White Paper Prepared by the Northeast States for Coordinated Ai r Use Management

June 5, 2006



## High Electric Demand Day and Air Quality in the Northeast

I. Context of Air Quality Problem

On hot summer days, high electricity demand can dra matically increase ozone-forming air pollution from electric generation that is curr ently not incorporated into air quality models used for planning purposes. The emission pe aks on the hottest days most

conducive to ozone formation create an obstacle to continued progress in attaining and maintaining air quality improvements in the Ozone T ransport Region.

The seasonal nature of the NOx Budget Program in th e Ozone Transport Region is not effectively addressing the short-term daily and hou rly spikes in ozone-forming NOx emissions on days of high electric demand and high ozone formation. Peak electricity demand on the hottest days is growing two to three times faster than baseload demand, and the electric power plants that are used to meet increasing peak demand can be among the dirtiest power plants in the region. Furthermo re, electric system operators must also maintain a set amount of generation resources (call ed “operating reserve”) that are on standby and available above and beyond peak electri city demand in case a large electric generator or transmission line goes down when deman d is greatest. The increased use of existing relatively dirty resources to meet increas ing peak demand and the operating reserve above the growing peak demand adds to the c hallenge of limiting ozone-forming emissions from electricity generation on hot summer days.

With higher electricity demand also come higher ele ctricity prices. Generation sources responding to peak day demand can garner significan t economic rewards, while in some

states the costs of traditional emission controls o n these sources may be passed through to ratepayers, further adding to upward pressure on pe ak day prices. Therefore, addressing air quality concerns on peak demand days requires c onsideration and integration of energy and economic factors in conjunction with air quality and public health concerns. This brings the opportunity for a more expansive de finition of available resources on peak days that includes not only supply (generation ) but also demand (energy efficiency and conservation).

A. Ozone Ground-level ozone is a persistent public health pr oblem in the Northeast. Breathing ozone in the air damages lung tissue and may cause permanent lung damage. It reduces lung function, making it harder to breathe and caus ing shortness of breath. It aggravates existing asthmatic conditions, thus potentially tri ggering asthma attacks that send children and others with asthma to hospital emergen cy rooms. Ozone places at particular risk those with preexisting respiratory illnesses, such as emphysema and bronchitis, and it may reduce the body’s ability to fight off bacteria l infections in the respiratory system.2

Ground-level ozone also affects otherwise healthy c hildren and adults who are very active, either at work or at play, during times of high ozone levels. 1

The highest concentrations of ground level ozone, o r “smog,” in the Northeast are most often seen on the hottest days of the ozone season. When tracking trends in high ozone levels and hot summer days, it is clear that the No rtheast states have made significant progress in improving the region’s air quality over the past 30 years. The trend in Connecticut, for example, shows a large decrease in the number of 8-hour ozone exceedance days relative to the number of hot days ( ≥ 90o F) since 1975 (Figure 1).

Figure 1. Trend in annual number of 8-hour ozone exceedance days relat ive to number of days ≥ 90o F or higher in Connecticut from 1975 to 2005. Temperatures are at Bradley International Airport near Hartford. The figure shows a decreasing trend in exceedance days that level s off in more recent years (Figure from Connecticut Department of Environmental Protection).

Because upwind regions to the south and west of Con necticut strongly influence ozone levels in Connecticut, its ozone trend is a reflect ion of measures taken not only in Connecticut, but in other parts of the Ozone Transp ort Region and other upwind states as

well.

The decreasing trend in ozone is due to measures th at the states and federal government

have taken to reduce the emissions of the chemical precursors of ozone – nitrogen oxides (NOx) and volatile organic compounds (VOCs).

1 U.S. EPA, Ozone and your Health , EPA-452/F-99-003, September 1999 (available at http://www.airnow.gov/index.cfm?action=static.brochure). 8-Hour Ozone Standard Number of Exceedance Days vs. "Hot" Days in CT

0 10 20 30 40 50 60 70 80 901975197719791981198319851987198919911993199519971999200120032005# Days # Days > 8-Hr NAAQS

# Days>90 Deg (NWS)3

Despite this success, more recent years suggest the decreasing ozone trend has flattened and is no longer decreasing at a sufficient rate to meet timely attainment. While new control measures are on the books and on the way, m odeling of future ozone concentrations indicate that people living in large portions of the Ozone Transport Region, both inside and outside the Northeast Corri dor, will remain exposed to ozone

concentrations above the current health-based 8-hou r ozone national ambient air quality standard (NAAQS) of 0.08 ppm after 2009. A larger part of the region will be just below the 8-hour NAAQS, highlighting a potential challeng e in maintaining the 8-hour ozone NAAQS during possible successive hot summers (Figur e 2).

Color key for ozone concentration scale (ppb)

Figure 2. The map on the left presents color-shaded 8-hour ozone concentrations representative of design values in 2002 at individual ozone monitors (represented b y circles) in the Ozone Transport Region. The map on the right presents the modeled ozone design values in 2009. Red shading indicates monitors with ozone levels above 87 ppb, which is above the 8-hour ozon e NAAQS of 85 ppb (0.08 ppm). Orange shading represent monitors with modeled ozone levels from 82 to 87 ppb, which ranges from just below to above the 8-hour ozone NAAQS of 85 ppb. While the diff erence between the left and right maps indicates continued progress in reducing peak ozone concentrations, t he elliptical regions in the right side map highlight the areas of continued nonattainment and near no nattainment. These areas contain the major east coast population centers. Note that the 2009 predicted design value map includes the benefits of control measures which have been adopted and take affect after 2002 (ad apted from OTC modeling).

In light of the flattening trends in ozone and the modeled 2009 ozone levels, demonstrating attainment of the 8-hour ozone NAAQS in State Implementation Plans (SIPs) and maintaining the standard once attained w ill continue to be major challenges in the Ozone Transport Region. Addressing emissions f rom the electric generation sector

Washington, DC Baltimore Philadelphia NYC Hartford Boston Buffalo

Pittsburgh 2002 current design value 2009 predicted design valu e4

on high electric demand days will be a key componen t in meeting these challenges. Figure 3 illustrates the relationship of EGU NOx em issions, high electric demand, and high ozone days for the New Jersey/downstate New Yo rk/southern New England region. NOx emissions from power plants (or electric genera ting units – EGU) on high electric demand days increase significantly over their ozone season average, which typically are also days of high ozone. This large increase occur s within the confines of the NOx Budget Program in the Ozone Transport Region, sugge sting that the seasonal budget does not adequately limit NOx emissions on high electric demand days – the days that are also

often the most conducive to ozone formation in the region.

Figure 3. Plot of peak daily electricity demand versus daily NOx emis sions from EGUs. Blue squares indicate days of relatively low ozone having daily average EGU NOx emissions of 212.0 tons per day. Red diamonds indicate days of high ozone, and have daily average EGU NOx emissions of 371.4 tons per day. The figure indicates virtually all the days of highest EGU d aily NOx emissions correspond to days of high

ozone.

B. Other air quality goals and challenges States have additional air quality goals and challe nges beyond ozone. Meeting the current fine particulate matter NAAQS (PM2.5) as we ll as EPA’s proposed more stringent PM2.5 standard in the future is a key obj ective. Demonstrating reasonable progress through regional measures to improve visib ility in national parks and wilderness areas will be a long term task under the federal re gional haze rule.



### II. Analysis of High Electric Demand Day

A. Electric generation on peak summer days5

As a general matter, an EGU can be considered as fa lling within one of three types of generation depending on its operation characteristi cs. “Baseload” units operate to provide the minimum electricity demand, or “load,” of a system, thus run almost continuously and produce electricity at an essentia lly constant rate. “Load following units” typically run at lower levels during the nig ht, and then increase generation during the day to follow the electricity demand. “Peaking ” units typically operate less than 10 percent of the time, and are usually turned on o nly at times of peak demand, for example on the hottest hours of summer days when ai r conditioning demand is high. They may only run a few hours or days during the co urse of a year, and may not operate at all during cooler summers. There are regulatory definitions of peaking units that typically define them as EGUs having a capacity fac tor not exceeding 10 percent averaged over three consecutive years or ozone seas ons, with the capacity factor not exceeding 20 percent during any one of those years or ozone seasons (e.g., 40 CFR 72.2 (defining by year); 40 CFR 75.74(c)11 (defining by ozone season)).

Figure 4. Example of baseload, load following, and peaking units i n Connecticut based on average operating time percentage during the 2002-2005 ozone season s.

Figure 4 is an example of how units can be grouped according to their average operating time. Based on the operational characteristics of the three types of generation, it can be seen that the units that help increase daily electr icity generation during periods of peak electricity demand during the ozone season are the load following and peaking units. This is also illustrated in Figure 5, which is a pr ofile of hourly EGU NOx emissions broken down by the three generation types over the course of one week in Connecticut with high electricity demand, hot weather, and high ozone levels. During the week of August 11-17, 2002, peak generation in the state wa s largely provided by load following units, with a smaller portion provided by peaking u nits. It should be noted that the dropoff in hourly base load emissions starting on Tuesd ay, August 13, was largely due to the6

shut down of Bridgeport Harbor Unit #3 (net capacit y about 375 MW), which remained

out of service for the remainder of the week. This outage likely resulted in a slightly higher fraction of the peak demand being met with l oad following units during the outage period.

Figure 5. Example of hourly emissions profiles over the course of one week in August 2002 in Connecticut showing the increase in hourly emissions of load following and peaking generation units relative to baseload units. This was a week of high electricity demand, hot weather, and high ozone levels.

The types of fuels and units used as load following and peaking can differ across different power pool regions. In New England, NOx emissions attributable to coal remained fairly constant throughout the ozone seaso n of 2005, indicating the prevalent use of coal plants as baseload units. The major in crease in NOx emissions with increasing electricity demand on warmer summer days in 2005 came to a large extent from greater utilization of residual oil (Figure 6)

. Connecticut EGU's August 11-17, 2002

SUM of UNIT TYPES: NOx Emissions

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

Sunday Monday Tuesday Wednesday Thursday Friday Saturday S undayHourly NOx Emissions (Pounds) Base Load

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Peak Load7

Figure 6. Daily NOx emissions by fossil fuel type from New Eng land EGUs during the 2005 ozone season. Note that NOx emissions from coal EGUs stays relativ ely constant, indicating its use as baseload. The increase in NOx emissions above baseload occurs primarily fr om residual oil (data from U.S. EPA Clean Air Markets – Data and Maps (http://cfpub.epa.gov/gdm) ).

The number of EGUs in operation in New England duri ng the 2005 ozone season, however, did not vary as much as the changes in NOx emissions, indicating that the residual oil EGUs were load following units, i.e., running most of the time, but increasing generation, hence NOx emissions, as electricity dem and increased (Figure 7). These oil units tend to have higher NOx emission rates, sugge sting they are less controlled for NOx than units utilized more often (i.e., higher capaci ty factors).8

Figure 7. Daily NOx emissions and number of residual oil-burning EGUs operating during August 2005 in southern New England. The bar chart indicates that the numb er of residual oil-burning EGUs operating did not vary much during this period, but NOx emissions increased and decreased significantly with temperature-driven generation demand (data from U.S. EPA Clean Air Markets – Data and Maps (http://cfpub.epa.gov/gdm)).

In contrast to the New England region, the increase in EGU NOx emissions in the New Jersey/downstate New York region during warmer days of the 2005 ozone season was about evenly split between increased utilization of natural gas and diesel oil. NOx emissions from residual oil also increased, but not to the same degree as in the New England region. NOx emissions from coal remained f airly stable, once again indicating its use as baseload generation (Figure 8).# of Units Operating or NOx tons/day9

Figure 8. Daily NOx emissions by fossil fuel type from New Jer sey/downstate New York EGUs during the

2005 ozone season. NOx emissions from coal and residual oil EGUs stayed relatively constant, indicating their use mainly as baseload. The largest increase in NOx emiss ions occurred primarily from diesel oil and natural gas, as compared to residual oil in New England (see Figure 10) (data from U.S. EPA Clean Air Markets – Data and Maps (http://cfpub.epa.gov/gdm)).

Unlike residual oil EGU utilization in southern New England, the number of diesel and other oil-fired combustion turbines in operation in the New York portion of the New York City multi-county nonattainment area varied si gnificantly on a day-to-day basis during the 2005 ozone season, along with NOx emissi ons. This suggests that the increase in NOx emissions on peak summer days in this region comes to a significant degree from peaking units, primarily combustion units in this c ase, brought on line just to meet hourly peak electricity demand (Figure 9). Fuel Types Comprising the Daily NOx Emissions Sorted by NOx Mass from downstate NY and NJ EGUs

June 1, 2005 – September 15, 2005NOx Emissions from NJ/downstate NY EGUs (tons)10

Figure 9. Daily NOx emissions and number of diesel and other oil- fired combustion turbines operating during August 2005 in the New York portion of the N ew York City 8-hour ozone nonattainment area. The bar chart indicates that the number of turbines operating var ied greatly during this period, in contrast to southern New England (see Figure 7). NOx emissions also increased and decreased significantly with the operating units and temperature-driven generation demand. Th is suggests that the NOx increase in this particular region comes in part from diesel gas and other oil-fired turbines (see Figure 8) operating as peaking units to meet increased demand (data from U.S. EPA Clea n Air Markets – Data and Maps (http://cfpub.epa.gov/gdm)).



### III. The Air Quality Impact of Peak Day Electricity Generation

A. Daily and hourly NOx emissions As discussed in Section II, electric generation, an d its associated NOx emissions, is not constant throughout the day, weeks, and months in t he Ozone Transport Region. Generally, we see more demand for electricity in th e summer, and possibly winter, than in the spring and fall. Daily electrical demand is usually associated with the temperature, the warmer the day the more electrical demand. And hourly electrical demand is very temperature dependent with hourly demand constantly increasing and decreasing.

Figure 10 provides an illustration of the daily var iability in EGU NOx emissions in the New Jersey/downstate New York area. Average daily emissions during the 2002 ozone season were 286.5 tons/day, but NOx from electric g eneration more than doubled on peak days, reaching over 600 tons/day.# units operating or NOx tons/day11

Figure 10. Day-to-day variability in NOx emissions from electric g enerating units in New Jersey/downstate New York between June 1, 2002 and September 15, 2002. Average daily NOx emissions were 286.5 tons per day (TPD) (data from U.S. EPA Clean Air Markets – Data and Maps (http://cfpub.epa.gov/gdm)).

As with the New Jersey/downstate New York region, t here were also significant peak emission days in New England. NOx emissions from E GUs in New England averaged 134.6 tons/day from June 1, 2002 to September 15, 2 002, with NOx emissions almost doubling to over 250 tons per day on peak days (Fig ure 11). Daily NOx Emission from EGUs in NJ/downstate NY

June 1, 2002 – September 15, 2002NOx Emissions from EGUs in NJ/downstate NY (tons)12

Figure 11. Day-to-day variability in NOx emissions from electric g enerating units in New England between June 1, 2002 and September 15, 2002. Average daily NOx emissions were 134.6 tons per day (TPD) (data from U.S. EPA Clean Air Markets – Data and Maps (http://cfpub.epa.gov/gdm)).

Figure 12 provides a different illustration of temp erature and NOx emissions from EGUs. This figure orders the daily EGU NOx emissions in N ew England during the 2002 ozone season from lowest to highest NOx amounts, with the temperature trend indicated by the

line drawn above the bars. This illustrates that t he highest EGU NOx emissions tend to coincide with the warmest days in New England. A s imilar relationship is seen as well with EGU NOx emissions in the New Jersey/downstate New York region. Daily NOx Emission from EGUs in New England (June 1, 2002 - September 15, 2002)

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1 5 - S e pNOx Emissions from EGUs in New England (tons)13 Daily NOx Emission from EGUs in New England (June 1, 2002 - September 15, 2002)

0 50 100 150 200 250 300NOx Emissions from EGUs in New England (tons)

0 10 20 30 40 50 60 70 80 90 100Max. Temp at Bradley Airport (deg. F)

Figure 12. Daily EGU NOx emissions during the 2002 New England ozone season (see Figure 11) ordered by increasing NOx amounts. The line above the bars indicat es the daily maximum temperature at Bradley International Airport near Hartford, CT that corresponds t o each bar directly underneath a temperature point. In general, increasing temperature corresponds to in creasing EGU NOx emissions (data from U.S. EPA Clean Air Markets – Data and Maps (http://cfpub.epa.gov /gdm)).

The increased electricity demand on the hottest day s results in large part from increased residential air conditioning demand. In Connecticu t, for example, increased residential use of air conditioning on peak summer days account s for 25 percent of total electricity demand. Because peak electricity demand is growing at a rate faster than baseload demand due to increasing residential air conditioni ng, the potential exists for even greater variability in day-to-day EGU NOx emissions in the future.

B. Modeling the air quality impacts of peak day el ectricity generation The variability in NOx emissions from EGUs is signi ficant enough to affect predicted ozone concentrations in ozone modeling. Unfortunat ely, the ozone models currently do not capture this ‘real world’ variability. Ozone m odels contain temporal profiles that allocate annual NOx and VOC inventories to particul ar months, days and hours of a day. These profiles are often referred to as modeling ‘d efault’ profiles. For NOx point source emissions (e.g., EGUs) the modeling ‘default’ profi les do not accurately represent all types of electric generators, especially those that operate to meet peak electrical demand.

An example of this is the changing operational cond itions of older units previously

treated as baseload. In some locations there are o ld oil-fired units originally designed for baseload, but now only operate when called upon as standby power supplies. Their emission rates are based on operating at 90 percent load, but their current operational

Daily maximum temperature s14

status involves more start up and shutdown emission s while generating little power in standby mode.

In addition, the increased generation needs due to growth in peak demand as compared to the baseload can lead to smaller, more nimble distr ibuted generation sources located closer to the point of demand. These may not be ca ptured as EGUs in the models, further minimizing the modeled NOx emissions due to increas ed electricity generation.

Figure 13 illustrates how the regional ozone modeli ng for the Ozone Transport Region incorporates NOx emissions from the EGUs using stat e-specific ‘default’ profiles. The

EGU NOx emissions are allocated across the months a ccording to state-specific allocation factors, and then allocated over the day s of the week. NOx emissions are also allocated by hour, showing an increase and decrease in emissions over the day. The EGU NOx emissions vary somewhat on a monthly and daily basis during the ozone season, with Saturdays and Sundays somewhat lower than week days. This variation, however, is simplified in that each individual day of the week within a particular month has the same EGU NOx emissions. For example, while a Tuesday’s EGU NOx emissions may differ from a Wednesday’s, each Tuesday in the same month will have the same amount of EGU NOx emissions as every other Tuesday that month

.

2002 New Jersey-Specific Modeled EGU NOx Emissions Profile

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DayModeled variability of EGU NOx emissions (tons)

Figure 13. Example of a state-specific ‘default’ profile (New Jersey i n this case) for daily EGU NOx emissions that is input into the regional ozone model fo r the Ozone Transport Region. The New Jersey state-specific NOx tons are from MARAMA 2 and include NOx emissions from more electric generators

than included in the U.S. EPA Clean Air Markets database.

2 MARAMA (Mid-Atlantic Regional Air Management Association), 2002 MANE-VU Emissions Inventory Version 1 Summaries, http://www.marama.org/visibility/EmissionsInventory/NJ .xls (New Jersey).15

As illustrated in Figure 13, ozone modeling in the Ozone Transport Region incorporates EGU NOx emissions that do not vary to the same exte nt they vary in reality. (To see this, compare Figure 13 with Figure 10.)

The New Jersey Department of Environmental Protecti on (NJ DEP) has begun an effort to better characterize NOx temporal variations and their impact on regional ozone formation using hourly data found in EPA’s Clean Ai r Market Division’s (CAMD) database. In this effort, NJ DEP is using hourly d ata in the CAMD database to match all EGUs, whether they are considered to be baseload, l oad following, or peaking units. Five states in the Ozone Transport Region have reviewed these matched files and designated their high electric demand day (HEDD) EGUs. New Je rsey, Connecticut, and Maryland looked at units operating on high electric demand d ays for the 2002-2005 ozone seasons. New Jersey and Maryland designated HEDD EGUs as tho se whose annual average operating time is about 20 percent or lower. Conne cticut designated HEDD EGUs as those whose annual average operating time is about 50 percent or lower. Massachusetts designated their six highest residual oil-fired loa d following units as HEDD EGUs. New York designated HEDD EGUs as those defined by regul ation in 6NYCRR, Part 200, Subpart 227-2. Using the CAMD data, NJ DEP was abl e to group EGUs in the remaining states in the Ozone Transport Region as “ peaking” and “load following” versus “baseload” according to their relative contr ibutions to maximum hourly and annual NOx amounts from all point sources. EGUs th at contributed less than 2 percent to NOx on an annual basis, but greater than 1 percent of NOx on a maximum hourly basis, were considered peaking or load following units. Th e NOx emissions from these peaking and load following EGUs were then controlled to 0.1 lb/mmBtu in the ozone model during the course of a modeled ozone episode. The r esults of this rough run showed a decrease of greater than 7 ppb in maximum ozone dur ing the course of the modeled episode attributable to these units. This is a sig nificant impact, and indicates an important opportunity for future efforts to reduce ozone forming NOx emissions from EGUs. Note that the NJ DEP is continuing to refine its model run as it receives matched hourly data from the states in the Ozone Transport Region.



### IV. Identifying NOx Reduction Strategies and Challe nges for Peak Ozone Days

A. Overview The units now used to meet peak electricity demand on the Northeast’s hottest days often do not have stringent emission controls because the y operate relatively infrequently (typically less than 10 percent of the year). Whil e their use is infrequent, it is often concentrated on the warmest days of the ozone seaso n, the worst days to be adding

additional NOx emissions.

Analysis of the units in operation during peak dema nd times in New England and the New Jersey/downstate New York region indicate that a relative few units may contribute the most to the increase in daily NOx emissions. T his indicates that a handful of load following and peaking units could be the prime targ ets for NOx reduction strategies on16

the worst ozone days in at least parts of the Ozone Transport Region. Care would need to be taken, however, that unit-specific measures do n ot lead to shifting generation to other dirty EGUs currently operating at lower capacity in the region, or that “leakage” occurs where dirtier generation shifts outside and upwind of the Ozone Transport Region.

Based on the above discussion, it appears that the ozone season NOx Budget Program in the Ozone Transport Region, while being met, does n ot provide sufficient constraints to achieve necessary NOx reductions on peak ozone summ er days. Electric generators are able to meet their seasonal budget allocations thro ugh NOx emission controls on high utilization units without having to implement signi ficant controls on other units.

Because peak ozone formation and peak electricity d emand often occur at the same time in the Ozone Transport Region, additional efforts t o reduce NOx emissions from electric generators on peak demand days must be cognizant of electric system needs. By the same token, electricity generation choices on peak demand days during the summer should be cognizant of public health and air qualit y needs. Therefore, in considering options to reduce NOx emissions from electric gener ators on peak demand days, planners should consider strategies that go beyond tradition al smokestack controls and include consideration of other less traditional options. Th ese can include output-based NOx allocations, surrendering of or limiting allowances on hot summer days, energy efficiency and conservation measures, and other approaches.

B. Technology-based NOx control measures Peaking units operating 500 hours or less during th e year often do not have NOx controls because of their limited use and relatively low sea sonal NOx emissions, even though they can have high hourly NOx emission rates and contrib ute significantly to total daily EGU NOx emissions on the peak days they operate. Their NOx emissions can have far more impact on ozone levels than their overall seasonal emissions would suggest because the few days that they do operate typically are the hot test days most conducive to ozone

formation.

Traditional technology-based control measures for E GUs will depend on the type of EGU under consideration. As the previous discussion po ints out, the types of fuels and units (peaking or load following) contributing the most t o peak daily NOx emissions in different power pools can differ. In New Jersey, f or example, high-emitting combustion turbines (“high emitting” means having a NOx emissi on rate greater than 0.15 lb/mmBtu) are important NOx emitters on hot summer days. In southern New England, it can be load following units burning residual oil.

The differences in which fossil fuel units power pr oducers rely on during peak demand days in New England and the New Jersey/downstate Ne w York areas suggest the need for different control technology options, which may app ly as well across the greater Ozone Transport Region. Note that there is a need for ad ditional analysis of trends in fuel use and EGU utilization on a daily basis during peak de mand days in other parts of the Ozone Transport Region.17

In the case of combustion turbines, the generating capacity varies with size, ranging from about 1 MW up to several hundred MW in generation c apacity. Aeroderivative turbines are at the lower end in terms of size, with the lar gest aeroderivative turbines approaching 40 to 50 MW in size with simple cycle efficiencies approaching 45 percent. Aeroderivative turbines are adapted from aircraft d esigns, and can be thought of as airplane engines without the airplane. Larger simp le cycle gas turbines used exclusively for stationary power generation can have generation capacities of several hundred megawatts and operate at thermal efficiencies appro aching 40 percent. These are generally cheaper, more rugged, and can operate lon ger between overhauls than aeroderivative turbines. Turbine combustors operat e at very high temperatures, so turbines without emissions controls can produce hig h levels of NOx. 3

Figure 14. Illustrative view of simple cycle combustion turbine used to generate electricity.

A snapshot of one August day during 2002 indicated that high emitting combustion turbines in New Jersey contributed over 50 percent of the state’s total EGU NOx emissions beginning around 3 p.m. in the afternoon, then decreased to only 15 percent by 8 p.m. that evening. Most of these sources operati ng as peaking units in New Jersey do not have any NOx controls.

Consistent with the specific example of New Jersey, the total NOx emissions from EGU combustion turbines across the Ozone Transport Regi on increased significantly on high ozone days in 2005 relative to their seasonal avera ge. During the days of July 26-27, August 4, and August 12, 2005, which all saw region al exceedances of the 8-hour ozone standard in the Northeast, the aggregated average N Ox emissions rate from combustion turbines across the region increased over their sea sonal average, indicating increased electricity generation from dirtier combustion turb ines during these polluted days (Table 1).

3 Gas Turbines, Energy Solutions Center, at http://www.energysolutionscenter.org/distgen/AppGuide/Ch apters/Chap4/4-3_Gas_Turbines.htm (accessed April 24, 2006).18 *Summarizes data from 477 combustion turbines in OT R states reporting hourly emissions to EPA in 2005 under the NOx Budget Program or Acid Rain Program.

Table 1. Table of aggregated daily average NOx emissions and emissions rates from combustion turbines in the Ozone Transport Region states. The seasonal average NOx rate from these sources is 0.155 lbs/mmBtu. The average NOx emissions rate increased to above 0.20 lbs /mmBtu on the four indicated days in 2005, which were all high ozone days in the Northeast. By compari son, the seasonal average NOx emissions rate from all EGUs in the Ozone Transport Region states durin g the 2005 ozone season was 0.164 lbs/mmBtu (average of 1,104 units) (data from U.S. EPA Clean Air Mar kets – Data and Maps (http://cfpub.epa.gov/gdm)).

The major share of NOx emissions from high emitting combustion turbines during the hottest part of the day coupled with the lack of ex isting NOx controls create a significant opportunity for NOx reductions at opportune times r elative to ozone episodes in the Northeast. Control options include water injection and replacement of existing aeroderivative turbines with newer Dry-Lo NOx-based simple cycle turbines.

Initial analysis estimates the cost of retrofitting water injection technology on combustion turbines reduces NOx by about 55 percent at a cost of about $75/MWh, or about $37,000/MW for peak turbines operating less than 50 0 hours per year. By comparison, the market price of peak electricity in New Jersey is over $700/MWh. Similarly, a recent
New York Times article stated that in 2003, New Yor k City received from the local power authority $40 for each kilowatt of demand the city removed from the electricity grid during times of peak electricity demand ($40/k W is equivalent to $40,000/MW). 4

4 Anthony DePalma, NY Times, “Relieving the Power Grid, Dirt ying the Air,” April 8, 2006. This article also reported that New York City was disconnecting facilit ies from the grid when requested during peak demand days by turning on their emergency backup diesel generator s, which are typically higher polluting, thus contributing to greater air pollution on peak summer d ays. Daily NOx Emissions in 2005 from Combustion Turbines * in OTR States

354 365 418 372 477 Number of

Units
Operating

0.207 1,756,262 181.9 Wednesday,
August 4 0.155 Total: 94,718,950
Daily ave: 619,078 Total: 7,363.3
Daily ave: 48.1 May 1 –
Sept. 30

0.241 2,155,401 260.2 Wednesday,
July 27

185.0 220.6 Total NOx Emissions (tons)

0.213 1,736,021 Friday,
August 12 0.223 1,979,451 Tuesday,
July 26 Average

Emissions Rate (lbs/mmBtu) Total Heat Input
(mmBtu’s) Date

354

365 418 372 477 Number of

Units
Operating

0.207 1,756,262 181.9 Wednesday,
August 4 0.155 Total: 94,718,950
Daily ave: 619,078 Total: 7,363.3
Daily ave: 48.1 May 1 –
Sept. 30

0.241 2,155,401 260.2 Wednesday,
July 27

185.0 220.6 Total NOx Emissions (tons)

0.213 1,736,021 Friday,
August 12 0.223 1,979,451 Tuesday,
July 26 Average

Emissions Rate (lbs/mmBtu) Total Heat Input
(mmBtu’s) Date19

Therefore, the costs of this technology in relation to the current market price at peak demand make this a potentially attractive short ter m option.

Over the long term, complete replacement of existin g aeroderivative turbines to newer Dry-Lo NOx-based simple cycle turbines hold the pro mise of reducing NOx emissions by over 90 percent. This could be done at a cost of $ 500,000 to $800,000 per MW, and represents complete replacement of the turbine, rat her than an add-on control.

C. NOx allowance options It is apparent that the seasonal NOx Budget Program in the Ozone Transport Region does not create sufficient incentives through allowance banking and trading to reduce NOx emissions effectively on hot summer days when ozone is often at its highest. Furthermore, while the NOx Budget Program originall y included units as low as 15 MW, the Clean Air Interstate Rule (CAIR) includes only units down to 25 MW. Therefore, the units between 15-25 MW will no longer be part of th e NOx Budget Program when CAIR replaces it after 2008. This represents a further erosion of the NOx Budget Program’s ability to reduce NOx emissions from smaller, poten tially dirtier EGUs on high electric demand days. Below are possible options that could improve the effectiveness of the trading programs in achieving NOx reductions from E GUs on hot summer days.

1. Increased allowance retirement rate Options within the existing budget program could in clude requiring more NOx allowances relative to tons emitted for peaking uni ts. Connecticut, for example, has implemented a retirement requirement of seven discr ete emission reduction credits or allowances per ton of NOx emitted from peaking EGUs that cannot meet their allowable

24-hour NOx emission rate and are in Connecticut’s NOx trading program. This, however, may not provide sufficient incentive to re duce emissions on peak summer days, so that a higher retirement ratio could be needed.

2. Reallocation of allowances There are also options to encourage greater utiliza tion of the cleanest units during peak hot summer days. With higher natural gas prices, s ome of the cleanest gas turbines in the Northeast do not operate as much during peak demand days, while other dirtier, lower fuel cost plants (e.g., residual oil and diesel) ra mp up generation to meet demand. To address this, the allocation of allowances could be distributed according to electric generation output, rather than the traditional fuel heat input method. 5 This would provide an incentive to run cleaner plants more during peak demand periods. A relatively greater share of allowances could also be given to newer pl ants, presuming these are likely the

cleanest in the EGU fleet.

3. Limiting access to allowances if performance s tandard exceeded Another strategy would be not allowing units to acq uire allowances to accommodate increased NOx emissions on hot summer days if their emissions rates exceeded a unit-

5 Operators of some cleaner power plants may also have permit con ditions restricting the number of hours the units may be operated. This may have to be addressed sep arately as it wouldn’t necessarily be resolved through an output-based reallocation of allowances.20

specific allowable performance standard. This coul d be done by establishing hourly emission performance standards for every unit in op eration on hot summer days without requiring any specific control technology. However , as with the increased allowance retirement rate option above, this strategy may not create a sufficient price incentive to

reduce emissions.

D. Other considerations for air quality and electr ic system planning There are additional considerations existing at the interface of air quality and electric system planning needs that arise because different planning authorities have different goals (i.e., improving air quality versus ensuring electric system reliability). The independent system operators (ISOs) who are respons ible for managing the regional electric power systems are engaged in long-term pla nning processes to secure resources and increase grid stability for the period after 20 08. These planning processes intersect with those being convened now by air quality regula tors for ozone and PM2.5 SIPs. In response to the Federal Energy Regulatory Commissio n (FERC), the region's ISOs are evaluating their existing resource and operating re serve requirements. Demand growth, especially driven by peak electricity demand growth , has resulted in the ISOs recommending that additional resources be developed to meet peak demand and to increase the amount of operating reserve (i.e., the amount of capability held in reserve above and beyond peak demand). These last two compo nents feed off each other, akin to a “positive feedback loop” pushing development of n ew electric system resources.

The evolving electric system may exacerbate existin g and potential regional air quality impacts. First, peak demand in general is increasi ng at a rate more rapid than overall base demand. Second, FERC has recently increased t he required operating reserves that the ISOs will need to maintain and plan for in the future. The combined effect significantly increases the amount of resources tha t will be required by the ISO to be available to provide these operating reserves in th e future. In real terms, if in 2005 an ISO is required to maintain a 15 percent operating reserve (e.g., capability to replace a large unit out of service or loss of transmission l ine), the capacity needed might be on the order of 1,500 MW that must be available to provide service within 10-30 minutes of being called. With peak load growth and FERC-driven increases in operating reserve requirements, the amount of resources needed to pro vide service within 10-30 minutes after 2005 could increase to 2,000 MW or more, and these increased resources must be included in ISO planning.

A real world example of the pressure to increase op erating reserves is the construction of

a new 345 kilovolt transmission line into southwest ern Connecticut. System reliability planning requires the availability of operating res erves within 10-30 minutes to quickly replace the new line if it is lost, but the existin g contingency measures are not sufficient to make up the entire load available with the new l ine. Therefore, the new transmission line will require a significant increase in the num ber of “quick start” electric system resources needed as a contingency measure if the ne w line fails during operation.

Several additional factors are also in play; the de finition is broad of a resource, capacity, load, and units being available to provide service within 10-30 minutes. While ISO and21

even some air quality regulators have often interpr eted these terms to relate to actual generating units, this narrow view may simply resul t in continued short-term solutions that rely on inefficient fossil-fueled generation. Energy efficiency, conservation, demand response, and distributed resources can and should be accommodated and integrated into long-term capacity and resource planning.

As an example, ISO-NE, the ISO for New England, has commenced planning to initiate an auction for long-term resources beginning in 200 8. Air regulators need to participate in these planning processes and to assure that not only do these ISO decisions not produce further harm, but to recognize that this is the moment to assure that the ISO decisions actually improve air quality. Simultaneo usly, air regulators are undertaking processes to plan for the attainment and maintenanc e of the ozone and PM2.5 standards.

Measures to reduce the air emissions from EGU and s maller units are part of the air planning processes, which also extend out several y ears. Decisions made or not considered by air regulators could affect energy ma rkets and result in higher costs, which will be borne by someone. ISOs and public utility c ommissions (PUCs) therefore need to be engaged in the air planning processes.

At first glance, the PUC and ISO worlds appear to b e at least as complicated, or even more so, than those of the air regulators. Understa nding PUC and ISO processes, decision making, pressure points, and other key milestones i s critically important to assure that air quality concerns are both heard and factored into r elevant decisions. Participating at the start also helps to mitigate the potential for stat e environmental agencies arriving in the middle when specific generating facilities are bein g permitted.

Energy efficiency and demand side measures can be l ess expensive than existing generation and can reduce federally mandated conges tion charges that would otherwise go towards building new generation. A process that values all resources by including energy efficiency and demand side measures (prefera bly valuing them higher than the supply side) will facilitate solutions that avoid c ontinued reliance on building more transmission lines or building more generators. Thi s in turn will reduce the need to operate inefficient fossil-fueled generation on pea k days and help to achieve our air quality objectives.

Other factors also contribute to the need for integ rating air quality and electricity planning processes. Several Northeast and Mid-Atlan tic states have launched the Regional Greenhouse Gas Initiative (RGGI). While ca rbon constraints are not within the OTC’s purview, RGGI provides a vehicle to help the overall region, including non-RGGI participating states, achieve co-benefits to air qu ality, public health and energy security, all of which fit squarely within OTC’s charge. The RGGI provision to require states to auction at least 25 percent of their carbon allowan ces for public benefit purposes can create increased investments in energy efficiency, renewable energy, and improved technology.

To address air quality and electric system planning needs, the market signals sent by electricity rate structures could be adjusted to pr ovide incentives for operating the22

cleanest plants more on peak demand days. Higher v alues could be set for electricity generated by cleaner units, while lower values plac ed on electricity from dirtier EGUs. The overall total payments for electricity could be kept the same, but payments within this amount could be redistributed so that higher i ndividual payments would go to the cleaner units, while lower payments would go to the dirtier ones. Consumers, therefore,

would not see a difference in their bills.



### V. Summary

While there has been significant success in reducin g the number of ozone exceedances in the OTR over the past two decades, current trends i ndicate stagnation in the rate of progress. In addition, ozone modeling predicts tha t many of the most heavily populated regions of the OTR will not attain the 8-hour ozone NAAQS by 2009, and many more areas will be just under the NAAQS, raising concern s about maintaining it.

The NOx Budget Program has contributed to the impro ving air quality in the OTR, but it is increasingly evident that the daily variability in NOx emissions from electric generation is not fully addressed through the progr am. Peak NOx emissions from electric generation on the hottest days in the Northeast can be more than double the seasonal average, and these often occur on the days that are most conducive for ozone formation. The types of units contributing the most to the inc rease in NOx emissions typically do not operate much over the course of the season, and ten d to be dirtier than generation needed

to meet baseload demand.

The NOx emission estimates used in ozone modeling d o not capture the full range of variability in NOx emissions from electric generati on. Therefore, the models may not adequately assess the ozone impacts of electric gen eration during periods of peak

demand.

Strategies available to reduce NOx emissions from e lectric generation on the hottest days include traditional control technologies and adjust ments within the NOx Budget Program. Reducing electricity demand is also an important ar ea for achieving reductions. Energy efficiency and conservation should be included amon g the resources for consideration as part of the “capacity” potential as there are multi ple opportunities yet to be exploited. Identifying and implementing these go beyond the tr aditional regulatory arena of state environmental agencies, and will involve the PUCs, ISOs, and other stakeholders.