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WCF 1-6 Alternatives For Compliance With The NC Lawsuit Orders

WCF 1-6 Alternatives For Compliance With The NC Lawsuit Orders. Prepared by: Bill McCollum Presented to: FSRA. Date: 3/11/09. Agenda. Issue Description Alternatives Considered Key Assumptions Cost Evaluation Changes from 2008 Global Insights. Issue Description. Issue Description:

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WCF 1-6 Alternatives For Compliance With The NC Lawsuit Orders

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  1. WCF 1-6 Alternatives For Compliance With The NC Lawsuit Orders Prepared by: Bill McCollum Presented to: FSRA Date: 3/11/09

  2. Agenda Issue Description Alternatives Considered Key Assumptions Cost Evaluation Changes from 2008 Global Insights

  3. Issue Description Issue Description: • Prior to the NC lawsuit ruling, the Clean Air Plan did not include scrubbers or SCRs for WCF 1-6. • SO2 emissions are ~1.0 lb/MM Btu with low sulfur fuel. • NOx emissions are ~0.45 lb/MM Btu. • Compliance with an expected mercury MACT rule by 2015 would be achieved with low emitting Colorado coal. • The NC lawsuit ordered scrubbers and SCRs to be installed and operated by Jan 2014 and imposed annual emissions rate and tonnage caps for each unit beginning in 2014: • SO2: 0.15 lb/MM BTU, ~618 tons per unit per year • NOx: 0.06 lb/MM Btu, ~263 tons per unit per year • WCF 7-8 also have Court-ordered SO2 and NOx rate and tonnage caps but already have scrubbers and SCRs installed.

  4. WCF 1-6 Clean Air Capital Costs • The 2008 LRFP did not include scrubber and SCR costs for WCF 1-6. • The Base Study Case for this evaluation include scrubber and SCR capital cost. • The cost estimate to comply with the NC lawsuit order for WCF 1-6 is estimated to be $909 MM.

  5. Alternatives Considered Coal-Fired Alternatives With Emissions Controls • Install scrubbers and SCRs at WCF 1-6 (Base Study Case). • URS/Washington Group has prepared conceptual arrangements and cost estimates for scrubber and SCR installation Gas-Fired Alternatives • Retire WCF 1-6 by Jan 2014. Replace capacity with combined cycle at the WCF site by Jan 2014 (WCF On-Site). • Retire WCF 1-6 by Jan 2014. Replace capacity with technology and timing as determined by capacity expansion model (WCF CapEx).

  6. Assumptions For All Alternatives • The Court-ordered compliance date is Dec. 31, 2013. • The Feb 2009, 90% Confidence Hydro Gen Plan. For the Base Study Case • Scrubbers and SCRs are installed by Jan 2014. (The typical scrubber schedule is 60 months. April 2008-Jan 2014 is less than 60 months.) • Wet scrubber technology is installed. • A two-scrubber module arrangement is installed. • This alternative would also comply with expected mercury emissions limitations. For Gas-Fired Alternatives • WCF CapEx • Replacement capacity construction present no schedule problems. • Transmission upgrades would be required to compensate for the loss of capacity in the WCF area. • WCF On-Site • CC construction by Jan 2014 presents no schedule problems. • Permitting and NEPA review present no schedule problems. • Gas pipeline upgrades and firm gas transportation would be required. • Gas pipeline upgrades present no schedule problems.

  7. Assumptions, cont’d Cost Assumptions • Present value calculations use 8% discount rate. • The URS/Washington Group cost estimate (completed 2/20/09) for WCF 1-6 scrubber and SCRs is $909 MM ($1066/KW nameplate rating). • The CC replacement capacity for WCF B cost is $803 MM ($996/KW) in as-spent $. • Other costs considered in the evaluation: • Transmission system upgrade costs (WCF CapEx). Ten year completion schedule. $87 MM • Firm gas transportation (WCF On-site). Costs are based on a 25-year contract. $65 MM per year • Gas price at WCF 1-6 starting at $8.75/MM Btu in 2014 and escalating to $13.27/MM Btu by 2028.

  8. WCF1-6 Summary of Present Values of Cost(Differences in Cost) • Conclusions: • WCF1-6 base case has higher cost than and WCF CapEx (replace off-site as needed). • Without cooling towers in the base case, the costs are similar. Highlights: • System variable costs – High system cost difference because WCF1-6 (with controls) generation is replaced with higher cost gas-fired generation. In addition, gas prices rise faster in the future than coal prices. • Transmission Upgrades – If WCF1-6 is retired and not replaced on-site, TVA must perform substantial transmission system upgrades. • Clean air costs – WCF base case has costs for controls (scrubbers, SCRs). WCF1-6 controls are more expensive than other plants because of less economies-of scale (smaller units). Note: Lower cost is better

  9. Changes from 2008 • Impacts from North Carolina Ruling • Revised Forecasts for Natural Gas and Coal Prices • Impacts Due to Current Economic Situation • Reductions in revenue due to decreased demand • Increased expenditures caused by market impact on investments (e.g. Nuclear Decommissioning Fund, Retirement System) • Capacity expansion delayed due to decreased demand • Kingston ash spill recovery costs • Different Environmental Agenda • More emphasis on CO2 reductions and use of renewables • Regulatory outlook on mercury and other emissions • More Information about Plant Generation Alternatives and Fuel Supply • Increased State Oversight • System pond regulation / permitting • Clean Air Plan • Mercury • Revised cost estimates • North Carolina lawsuit

  10. Global Implications - WCF • North Carolina Lawsuit Ruling • If we shut down Widows Creek Units 1-6 and let system reoptimize, the lost energy is replaced by gas fired generation. • NOx and SO2 emissions will decrease slightly but not significantly with the gas option. However CO2 emissions due show a distinct drop. • Cashflow – Near Term vs Long Term • Gas option capital and firm gas costs may roughly balance controls fixed O&M and capital costs. • Assumptions of gas cost combined with its volatility drive the cost advantage / disadvantage for the gas options. • Transmission • The required transmission upgrades if WCF 1-6 are shutdown are much less expensive than the new transmission line required for a JSF shutdown • These transmission upgrades will likely be needed within the planning horizon anyway. • Environmental Implications - How does TVA want to be perceived • Adding controls and continuing to operate WCF 1-6 doesn’t promote a “green” perception. • Retiring and replacing WCF 1-6 with a natural gas-fired plant may be more acceptable to the “green” stakeholders.

  11. Other Global Implications • Trend to Renewables and DSM • If 1400 MW of DSM currently in planning assumptions doesn’t show up, coal and gas fleet generation will increase • Renewables up to 2000 MW may be purchased, but resulting energy into the system is small, ~13% capacity factor of wind and ~38% of solar • Fuel Portfolio • With one or more coal plants shut down, TVA’s fuel portfolio will shift toward more natural gas consumption • CO2 Legislation • Could be a cap on annual emissions with no allocation • Redispatching fleet may not be sufficient, may have to cap coal fleet capacity factors to comply • Completion of Planned Nuclear Units • Higher coal fleet capacity factors if a delay in nuclear unit completion

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