From: Frey, Nathan J. To: Culligan, Kevin Cc: Hutson, Nick ; Wayland, Robertj Subject: Re: uncertainty language Date: Wednesday, September 18, 2013 9:07:07 PM 

### Thanks Kevin - let's touch base in the morning.

From : Culligan, Kevin [mailto:Culligan.Kevin@epa.gov] Sent : Wednesday, September 18, 2013 07:37 PM To : Frey, Nathan J. Cc : Hutson, Nick <Hutson.Nick@epa.gov>; Wayland, Robertj <Wayland.Robertj@epa.gov> Subject : uncertainty language 

## Nathan,

Here is our shot at revisions. Note that there are a couple small placeholders related to the year dollars used and the methodology for escalating. We will work with our econ folks first thing tomorrow to get those right. I think that even without them, DOE will be able to judge whether we've hit the mark and if not suggest edits. I'll be checking e-mail and can also be reached at 240-426-1025.

- Kevin1. Cost estimates for implementation of partial CCS The EPA has examined costs of new fossil fueled power generation options. These options are shown in Table 6 below

. The costs in Table 6 table show s projected the costs of new fossil generation with and without various carbon capture options. The costs for new NGCC technology are provided at two different natural gas prices: at $6.11/MMBtu, which is reasonably consistent with current and projected prices; and at $10/MMBtu, which would be well above current and projected natural gas prices. We also show projected costs for SCPC and IGCC units with no CCS (i.e., units that would not meet the proposed emission standard) and for those units with partial capture CCS installed such that their emissions would meet the proposed 1,100 lb CO 2 /MWh standard. We have also included costs for those same units when EOR opportunities are available. We have included a “low EOR” case assuming a low EOR price of $20 per ton of CO 2 , and a “high EOR” of $40/ton. (These EOR prices are net of the costs of transportation, storage, and monitoring (TSM). We also show the projected costs for implementation of full capture CCS (i.e., 90 percent capture).**Table 6. Levelized Cost of Electricity for Fossil Fuel**  **Electric Generating Technologies, Excluding Transmission Costs**  1,2

**Technology Levelized Cost of**  **Electricity ($2011/MWh)**  **3 ,**  4 **, 5**  NGCC @ $6.11/MMBtu 59

1 These costs come from the following DOE/NETL studies: (1) Cost and Performance Baseline for Fossil Energy Plants Volume 1:Bituminous Coal and Natural Gas to Electricity, Rev 2, DOE/NETL2010/1397 (Nov 2010); (2) Updated Costs (June 2011 Basis) for Selected Bituminous Baseline Cases” DOE/NETL-341/082312 (Aug 2012); (3) Cost and Performance of PC and IGCC Plants for a Range of Carbon Dioxide Capture, DOE/NETL-2011/1498 (May 2011). Capacity factor are assumed at 85 percent. 2 These costs do not include the impact of subsidies that may potentially be available to developers of new projects that include CCS. 3 Data for fossil fuel

- fired generation comes from DOE/NETL: (1) Cost and Performance Baseline for Fossil Energy Plants Volume 1: Bituminous Coal and Natural Gas to Electricity, Rev 2, DOE/NELT

2010/1397 (Nov 2010); (2) Updated Costs (June 2011 Basis) for S elected Bituminous Baseline Cases” DOE/NETL

- 341/082312 (Aug 2012); (3) Cost and Performance of PC and IGCC Plants for a Range of Carbon Dioxide Capture, DOE/NETL

- 2011/1498 (May 2011). Data for non

- fossil fuel

- fired generation comes from DOE Energy Informat ion Administration ( EIA ) Annual Energy Outlook ( AEO ) 2013

. Levelized Cost of Electricity ( LCOE ) estimates come from http://www.eia.gov/forecasts/aeo/electricity_generation.cfm

. T o maintain consistency with DOE/NETL estimates , EIA estimates provided in this table do not include transmission investment

. 4 LCOE point estimates are provided for coal

- fired capacity types; all other LCOE estimates are presented as a range that reflects EI A’s view on the regional variation in local labor markets, cost and availability of fuel, and renewable resources. The capacity factor ranges for renewable non

- dispatchable technologies are as follows: Wind

– 30% to 39%, Wind Offshore

– 33% to 42%, Solar PV

- 22% to 32%, and Solar Thermal

– 11% to 26%. Capacity factors for dispatchable technologies are as follows: Coal and NGCC

– 85%, Nuclear

– 90%, Biomass

– 83%, Geothermal

– 92%, and Combustion Turbine

– 30%. There is no capacity credit provided to dispatchable resources. 5 These costs do not include the impact of subsidies that may potentially be available to developers of new projects that include CCS.NGCC @ $10.0/MMBtu 86

SCPC w/o CCS 6 92 SCPC (1,100 lb/MWh; no EOR) 110 SCPC (1,100 lb/MWh; low EOR) 96 SCPC (1,100 lb/MWh; high EOR) 88 SCPC (full, 90 percent CCS) 147

IGCC w/o CCS 97 IGCC (1,100 lb/MWh; no EOR) 109 IGCC (1,100 lb/MWh; low EOR) 101 IGCC (1,100 lb/MWh; high EOR) 97 IGCC (full, 90 percent CCS) 136

The cost estimates from the DOE/NETL studies carry an accuracy of

- 15% ± 30%, consistent with a “feasibility study” level of design engineering applied to the various cases in this study DOE/NETL explain that there are a range of future potential costs that are up to 15% below, or 30% above a central estimate. We have presented that central estimate above. Also note that the DOE/NETL studies were not generally calculated in year (x) dollars. We have adjusted them all to year y dollars using Bureau of Economic Indicator factors, to make consistent with other costs used throughout today’s preamble. ( i.e., the LCOE values can range from 15 percent less to as much as 30 percent higher than the value provide in Table 6)

. The value of the studies lies not in the absolute accuracy of the individual

6 SCPC LCOE includes a 3% increase to the weighted average cost of capital to reflect EIA’s climate uncertainty adder (CUA).case results but in the fact that all cases were evaluated under the same set of technical and economic assumptions. This consistency of approach allows meaningful comparisons among the

cases evaluated. For an emerging technology like CCS, costs can be estimated for a “first-of-a-kind” (FOAK) plant or an “n th -of-a-kind” (NOAK) plant, the latter of which has lower costs due to the “learning by doing” and risk reduction benefits that result from serial deployments as well as from continuing research, development and demonstration projects. 7 The estimates provided in Table 6 for a new NGCC unit and for a SCPC plant without CO 2 capture are based on mature technologies and are thus NOAK costs. For plants that utilize technologies that are not yet fully mature, such the IGCC or any plant that includes CO 2 capture, the cost estimates in Table 4 6 represent a plant that is somewhere between FOAK and NOAK, sometimes referred to as “next-of-a-kind”. Because there are a number of projects currently under development, the EPA believes it is reasonable to focus on the next-of-a-kind costs provided in Table 6. The lessons learned

7 Elsewhere in this preamble, we describe the evidence that as technology matures, its costs decrease. Note also that EPA regulations of mobile source air emissions incorporate the decreasing costs of technology over time. See, e.g., “2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards – Final Rule,” 77 Fed. Reg. 62624, 62984/1 to 62985/1 (October 15, 2012) (incorporating “cost reductions, due to learning effects”).from design, construction and operation of those projects, as well as for that of Duke Energy’s Edwardsport IGCC (which does not include CCS) will help lower costs for future gasification facilities implementing CCS. The TCEP project and the HECA project are both in advanced stages of design and development. Summit Power, the developer of TCEP, is also pursuing a number of additional projects that would benefit from lessons learned from TCEP. These include the Captain CleanEnergy Project in the United Kingdom (UK) and another polygeneration project in Texas. 8 For a new conventional PC plant implementing post-combustion CCS, the Boundary Dam project will perhaps represent a FOAK project while the W.A. Parish project may represent a second-of-a-kind project - or perhaps even a next-of-a-kind project. Further, as discussed elsewhere in this preamble, many of the individual components of a new generation project with CCS have been previously demonstrated. For example, capturing CO 2 from a coal gasification syngas stream has been occurring for more than ten years at the Dakota Gasification facility. Experience gained at that facility can inform design and operational choices of a new IGCC implementing partial CCS.

8 (http://ghgnews.com/index.cfm/summit-even-without-uk-demofunding-project-will-move-forward/?mobileFormat=true ).For all these reasons, the next IGCC and SCPC facilities with CCS can be expected to be less expensive than the current FOAK projects, if somewhat more expensive than the NOAK facilities with CCS that construct when CCS has become a fullymature technology. The costs in Table 6 reflect those next-of-akind costs. The EPA has also examined costs of new non-fossil fueled power generation options. These options are shown in Table 6

below.

**Table 7. Range of Levelized Cost of Electricity for Non-Fossil Fuel Electric Generating Technologies, Excluding Transmission**  **Costs 9,10** 

9 Data for non-fossil fuel-fired generation comes from DOE Energy Information Administration (EIA) Annual Energy Outlook (AEO) 2013. Levelized Cost of Electricity (LCOE) estimates come from http://www.eia.gov/forecasts/aeo/electricity_generation.cfm

. To maintain consistency with DOE/NETL estimates in Table 6, the EIA estimates provided in this table do not include transmission investment. 10 The LCOE estimates in Table 7 are presented as a range that reflects EIA’s view on the regional variation in local labor markets, cost and availability of fuel, and renewable resources. The capacity factor ranges for renewable non-dispatchable technologies are as follows: Wind – 30 to 39 percent, Wind Offshore – 33 to 42 percent, Solar PV- 22 to 32 percent, and Solar Thermal – 11 to 26 percent. Capacity factors for dispatchable non-fossil fueled technologies are as follows: Nuclear – 90 percent, Biomass – 83 percent, and Geothermal – 92 percent. There is no capacity credit provided to dispatchable resources. Formatted: Indent: First line: 0.5"**Technology Levelized Cost of**  **Electricity ($2011/MWh)**  Nuclear 103 - 114 Biomass 97 - 130 Geothermal 80 – 99 Combustion Turbine 87 – 116 Onshore Wind 70 – 97 Offshore Wind 177 – 289 Solar PV 11 109 – 220 Solar Thermal 184 – 412 Nuclear 103 - 114 Biomass 97 - 130 Geothermal 80 – 99

11 Costs are expressed in terms of net AC power available to the grid for the installed capacity.