Tamar Hallerman
GHG Monitor
05/18/12
The Midwest could face a “major challenge” in bringing its coal fleet into compliance with the Environmental Protection Agency’s recently-finalized air toxics standards by the 2015-2016 deadline, according to a new report. The Midwest Independent Transmission System Operator (MISO) commissioned the economic consulting firm the Brattle Group to analyze the feasibility of installing, nearly simultaneously, the retrofits and new generation needed within the MISO region to comply with EPA’s Mercury and Air Toxics Standards (MATS). The report concludes that meeting the rule’s requirements by the 2015-2016 deadline will pose “significant challenges” for the Midwest. “In evaluating the feasibility of the entire coal fleet to meet MATS by the compliance deadline, we found that it is very likely that the industry will run into delays and bottlenecks, while MISO may face an operational challenge in managing outage scheduling,” the report says.
EPA finalized MATS for coal- and oil-fired power generation in December, requiring unit operators to install pollution-control technologies like wet and dry FGD scrubbers and baghouses to cut down on the emissions of mercury and other toxic air pollutants like arsenic and nickel. Under the plan, operators have three to four years to comply with the rulemaking, with some pre-approved units getting an extra fifth year to fulfill the requirements. When EPA was in the process of finalizing the rulemaking last year, some utility executives requested a longer compliance timeframe, arguing that the 2015-2016 deadline would be hard to meet given the projected competition across the power sector for labor and equipment. They also argued that the reliability of the grid could be compromised as utilities take units offline in order to install new equipment.
Lead Time and Labor Limitations
As part of its study, Brattle said it examined previous cases of retrofit and new capacity installations, as well as the outage time needed to install the new equipment. The authors said they also compiled information on the average timelines for project completion and took into consideration the potential bottlenecks for specialized labor such as boilermakers, design engineers and welders. Based on estimates that 51-58 GW of capacity in the Midwest will likely need to be upgraded with environmental control systems and that 5-26 GW of new generation will likely be needed within the MISO region, the report concludes that compliance will generally require heavy coordination across utilities in the region. “Overall, it will be a major challenge for the industry, states, and MISO to comply with MATS for a number of reasons,” the report concludes. “The industry will need to install retrofits at a pace and scale that exceeds the historical demonstrated capability, while the system operator is likely to experience a substantial operational challenge in the transition to schedule the outages to install and test the required environmental retrofits on coal units.”
The report concludes that installing pollution control equipment like dry sorbent and activated carbon injection systems will likely be easy to do within the compliance timeline. However, the authors say that technologies like wet and dry FGD scrubbers, baghouses, electrostatic precipitators and selective catalytic reduction systems have a longer lead time and could take three to four years to install. The report says that while some developers will easily be able to make the deadline given that some retrofit projects are already under way, other projects needing state commission approval for rate recovery could face time crunches depending on the state’s speed of approval. That could be especially challenging for state public utility commissions given that there will likely be a large number of projects seeking upgrades offset by rate recovery at once, according to the study. “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,” the report concludes.
Labor Shortages, Scheduled Outages
One of the largest bottlenecks for unit operators, according to the study, will likely be for labor and equipment given that demand will be high across most utilities in the region. Those potential local and regional bottlenecks could create delays and escalate installation costs due to the short supply of trained labor and construction materials, the study says. “We find that MATS will require retrofit and new build activities that exceed the historical industry maximum in the Midwest by 51-162 percent based on MISO’s projected retrofit requirements and individual plant owner announcements,” the study says. In particular, it highlights that boilermakers will likely be in the most demand and that there will likely be a substantial need to train new labor.
In terms of scheduled outages to install new equipment, Brattle said that most outages will likely take several days or a week to install, but that some types of upgrades could take longer. “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,” the study says, adding that longer than average outages may need to occur given the retrofits dictated by MATS on top of previously-planned standard outages.
Report Could Fuel MATS Opponents
The results of the report could help fuel MATS opponents, who have argued for more than a year that the compliance schedule is not flexible enough for utilities. Recent hearings on the standards on Capitol Hill and at national meetings of utility regulators have focused on whether the rule could create grid reliability issues in certain regions of the country, particularly in the Midwest and South, which both rely heavily on coal-fired power for electricity but have many aging units in need of retrofits.
