The U.S. Environmental Protection Agency’s new Mercury and Air Toxics Standards (MATS) will force power plant operators to retire coal units rather than make the required capital investments, with about 30 GW having already announced retirement plans nationwide.
To replace this retiring generation and meet load growth requirements by 2015, another 30 GW-84 GW of new generation may be needed nationally, while 5 GW-26 GW may be needed in the Midwest ISO region, said a new report from The Brattle Group done on behalf of MISO. The report is called “Supply Chain and Outage Analysis of MISO Coal Retrofits for MATS.”
MATS will require the coal and oil fleet in the U.S. to comply with certain emissions standards by April 2015, with a potential one-year extension available under certain circumstances. This standard will require much of the U.S. coal fleet to install retrofit controls for compliance or face retirement. Nationwide estimates project that 93 GW-248 GW of coal (measured in wet flue gas desulfurization (FGD) equivalent GW) will require environmental controls upgrades, while MISO projects 51-58 wet FGD equivalent GW will require upgrades in the Midwest alone.
MISO asked Brattle to help evaluate the feasibility of the large number of simultaneous environmental retrofits and new generation that may be needed in conjunction with the MATS rule. In particular, MISO asked Brattle to:
- evaluate the scale of the retrofit and new build requirements for MATS by 2015/16 relative to the capability of the retrofit and construction industry;
- identify potential labor supply chain bottlenecks to meeting these requirements;
- estimate the level of outages needed on the existing fleet for installing and testing new environmental retrofits; and
- evaluate the extent to which these retrofits, new generation, and required outages can be implemented by the MATS compliance date of April 2015 with possible extensions to 2016.
With respect to the timeline needed for retrofits, Brattle found that some types of upgrades can be put into service before 2015 without difficulty, including activated carbon injection (ACI) and dry sorbent injection (DSI), which can be implemented within about a year and a half. However, most projects have a longer lead time of 3-4 years, including wet and dry FGD, baghouses, electrostatic precipitators (ESP), and selective catalytic reduction (SCR), as well as new gas-fired combustion turbines (CTs) and combined cycles (CCs).
“Some of these long-lead projects will be able to come online prior to the MATS deadline, particularly as many of them are already under development,” Brattle noted. “Many plant owners have already announced upgrade plans, although many others are likely still in the scoping phase. For the retrofit projects that need state commission approval of cost recovery to move forward, their ability to meet the MATS deadline will in part depend on the states’ speed of approval when evaluating a large number of projects at once. These long lead times introduce a substantial concern for any long-lead projects that are initiated late, both due to the timing constraint and due to the potential for difficulty in obtaining the necessary engineering and construction support during a period of very high demand.”
Coal-reliant Midwest to need very big emissions build
Brattle found that MATS will require retrofit and new build activities that exceed the historical industry maximum in the Midwest by 51%-162% based on MISO’s projected retrofit requirements and plant owner announcements. For the nationwide retrofits, the needs imposed by MATS could be substantially below historical maximums if the EPA’s projections are correct, or up to 93% above historical maximums if industry estimates are more accurate. “We believe that the EPA estimates may be optimistic while industry estimates may be pessimistic, especially in the highest retrofit cases,” Brattle noted.
Brattle evaluated the potential for craft labor to become a bottleneck that could introduce project delays. Based on estimates of typical craft labor requirements for retrofits and new construction, it projected a time profile of craft labor required for MATS compliance. Comparing projected labor needs against the current labor supply for each craft revealed that boilermakers are the most likely bottleneck. As many as 7,590 boilermakers (or 40% of boilermakers currently employed nationally) could be needed to complete the projected retrofits and new generation construction by 2015. This potential demand is more than four times the number of boilermakers (1,850) currently employed in the Utility System Construction Industry.
Brattle also looked at the potential impacts of MATS on MISO’s outage scheduling process by examining the length of typical planned outages for coal units compared with outages associated with plant retrofits. Based on interviews with project developers and electric utilities, Brattle understands that most of the work associated with retrofits can be completed while the plant is operating, although final tie-in to major plant systems can only be done during an outage.
These emissions equipment tie-ins will usually be scheduled concurrently with other standard maintenance during a planned outage but will require a longer than typical outage. Brattle estimated that some upgrades such as dry FGD, DSI, selective non-catalytic reduction (SNCR), and ACI require that the outage duration need only be extended a few days or a week, although some types of upgrades impose much longer outages. Wet FGD, baghouses, and SCR retrofits are likely to require normal outages be extended by about three weeks.
“Considering the fleet-wide impacts of these outages, it appears that MISO may have to schedule approximately 45% more MW of coal outages per season for MATS compliance by Fall 2015 (which assumes many plants will gain a 1-year compliance extension),” Brattle said. “The impact of these additional outages is further exacerbated by the fact that a substantial fraction of coal plants are likely to retire rather than comply with MATS, hence reducing the system’s ability to absorb additional outages. Based on MISO’s initial analysis of the fleet’s ability to absorb outages, it appears that the total quantity of outages for MATS could be easily absorbed and scheduled in its low retirement scenarios. However, in MISO’s 12 GW retirement scenario, it appears that MISO may only be able to absorb these outages by extending its typical 6-month (fall and spring) outage season to a 9-month (fall, winter, and spring) season. In MISO’s even higher 19 GW retirement scenario, it appears likely that the [regional transmission organization] would not be able to schedule all of the needed outages even in a 9-month window without facing reliability concerns or gaining an additional 1-year reliability extension to 2017.”