbines) 

September 20, 2007 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix C: Cost Effectiveness Analysis September 20, 2007 

Final Staff Report with Appendices for 

Revised Proposed Amendments to Rule 4703

C-2

COST EFFECTIVENESS ANALYSIS 

Rule 4703 (Stationary Gas Turbines) 

I. SUMMARY 

District staff has performed a preliminary cost effectiveness analysis for the proposed 

amendments of Rule 4703 as required by the California Health and Safety Code. Rule 

4703 is being amended to specify Best Available Retrofit Control Technology (BARCT) 

emission limits and all feasible measures for stationary gas turbines in the San Joaquin 

Valley Air Basin. Cost effectiveness is the total annualized cost, in dollars, of the proposed 

control option divided by emissions reduction, in tons, of the proposed control option. 

Four scenarios were analyzed for cost effectiveness. Each scenario considered the 

installation of a selective catalytic reduction (SCR) control system to comply with the 

proposed NOx emission limits. The scenarios included low cost and high cost estimates to 

retrofit existing turbines and low cost and high cost estimates for new turbine installations. 

Several cases were analyzed for each scenario. The cases analyzed included different 

size turbines and different annual hours of operation. Table 1 below summarizes the 

results of the cost effectiveness analysis for full time units. Table 2 below summarizes the 

results of the cost effectiveness analysis for units operated 877 hrs/year. 

Table 1 Summary of Cost Effectiveness Analysis Results for Full Time Units 

Cost Effectiveness ($/ton) Turbine 

Size, MW New Installation 

Low Cost 

New Installation 

High Cost 

Retrofit 

Low Cost

Retrofit 

High Cost

1 $ 27,813 $ 29,827 $ 30,844 $ 41,912 

2 $ 16,914 $ 18,928 $ 20,943 $ 31,013 

4 $ 10,447 $ 12,317 $ 14,187 $ 23,539 

6 $ 10,964 $ 13,344 $ 12,355 $ 21,707 

8 $ 9,757 $ 12,137 $ 11,407 $ 20,758 

10 $ 9,011 $ 11,392 $ 13,772 $ 25,674 

25 $ 10,504 $ 14,075 $ 17,645 $ 35,498 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix C: Cost Effectiveness Analysis September 20, 2007 

Final Staff Report with Appendices for 

Revised Proposed Amendments to Rule 4703

C-3

Table 2 Summary of Cost Effectiveness Analysis Results for Units Operated 877 Hrs/year 

Cost Effectiveness ($/ton) Turbine 

Size, MW New Installation 

Low Cost 

New Installation 

High Cost 

Retrofit 

Low Cost

Retrofit 

High Cost

1 $ 59,999 $ 78,105 $ 95,215 $ 186,746 

2 $ 49,100 $ 67,206 $ 85,313 $ 175,847 

4 $ 46,538 $ 65,938 $ 85,339 $ 182,339 

6 $ 56,540 $ 81,231 $ 83,224 $ 180,225 

8 $ 55,147 $ 79,838 $ 82,130 $ 179,131 

10 $ 54,287 $ 78,978 $ 103,669 $ 227,125 

25 $ 67,560 $ 99,658 $ 131,757 $ 292,249 

In general, the cost effectiveness analysis indicated that the larger units with the higher 

annual hours of operation had the lower cost effectiveness. The smaller units with the 

lower annual hours of operation had the higher cost effectiveness. Although a few of the 

results indicated a high cost effectiveness, such results are influenced more by the effect 

of the low emissions reduction and not from high annual costs. District staff feels that the 

cost effectiveness results are reasonable for the cases analyzed. The results of the 

analysis are at the end of this appendix. 

Industry provided cost estimates for retrofitting different types of turbines commonly used 

by the petroleum industry that show that for small turbines the installed cost ranges from 

$420/KW to $1300/KW. District staff feels that the cost estimates ($100/KW to $450/KW) 

used for the cost effectiveness analysis are reasonable for the cases analyzed. 

II. REQUIREMENTS OF THE ANALYSIS 

Pursuant to Section 40920.6 of the California Health and Safety Code, prior to adopting 

rules or regulations to meet the requirement for BARCT or for a feasible measure, the 

District is required to review the information developed to assess the cost effectiveness of 

the proposed control option. Cost effectiveness is the total annualized cost, in dollars, of 

the proposed control option divided by the emissions reduction, in tons, of the proposed 

control option. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix C: Cost Effectiveness Analysis September 20, 2007 

Final Staff Report with Appendices for 

Revised Proposed Amendments to Rule 4703

C-4

III. COST EFFECTIVENESS ANALYSIS 

As noted above, four scenarios were analyzed for cost effectiveness. Each scenario 

considered the installation of a SCR control system to comply with the proposed NOx 

emission limits. The scenarios included low cost and high cost estimates for new turbine 

installations and low cost and high cost estimates to retrofit existing turbines. The four 

scenarios are listed below: 

Scenario 1 - new turbine installation low cost estimate ($100/KW) 

Scenario 2 - new turbine installation high cost estimate ($150/KW) 

Scenario 3 - retrofit installation low cost estimate ($200/KW) 

Scenario 4 - retrofit installation high cost estimate ($450/KW) 

These estimated capital costs (in $/KW) of the SCR control system were provided by 

industry. Several cases were analyzed for each scenario. The cases considered turbine 

sizes of 1 to 10 MW and 25 MW. These sizes are comparable to the sizes of the turbines 

subject to the proposed NOx emission limits. In addition, the cases considered annual 

operating hours that ranged from 877 to 7884 hours. As detailed below, the estimated 

NOx emissions reduction and the estimated annual costs of a SCR control system were 

calculated. The estimated NOx cost effectiveness was then determined for each case. 

A. Cost Effectiveness Calculation 

The cost effectiveness analysis was performed as follows for each case of each scenario: 

1. The estimated annualized capital costs and additional operating and maintenance 

costs for the selective catalytic reduction (SCR) system were calculated using the 

methodology from a 1999 study prepared by ONSITE SYCOM Energy Corporation and 

SCR costs from Solar Turbines Incorporated (STI). Table A-5, 1999 Conventional SCR 

Cost Comparison, in the ONSITE SYCOM Energy Corporation study contains a 

methodology for calculating the total annual costs for SCR systems for different size 

turbines. District staff used this methodology (4.2 MW turbine) to calculate the total 

annual costs of the SCR systems. As appropriate, dollar amounts were adjusted to 

2007 dollars (assume CPI increased 4%/year). Table 3 below presents a sample 

calculation of the SCR annual costs. 

2. The estimated Current Annual NOx emissions and the estimated Potential Annual NOx 

emissions were calculated using the following equation: 

 

NOx = LF x MMBtu/hr x HR x EF / 2,000 lb/ton 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix C: Cost Effectiveness Analysis September 20, 2007 

Final Staff Report with Appendices for 

Revised Proposed Amendments to Rule 4703

C-5

Where: 

NOx = Current annual NOx emissions or Potential annual NOx emissions 

LF = turbine load factor 

MMBtu/HR = heat input rating 

HR = annual hours of operation 

EF = NOx emission factor in pounds per MMBtu 

Where: 

EF = NOx emission factor in ppmv x 0.00366 

ppmv = NOx emissions in parts per million corrected to 15% oxygen 

0.00366 = Conversion factor used: 0.00366 lb/MMBtu per ppmv NOx 

3. The estimated annual NOx emissions reduction was calculated using the following 

equation: 

NOx Emissions Reduction = Current annual NOx emissions - Potential annual NOx 

 emissions. 

4. The cost effectiveness was calculated by dividing total annual costs by the tons of NOx 

emissions reduced per year. 

B. Assumptions for the Cost Effectiveness Calculation 

The more significant assumptions made in the cost effectiveness analysis are listed below. 

1. It was assumed that units would comply with the proposed Tier 3 NOx limits. 

2. It was assumed that units with an annual operating hours limit on their permit were 

available for the full amount of those hours and that other turbines were operated 

90% of the year due to maintenance, etc. 

3. It was assumed that units would operate the same number of hours as they are 

currently operated. 

4. It was assumed that units are and would be operated at 75% of rating. 

5. It was assumed that equipment has a 15-year life and that the annual interest rate is 

10%. 

6. It was assumed that units operate on PUC quality natural gas. 

7. It was assumed that a SCR system would be retrofit on a unit during a normally 

scheduled overhaul of the unit or installed during the scheduled installation of a unit. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix C: Cost Effectiveness Analysis September 20, 2007 

Final Staff Report with Appendices for 

Revised Proposed Amendments to Rule 4703

C-6

8. It was assumed that cost estimates for a SCR system for a new turbine installation range 

from $100/kW to $150/kW and for a SCR system retrofit on an existing turbine 

installation the cost estimates range from $200/kW to $450/kW. 

C. Results of the Cost Effectiveness Calculation 

Table 3, Sample Calculation of SCR Annual Costs, lists the methodology (from a 1999 

study prepared by ONSITE SYCOM Energy Corporation) used in calculating the estimated 

annualized capital costs and additional operating and maintenance costs for the selective 

catalytic reduction (SCR) system. The results of the cost effectiveness calculations for the 

cases for full time operation for the four scenarios are contained in Table 4 below. 

IV. INCREMENTAL COST EFFECTIVENESS ANALYSIS 

The procedure for incremental cost effectiveness analysis is detailed in California Health 

and Safety Code Section 40920.6(a)(3). The incremental cost effectiveness analysis 

proceeds from the bottom up and compares the differences in costs and differences in 

emissions reduction of the candidate control options. This method is useful for comparing 

the cost effectiveness of candidate controls, but the incremental cost effectiveness 

analysis results do not reveal the emissions reduction potential of the control options. In 

general, there is no correlation between emissions reduction and cost effectiveness. In 

other words, there is no assurance that a more cost effective control option would result in 

a greater, or significant, emissions reduction. The top-down analysis, on the other hand, 

identifies the control option with the greatest emissions reduction and an acceptable cost 

effectiveness. 

Although incremental cost effectiveness analysis results in a ranking of relative cost 

effectiveness values, incremental cost effectiveness analysis alone does not produce an 

absolute cost effectiveness value for any control option. The relative values produced in 

the incremental cost effectiveness analysis and absolute cost effectiveness values are not 

interchangeable and cannot be evaluated similarly. Incremental cost effectiveness 

analysis results should not be compared with the District’s acceptable values for cost 

effectiveness. As there were no more effective controls than what is proposed, no 

incremental cost effectiveness analysis was possible. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix C: Cost Effectiveness Analysis September 20, 2007 

Final Staff Report with Appendices for 

Revised Proposed Amendments to Rule 4703

C-7

Table 3 Sample Calculation of SCR Annual Costs 

ITEM SOURCE COST 

Turbine Rating 1 MW 

SCR Cost/KW $200/KW 

Operating Hours 7884 hrs/year 

Direct Capital Costs 

Total Capital Investment (TCI) $ 200,000 

Direct Annual Costs 

Operating Costs 

Operator 0.5 hr/shift, $25/hr OAQPS $ 16,859 

Supervisor 15% of operator OAQPS $ 2,529 

Maintenance Costs 

Labor 0.5 hr/shift, $25/hr OAQPS $ 16,859 

Material 100% of labor cost OAQPS $ 16,859 

Utility Costs 

Electricity Costs Variable $ 5,747 

Cat. Replacement MHIA $ 5,621 

Cat. Disposal OAQPS $ 211 

Ammonia Variable $ 1,008 

NH3 Inject Skid MHIA $ 2,916 

Total Direct Annual Costs $ 64,394 

Indirect Annual Costs 

Overhead 60% of O and M OAQPS $ 31,864 

Administrative 0.02 x TCI OAQPS $ 4,000 

Insurance 0.01 x TCI OAQPS $ 2,000 

Property Tax 0.01 x TCI OAQPS $ 2,000 

Capital Recovery 0.13 x TCI 

(10% int. rate, 15 yr period) OAQPS $ 26,000 

Total Indirect Annual Costs $ 65,864 

Total Annual Costs $ 130,166 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix C: Cost Effectiveness Analysis September 20, 2007 

Final Staff Report with Appendices for 

Revised Proposed Amendments to Rule 4703

C-8

Table 4 Cost Effectiveness Results for Full Time Operation for Scenarios 1, 2, 3 and 4 

MW MMBtu/hr 

Current 

NOx EF, 

ppmvA

Potential 

NOx EF, 

ppmvB

NOx 

Reduction 

Tons/YearC

SCR 

Cost/KWD

Installed 

Control 

Equipment 

Cost ($)E

Annualized 

Equipment 

Cost ($)F

Total Annual 

Cost ($)G

Cost 

Effectiveness 

($/ton)H

Scenario 1 - new turbine installation low cost estimate 

1 15.0 35 9 4.22 $ 100 $ 100,000 $ 13,000 $ 117,375 $ 27,813 

2 30.0 35 9 8.44 $ 100 $ 200,000 $ 26,000 $ 142,760 $ 16,914 

4 56.0 35 5 18.18 $ 100 $ 400,000 $ 52,000 $ 189,911 $ 10,447 

6 66.0 35 5 21.43 $ 100 $ 600,000 $ 78,000 $ 234,904 $ 10,964 

8 88.0 35 5 28.57 $ 100 $ 800,000 $ 104,000 $ 278,726 $ 9,757 

10 110.0 35 5 35.71 $ 100 $ 1,000,000 $ 130,000 $ 321,778 $ 9,011 

25 275.0 25 5 59.51 $ 100 $ 2,500,000 $ 325,000 $ 625,136 $ 10,504 

Scenario 2 - new turbine installation high cost estimate 

1 15.0 35 9 4.22 $ 150 $ 150,000 $ 19,500 $ 125,875 $ 29,827 

2 30.0 35 9 8.44 $ 150 $ 300,000 $ 39,000 $ 159,760 $ 18,928 

4 56.0 35 5 18.18 $ 150 $ 600,000 $ 78,000 $ 223,911 $ 12,317 

6 66.0 35 5 21.43 $ 150 $ 900,000 $ 117,000 $ 285,904 $ 13,344 

8 88.0 35 5 28.57 $ 150 $ 1,200,000 $ 156,000 $ 346,726 $ 12,137 

10 110.0 35 5 35.71 $ 150 $ 1,500,000 $ 195,000 $ 406,778 $ 11,392 

25 275.0 25 5 59.51 $ 150 $ 3,750,000 $ 487,500 $ 837,636 $ 14,075 

Scenario 3 - retrofit installation low cost estimate 

1 15.0 35 9 4.22 $ 200 $ 200,000 $ 26,000 $ 130,166 $ 30,844 

2 30.0 35 9 8.44 $ 200 $ 400,000 $ 52,000 $ 176,760 $ 20,943 

4 56.0 35 5 18.18 $ 200 $ 800,000 $ 104,000 $ 257,911 $ 14,187 

6 84.0 35 5 27.27 $ 200 $ 1,200,000 $ 156,000 $ 336,904 $ 12,355 

8 112.0 35 5 36.36 $ 200 $ 1,600,000 $ 208,000 $ 414,726 $ 11,407 

10 110.0 35 5 35.71 $ 200 $ 2,000,000 $ 260,000 $ 491,778 $ 13,772 

25 275.0 25 5 59.51 $ 200 $ 5,000,000 $ 650,000 $ 1,050,136 $ 17,645 

Scenario 4 - retrofit installation high cost estimate 

1 15.0 35 9 4.22 $ 450 $ 450,000 $ 58,500 $ 176,875 $ 41,912 

2 30.0 35 9 8.44 $ 450 $ 900,000 $ 117,000 $ 261,760 $ 31,013 

4 56.0 35 5 18.18 $ 450 $ 1,800,000 $ 234,000 $ 427,911 $ 23,539 

6 84.0 35 5 27.27 $ 450 $ 2,700,000 $ 351,000 $ 591,904 $ 21,707 

8 112.0 35 5 36.36 $ 450 $ 3,600,000 $ 468,000 $ 754,726 $ 20,758 

10 110.0 35 5 35.71 $ 450 $ 4,500,000 $ 585,000 $ 916,778 $ 25,674 

25 275.0 25 5 59.51 $ 450 $ 11,250,000 $ 1,462,500 $ 2,112,636 $ 35,498 

A

 NOx Limit for a turbine in compliance with Tier 2 limits of Rule 4703. 

B

 Proposed NOx limit from draft Rule 4703. 

C Emissions Reduction = Annual Current NOx Emissions - Annual Potential NOx Emissions 

D The estimated costs of the SCR control system were provided by industry. 

E

 Installed Control Equipment Cost = MW x SCR Cost/KW x 1000 

F

 Annualized Equipment Cost was calculated based on a 15-year life and 10% interest. The 

annual cost factor multiplier is 0.13. Annualized Equipment Cost = Installed Control Equipment 

Cost x Annual Cost Factor Multiplier 

G Total Annual Cost = Annualized Equipment Cost + Change in Annual O&M Cost 

H Cost Effectiveness = Total Annual Cost / NOx Emissions Reduction in Tons/Year 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix C: Cost Effectiveness Analysis September 20, 2007 

Final Staff Report with Appendices for 

Revised Proposed Amendments to Rule 4703

C-9