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# OAR Box 

# 1828
Prepped by Ollie Stewart



### Document

Number: 

# 323 ) IV-B-2 7
Docket Number: 

# A-83-2 7

Printed 11/12/200811:12:59AM Sheet 323 of 325P. 2 

# A-83-2 7

, CORPORATIO N 

### ^ IV-B-2 7 MEMORANDU M

DATE : Jul y

20 , 198 7 TO : Wal t Stevenson , EPA/SD B FROM : J . Thoma s Waddell , Radia nCorporatio n SUBJECT : Profitabilit y

Analysi s onThird-Part y Cogeneratio nProject s

Thi s memorandum

present s "th

e result s o f a profitabilit y analysi s conducte dt o examin e th e impac t o f a percen t SO - reductio nrequiremen t on third-party , coal-fire dcogeneratio nprojects . Th e projec t chose nfo r analysi s i s a 5 5 M

W cogeneratio nfacilit y

inMichigan . Desig nan d operatin g parameter s wer e supplie db y a third-part y

cogeneratio nspecialis t submittin g comment s onth e propose dne w sourc e performanc e standard s (NSPS ) whic hlimi t SO - fro m industria l stea

m generatin g units . A return-on-investmen t (ROI ) 

### analysi s wa s selecte dt o examin e profitability . Tw o cases , describe di n Tabl e 1 , wer e considered : 1 ) firin g low-sulfu r coa l t o mee t Stat e requirements , an

d 2 ) burnin g medium-sulfu r coa l whil e meetin g a 9 0 percen t SO - reductio nrequirement . Th e methodolog y

use di ncalculatin g cost s fo r th e steam generatin g units , fabri c filters , an d FG D system s i s presente dinth e SO - Cos t Report . Cost s fo r th e steam

generator/turbin e se t wer e scale dfo r correc t siz e fro m 3 cost s provide db

y Powe r System s Engineering . Fue l price s use di nthi s analysi s reflec t th e revise denerg y scenarios . Cost s fo r FG D system s 5 represen t "generic " FG D costs . Capita l an d operating-and-maintenanc e (O&M ) cost s wer e update dt o 198 5 dollar s usin g Chemica l Engineerin g (CE ) an d BL S produce r pric e indices , respectively . Revenue s fo r th e cogeneratio nplan t com e fro m sellin g steam

t o industria l user s an

d electricit y

t o anelectri c utility . Th e sellin g pric e fo r steam wa s estimate db

y calculatin g th e cos t incurre db y a nindustria l use r t o generat e a

nequivalen t amoun t o f proces s stea m itself . Th e tota l annualize dcosts , includin g capita l an d O& M charges , wer e calculate dusin g

Progres s Center/320 0 E

. Chape l Hil l Rd./Nelso n Hwy./P.O

. Bo x13000/Researc h Triangl e Park

. N.C

. 27709/(919)541-910 0P. 3

Cas e 2 : TABL E 1 . COGENERATIO N SYSTE M DESIGN AND OPERATINGPARAMETER S

Cas e 1 :
o Thre e 20 0 millio nBtu/hr , spreade r stoke r boilers .
o Eac hboile r equippe d wit ha fabri c filte r controllin g particulat e emission s t o 0.0 5 lb/millio nBtu .
o Lo w exces s ai r use d fo r NO control .
o On e 5 5 M

W stea m turbine/generato r (STG ) set .
o Syste m

operate s a t a capacit y facto r o f 0.85 .
o Burn s 0.7 5 percen t sulfu r coal .

Everythin g inCas e 1 included , excep t system burn s 1.8 8 percen t sulfu r coal . Eac hboile r equippe d wit ha flu e ga s desulfurizatio n(FGD ) system operatin g a t 9 2 percen t SO - remova l (t o accoun t fo r syste m variabilit y

i nmeetin g continuou s 9 0 percen t remova l requirement) .P. 4

U . S . EP A

cos t algorithm s (IBCOST) . Thes e cost s wer e the nuse dt o determin e steam

productio ncost s ona dollar s pe r millio nBt u($/MMBtu ) basis . Th e sellin g pric e wa s assume d t o b e 5 percen t les s tha nthi s productio ncost , resultin g ina steam pric e o f roughl y

$6.20/MMBtu . Electricit y

wa s price da t 2. 5 cent/kWh . Thi s i s base donavoide dcos t energ y credit s offere db

y electri c utilitie s i nMichigan . Result s o f th e analysi s ar e presente dinTabl e 2 . Th e cos t o f addin g FG D system s increase s capita l an dO& M cost s b

y 7. 5 an d12. 7 percent , respectively . Th e RO I whe nburnin g low-sulfu r coa l i s 14. 9 percent ; addin g FG D system s an

dburnin g medium-sulfu r coa l reduce s th e RO I b y 1. 3 percent . I t shoul db e note dtha t a capacit y credi t wa s no t considere di ncalculatin g revenues . Whil e receivin g fund s fo r installe dcapacit y woul dincreas e th e RO I value s fo r bot hCas e 1 an dCas e 2 , th e relativ e impac t o f 9 0 percen t S0 - reductio nwoul db e th e same , o r abou t 1. 3 percen t differenc e inROI .P. 5



### TABL E 2 . RESULT S OF COGENERATION COS T ANALYSIS 3



### Cas e 1 Cas e 2
Tota l Capita l Cost s ($1,000 ) 78,93 6 84,88 6

Tota l O& M

Cost s ($l,000/yr ) 21,21 0 23,90 7

Revenue s ($l,000/yr ) 32,86 0 32,86 0

Retur no nInvestmen t (percent ) 14. 9 13. 6

a

### Al l cost s in198 5 dollars . Base donpresen t valu e discounte dcas hflow an daccelerate d(ACRS ) depreciation .REFERENCE S

1 . Comment s o f Cogentrix , Inc. , t o U . S . Environmenta l Protectio nAgency . Docke t No . A-83-27 , NSP S fo r Industrial-Commercial-Institutional Stea m Generatin g Units . 2 . Laughlin , J . H. , e t al . (Radia nCorporation) . Industria l Boile r S0 - Cos t Report . Prepare d fo r U . S . Environmenta l Protectio nAgency , EPA-450/3-85-011 , Novembe r 1984 . 3 . Memorandu

m fro m Shumaker , J . an

d T . Waddel l (Radia nCorporation) , t o Porter , F . (EPA/SDB) , Apri l 29 , 1987 . Us e o f a Generi c Cos t Algorith m t o Represen t th e Cost s o f Industria l FG D Systems . 4 . Memorandu

m fro m Aul , E. , an

d B . Stackhous e (Radia nCorporation) , t o Byrne , D . (EPA/SDB) , Apri l 15 , 1987 . Impact s o f New Fue l Price s on Cost s an d Cos t Effectivenes s Value s fo r Industria l Coal - an d Oil-Fire d Mode l Steam

Generatin g Units . 5 . Energ v

Use r News , Octobe r 7 , 1985 . States ' Cogeneratio nRat e - Settin g Unde r PURPA , Par t 5 . 6 . Emissio nStandard s an d Engineerin g Division . Surve y o f Ne w Industria l Boile r Projects--1981-1984 . U.S . Environmenta l Protectio nAgency , EPA-450/3-87-006 , Apri l 1987 .