## Emission Reduction Costs for the Be yond-the-Floor Mercury Rate in the Toxics Rule

EPA’s IPM modeling of beyond-the-floor (BTF) me rcury reduction from subcategorized units subject to the proposed Toxics Ru le projects two methods for co mpliance: fuel switching from lignite to subbituminous coal or retrofitting of activated carbon inje ction systems. This technical support document (TSD) presents th e modeled ACI retrofit costs and incremental fuel switching costs from the proposed Toxics Rule policy case analysis. The estimated compliance cost can be compared with the projected mercury reductions to consider the cost-effectiveness on a cost-perton basis for beyond-the-floor mercury reduc tions from these subcategorized units.

Fuel Switching costs (based on IP M modeling of unit coal choice):

EPA’s IPM modeling of the proposed Toxics Rule projects that about 4.7 GW of capacity would switch from lignite to sub-bituminous fuel to meet the subcategorized beyond-the-floor mercury emissions rate standard, at a total incremental fuel cost (weighted by generation changes) of about $24.8 million (in 2007-year dollars). Thes e units collectively achieve about a 1,580-lb reduction in mercury emissions fr om the base case; therefore, the average emission reduction cost from fuel-switching at these un its is about $15,696 per lb Hg removed.

Subcategorized Capacity Projected to Switch Coal Incremental Generation Incremental Fuel Cost GenerationWeighted Incremental Fuel Cost Mercury Reduction Cost of Mercury Removed

4.7 GW -65 GWh $23.9 million $24.8 million 1,580 lbs $15,696/lb

ACI Retrofit Costs (based on IPM modeling assumptions derived from Sargent & Lundy engineering analysis):

For units adopting ACI retrofits, this cost anal ysis is weighted based on whether the retrofitting capacity has a pre-existing fabric filter (IPM includes separate ACI retrofit options with and without Toxecon on this basis).

EPA’s IPM modeling projects that about 3.2 GW of capacity would adopt ACI with Toxecon to meet the subcategorized beyond-the-floor mercury emissions rate standar d, at a total annualized retrofit cost of about $2.34 milli on (in 2007-year dollars). This analysis excludes capital costs for installing the Toxecon fabric filter system on the basis of its use for PM control under the Toxics Rule. The representative unit shown in the table below achieve s a 180.9-lb reduction in mercury emissions from the base case at an annu alized retrofit cost of $2.34 million; therefore,the average emission reduction cost from ACI re trofitting at these units is about $12,935 per lb Hg removed. The proposed Toxics Rule modeli ng also projects that 2.2 GW of capacity with existing fabric filters would adopt ACI without Toxecon; the repres entative unit in this category would incur a total annualized retrofit cost of about $5.09 million while achieving about 111.2 lbs of mercury emission reductions for an average cost of $45,773/lb reduced.

Type of Retrofit ACI with Toxecon ACI without Toxecon Subcategorized Capacity 3.2 GW 2.2 GW Average Capacity per Unit 451 MW 247 MW Average Capital Cost (excluding fabric filter) $9 /kW $13 /kW

Average Fixed Operation & Maintenance Cost $0.57 /kW $0.06 /kW

Average Variable Operation & Maintenance Cost $0.48 /MWh $2.56 /MWh

Total Annualized Cost of Retrofit $2.34 million $5.09 million Mercury Reduction 180.9 lbs 111.2 lbs Cost of Mercury Removed $12,935/lb $45,773/lb (calculations assume an 85% capacity factor and a capit al charge rate of 11.4%)

Average Cost-Effectiveness of Mercury Reduced for Beyond-the-Floor

Compliance Strategy Estimated Annual Mercury Reductions Estimated Annual Costs

Coal-Switching 1,580 lbs $24.8 million Retrofit ACI with Toxecon 1,284 lbs $16.6 million Retrofit ACI without Toxecon 990 lbs $45.3 million Total 3,854 lbs $86.7 million

Based on total estimated mercury reductions and annual costs in the table above, the average removal cost for mercury emissions from th ese subcategorized units fuel-switching and retrofitting with ACI is estimat ed to be $22,496/lb. Based on these results, EPA believes that the projected compliance behavior fo r the subcategorized capacity under the proposed Toxics Rule would yield cost-effective mercur y reductions at the beyond-the-fl oor emissions rate standard.