1 of 3 Memorandum

To: Clean Power Plan Docket

Subject: Comparison of building block costs to FGD costs

Date: July 2015

Introduction

In section V.A.4.d of the preamble, the EPA evaluates the cost reasonableness of the BSER determination of the final rule by comparing the estimated costs of reducing CO 2 through the building
blocks to two benchmarks. This memo summarizes the analysis supporting the evalua tion of the first benchmark, which comprises costs that some affected EGUs incur to reduce SO 2 through the installation and operation of wet or dry scrubbers.

In order to perform this cost comparison, the EPA converted the average cost of CO 2 removal ($/t on) through the building blocks and the average cost of reducing SO 2 through installation and operation of a
scrubber to the common metric of average cost per net megawatthour of electricity generated ($/MWh). The assumptions supporting these calculations are detailed below.

Building Block Costs

As the basis for the costs of reducing CO 2 through use of the individual building blocks, we use the average cost per ton of CO 2 removed computed for each individual building block as described in
secti ons V.C., V.D., and V.E. of the preamble and the GHG Mitigation Measures TSD. These costs are $23, $24, and $37 per ton of CO 2 removed for building blocks 1, 2, and 3, respectively.

In addition, as the basis for the cost of reducing CO 2 at coal

- fired ste am EGUs through the use of all three building blocks combined, we use a weighted average of the costs of the individual building blocks. We weight the costs of the individual building blocks by the total estimated cumulative CO 2 reductions
for each of thes e building blocks over the 2022

- 2030 period . Those estimates are 556 million short tons for building block 1, 2,516 million short tons for building block 2, and 2,195 million short tons for building block 3. 1 The weighted average is the sum of the produc ts of the average cost and reductions for each building block, divided by the sum of the reductions. This weighted average cost of the three building blocks is $30/ton.

CO 2 Control Costs

To represent a typical coal steam EGU, we assume an average heat rat e of 10,000 Btu/kWh. We also
assume a 36% reduction in CO 2 emissions from compliance with the uniform CPP emissions performance
rate for fossil steam units , which is consistent with lower ing the emissions rate of a typical unit from 2,039 lbs/MWh 2 to the 2030 emission performance rate of 1,305 lbs/MWh. At the weighted average cost for the three building blocks combined of $30/ton, the average cost of CO 2 control for this typical
coal steam EGU is about $11/MWh. See Table 1. At the individual bu ilding block costs of $23, $24, and

1 For building block 1, these cumulative reduction estimates are based on an annual average multiplied by 9 years (2022

- 2030). For building blocks 2 and 3, these cumulative reductions are a model

- projected estimate over this time period. For more detail, see the GHG Mitigation Measures TSD.

2 Assumes coal is EPRI ILL#6, C = 61%wt, HHV=10,982Btu/lb2 of 3 $37 per ton, the average cost of CO 2 control for this typical coal steam EGU is about $8, $ 9 , and $14 per MWh for building blocks 1, 2, and 3, respectively. See Table 1.

To represent a typical NGCC EGU, we assume a heat rate of 7,800 Btu/kWh. We assume a 15%
reduction in CO 2 emissions, which is consistent with lower ing the emissions rate of a typical unit from 909 lbs/MWh to the 2030 emission performance rate of 771 lbs/MWh. Since blocks 1 and 2 do not apply to NGCC u nits , we assume a conservatively high $37/ton (the average cost of building block 3 ) . At $37/ton, the average cost of CO 2 control for this typical NGCC unit is about $3/MWh. See Table 1.

SO 2 Control Costs

To estimate the cost of reducing SO 2 at a typical coal steam EGU by installing and operating a scrubber

, we assume the same 10,000 Btu/kWh heat rate as above and a 70% utilization rate . Additionally, we evaluate the costs of installing either a wet or dry scrubber over a range unit capacities ( 300 MW

– 700 MW). This range represents the range of unit sizes that have generally installed wet or dry scrubbers.
We also assume that a wet scrubber achieves a 96% SO 2 reduction, on average, and a dry scrubber
achieves a 92% SO 2 reduction, on average. The capital and operating costs that we assume over this range of capacities is summarized in the table below. Additionally, we annualize the capital costs using a 13% capital charge rate. We find that, for a typical coal steam EGU, the annualized costs of installing and operating a wet scrubber are approximately $14 to $18 per MWh and the annualized costs of installing and operating a dry scrubber are approximately $13 to $16 per MWh

. Capital, fixed O&M, and variable O&M cost inputs are documented in Cha pter 5 of the Documentation for EPA Base Case v.5.13 Using the Integrated Planning Model, which is available in the docket and also at: http://www.epa.gov/powersectormodeling/

.3 of 3 Table 1. CO 2 vs SO 2 Control Costs, $/MWh

Note: This table , with the underlying calculations

, is also available in the docket.