SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis September 17, 20 09

C-1 Final Staff Report with Appendices for Rule 4695 

## APPENDIX C

COST EFFECTIVENESS ANALYSIS

FOR RULE 4695

September 17, 2009SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis September 17, 20 09

C-2 Final Staff Report with Appendices for Rule 4695 

### APPENDIX C Cost Effectiveness Analysis

I. INTRODUCTION

The California Health and Safety Code (CH&SC) 40920 .6(a) requires the San Joaquin Valley Unified Air Pollution Control District to co nduct both an "absolute" cost effectiveness analysis and an “incremental” cost ef fectiveness analysis of available emission control options prior to adopting each Bes t Available Retrofit Control Technology (BARCT) rule. The purpose of conducting a cost effectiveness analysis is to evaluate the economic reasonableness of the poll ution control measure or rule as it applies to operators in the San Joaquin Valley Air Basin. The analysis also serves as a guideline in developing the control requirements of a rule.

II. SUMMARY AND CONCLUSION

Wine Aging

An emissions capture and control system consisting of a Permanent Total Enclosure (EPA Method 204) and an emissions control device (r egenerative thermal oxidizer) was found to offer a cost effectiveness of $26,700 per ton for wine aging operations with uncontrolled Potential to Emit of 30 tons-ethanol p er year or more. Since thermal oxidation offers a VOC destruction efficiency (98%) which is greater than that of the other available control technology options, an incr emental cost effectiveness analysis was not applicable.

Brandy Aging

An emissions capture and control system consisting of a Permanent Total Enclosure (EPA Method 204) and an emissions control device (r egenerative thermal oxidizer) was found to offer a cost effectiveness of $24,600 per ton for brandy aging operations with uncontrolled Potential to Emit of 4 tons-ethanol pe r year or more. Since thermal oxidation offers a VOC destruction efficiency (98%) which is greater than that of the other available control technology options, an incr emental cost effectiveness analysis was not applicable.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis September 17, 20 09

C-3 Final Staff Report with Appendices for Rule 4695 III. COST EFFECTIVENESS ANALYSIS

Introduction

District staff used available technical and cost in formation contained in technical reports, EPA’s Air Pollution Control Cost Manual, District p ermit files for existing brandy aging operations and information supplied by equipment ma nufacturers and the wine and brandy aging industry to conduct a cost effectivene ss analysis of the proposed requirements of Rule 4695. A previous review of the available VOC control tech nologies has indicated that the following would be potentially applicable to the co ntrol of ethanol emissions from wine and brandy aging operations: 1. Thermal Oxidation (conversion of the VOC to CO 2 ) – 98% Control Efficiency (CE) 2. Catalytic Oxidation (conversion of the VOC to CO 2 ) – 95% Control Efficiency (CE) 2. Absorption (“scrubbers”, which transfer the VOC in air emissions to a liquid waste stream) – 90% CE 3. Adsorption (often using activated carbon, which transfers the VOC in the air onto a solid substrate) – 95% CE 4. Condensation (conversion of the VOC gases into l iquids) – 90% CE 5. Biological control systems (e.g., bio-filters or bio-scrubbers) – 90% CE While any of the above technologies could potential ly be applied for control of VOC emissions from wine and brandy aging facilities, th is cost effectiveness analysis will be based only on the use of regenerative thermal oxida tion (RTO) technology due to:

• All existing brandy aging facilities in the San Joa quin Valley which have been modified to install controls have used RTO technolo gy. As of the date of this analysis, six brandy aging warehouses in the Distri ct, which represent in excess of 95% of the brandy aging capacity in the San Joaquin Valley, have been retrofit with RTO-based VOC controls.

• The wine and brandy aging industry in the San Joaqu in Valley has indicated a preference for RTO technology for both wine and bra ndy aging operations and all cost information which has been supplied by the ind ustry to support this analysis is based on use of an RTO.

• Thermal and catalytic oxidation, condensation, and biological control were previously found to offer similar cost effectivenes s in this application while absorption and adsorption were found to be signific antly more expensive due to operating costs associated with either waste water disposal or regeneration of spent activated carbon. In general, it has been fou nd that the cost effectiveness analysis is relatively insensitive with respect to selection of the control device largely due to the significant costs associated wit h the PTE, ducting, induced draftSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis September 17, 20 09

C-4 Final Staff Report with Appendices for Rule 4695 fan, instrumentation and other scope items which ar e independent of the control technology selection. No control technology was fo und to offer better cost effectiveness than RTO technology largely due to it s low operating cost (high thermal efficiency). Therefore, the evaluation can be based on RTO technology without a loss of generality.

• An RTO provides the highest thermal efficiency and lowest collateral emissions of NO x and greenhouse gases when compared to other types of thermal oxidation systems. In addition, all potential control options listed a bove are classified as capture and control systems and therefore all share a common requiremen t for a capture system consisting of an enclosure for the barrel aging operation, duc ting and an induced draft fan to deliver the captured emissions from the enclosure t o the control device. Based on the existing brandy storage operations currently operat ing within the District, an enclosure that meets the criteria for a Permanent Total Enclo sure (PTE), pursuant to U.S. EPA Method 204, is considered to be an Achieved-in-Prac tice capture system for wine and brandy aging. By definition the capture efficienc y for a PTE is considered to be 100%. However, since wine and brandy aging operations (an d their emissions) are a continuous 24 hour/day operation throughout the yea r, it would be difficult and expensive to continuously maintain the warehouse in “PTE” status due to on-going requirements to transport product into and out of t he warehouse and due to requirements for maintenance during which the wareh ouse must be opened or the control device must be shut down. During such perio ds, uncontrolled emissions are delivered to the atmosphere in the absence of expen sive air lock systems and redundant control devices. As mentioned above, all existing brandy aging facil ities in the District utilize an RTO for the control device. Additionally, based upon exist ing brandy aging operations currently permitted in the SJV, the District has determined t hat a PTE in this application can achieve an on-line availability of 95%, i.e., acces s and maintenance requirements will not exceed 5% of the total operating time for the w arehouse. Annual downtime for control device maintenance is potentially 10 days p er year during which time the emissions are also uncontrolled. Overall capture a nd control efficiency (CCE) is thus calculated as: CCE = CE x (days on-line per year) ÷ (total days pe r year) CCE = CE x (365 - 10 - 5% x (365 - 10)) ÷ 365 = CE x 92% Since this analysis will only consider thermal oxid ation, CE = 98%. Therefore,

CCE = 98% x 92% = 90.2%SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis September 17, 20 09

C-5 Final Staff Report with Appendices for Rule 4695 Basis and Assumptions

The following are assumptions used for the cost eff ectiveness analysis:

1. Existing wine and brandy aging operations are as sumed to be conducted in 59 and 50 gallon wooden barrels respectively, stored in de dicated warehouses. The warehouse construction typically features concrete tilt-up walls with insulated woodframe roof covered with composition roofing. The w arehouse space is commonly conditioned with refrigerated air conditioning and humidification to minimize evaporative loss during the aging process.

2. Wine loss from barrel storage is 1.4% per year f or wine aging warehouses with conditioned storage space based on data provided by industry. Average ethanol content is assumed to be 14 vol% yielding an emissi on factor of 0.764 lb-VOC per 59 gallon barrel per year.

3. The emission factor for brandy aging is 9.93 lb- VOC per barrel per year based on an average loss of 3 proof gallons per year per 50 gal lon barrel for permitted facilities in the SJV and 3.31 lb-ethanol per proof gallon.

4. The Total Capital Investment (TCI) for installat ion of controls on wine or brandy aging operations is based on the following scope:

• Modify an existing warehouse to convert it to a PT E for wine or brandy aging.

• Install a control device equipment package consist ing of the control device, a variable speed controlled induced draft fan, and st ack with associated interconnecting ducting, controls and instrumentati on.

• Install ducting as required for collection of emis sions and connection of the PTE to the control device package.

5. Warehouse size in square feet, as a function of the number of barrels stored, was determined based on the typical existing warehouse floor space versus barrel capacity for brandy aging operations currently perm itted by the District. Based on typical industry practice, it was assumed that wine barrels are stored in metal racks in horizontal position and stacked up to 6 barrels high. For brandy, the barrels are palletized and stacked vertically up to six barrels high. A wine aging warehouse with an uncontrolled Potential to Emit of 30 tons per ye ar was determined to consist of a 150,800 square feet warehouse space housing 78,493 barrels (59 gallons each). A brandy aging warehouse with an uncontrolled Potenti al to Emit of 4 tons per year was determined to consist of a 2,940 square feet wa rehouse space housing 806 barrels (50 gallons each).

6. Determination of the required air flow capacity per square foot of warehouse space (for estimation of electricity and fuel consumption ) was made based on rated air flowSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis September 17, 20 09

C-6 Final Staff Report with Appendices for Rule 4695 capacities of existing brandy aging facilities curr ently permitted by the District. Since the air rate is primarily set by the ability to sea l the existing structure to minimize the air flow, the rated capacities as determined from t he brandy operations are assumed to be applicable to wine aging as well. Using typi cal values, rated air flow for a 150,800 ft 2 warehouse was estimated at 9,950 scfm (66 scfm/100 0 sq ft). Rated air flow for a 2,940 ft 2 warehouse was estimated at 280 scfm (95 scfm/1000 sq ft).

5. The actual detailed scope and the associated act ual Total Capital Investment which was required for a previous conversion of two large existing brandy aging warehouses to PTE’s and the installation of RTO-bas ed controls on these warehouses was provided to the District by the Wine Institute as confidential information. District staff applied the “six tenth s factor rule” (a commonly used estimating technique) to the industry supplied cost data to estimate the Total Capital Investment required for the specific size of operat ions being evaluated. Per the “sixtenths-factor rule”, if a new piece of equipment is similar to one of another capacity for which cost data are available, the cost of the new unit with X times the capacity of the first is approximately (X) 0.6 times the cost of the initial unit:

Cost of equip. A = cost of equip. B 

## ( (cap. of equip. A)/ (cap. of equip. B) 

## ) 0.6

Applying this equation to the two cases in this ana lysis yields:

TCI (150,800 ft 2 ) = $2,469,400 x (150,800 ft 2 /155,600 ft 2 ) 0.6 = $2,423,400

TCI (2,940 ft 2 ) = $2,469,400 x (150,800 ft 2 /2,940 ft 2 ) 0.6 = $228,200

6. Annual Cost was estimated in accordance with the cost estimation template provided in the EPA Control Cost Manual, Table 2.10 with the following exceptions:

• Unit costs given in Table 2.10 for labor were esca lated to 2009 at a rate of 3% per year.

• Annual maintenance cost was estimated at 3% of TCI based on typical ranges given by Peters & Timmerhaus 1

. 7. The Capital Recovery Factor is 0.163 based on 10 -year amortization at 10% annual interest rate.

8. Electricity cost was calculated for the energy c onsumption by the induced draft fan, based on the rated flow of the RTO, a pressure diff erential of 10 “WC, fan efficiency of 65% and electric motor efficiency of 90%. A un it price of $0.12 per kWh was applied based on published average rates for Califo rnia.

1 Peters, Max and Klaus Timmerhaus, Plant Design and Economics for Chemical Engineers, McGraw-Hill, New York, 1968 , p. 132.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis September 17, 20 09

C-7 Final Staff Report with Appendices for Rule 4695 9. Natural gas requirements were estimated based o n the following:

• The RTO operates at 1,400 o F

• Thermal efficiency is 95%

• Ethanol is assumed to provide 50% of the thermal r equirements for brandy operation and 8% is assumed for wine operations.

• Natural gas is priced at $8.00/MMBtu based on the average published NYMEX Henry-Hub price for 2008.

Cost Effectiveness Analysis

Table 1 presents the evaluated Total Capital Invest ment (TCI), Annual Cost and the Cost Effectiveness each for the wine and brandy ope rations. As shown, a cost effectiveness of $26,700 per ton is applicable to t he installation of VOC controls on a wine aging warehouse with an uncontrolled Potential to Emit of 30 tons per year. A cost effectiveness of $24,600 per ton is applicable to t he installation of VOC controls on a brandy aging warehouse with an uncontrolled Potenti al to Emit of 4 tons per year.Table 1

C-8 Final Staff Report with Appendices for Rule 4695 

### Cost Effectiveness for Wine and Brandy Aging Wareho uses

Case Wine Aging Warehouse Brandy Aging Warehouse

Uncontrolled PE, tons per year 30.0 4

Warehouse Size ft2 150,800 2,940 Barrel Aging Capacity (bbls) 78,493 806

Total Capital Investment (TCI) $2,423,400 228200

Direct Annual Costs Operating Labor (0.5 hr/shift @

$28.35/hr)) $15,500 $15,500

Supervision @ 15% $2,300 $2,300 Operating Materials @ 15% of maintenance $10,900 $1,000

Maintenance @ 3% of TCI $72,700 $6,800

Utilities Natural Gas $48,700 $700 Electricity $21,000 $600 Total Direct Cost (TDC) $171,100 $26,900
Indirect Annual Cost Overhead @ 60% of Operating Labor and Maintenance $60,800 $15,400

Administrative Charges, 2% TCI $48,500 $4,600 Property Tax, 1% TCI $24,200 $2,300 Insurance, 1% TCI $24,200 $2,300 Capital Recovery (CRF = 0.163) $395,000 $37,200
Total Indirect Annual Cost (TIAC) $552,700 $61,800

Total Annual Cost (TDC + TIAC) $723,800 $88,700

Destruction Efficiency % 90.2% 90.2%

Annual Emissions Reduction - tons 27.06 3.61

Cost Effectiveness ($ per ton) $26,700 $24,600