Regulatory Impact Analysis for the Proposed Emission Guidelines for Greenhouse Gas Emissions from Existing Electric Utility Generating Units; Revisions to Emission Guideline Implementing Regulations; Revisions to New Source Review Program ii EPA-452/R-18-006 August 2018 Regulatory Impact Analysis for the Proposed Emission Guidelines for Greenhouse Gas Emissions from Existing Electric Utility Generating Units; Revisions to Emission Guideline Implementing Regulations; Revisions to New Source Review Program U.S. Environmental Protection Agency Office of Air Quality Planning and Standards Health and Environmental Impact Division Research Triangle Park, NC iii CONTACT INFORMATION This document has been prepared by staff from the Office of Air Quality Planning and Standards, the Office of Atmospheric Programs, and the Office of Policy of the U.S. Environmental Protection Agency. Questions related to this document should be addressed to Brian Keaveny, U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards, Research Triangle Park, North Carolina 27711 (email: [email protected]). iv TABLE OF CONTENTS LIST OF TABLES .................................................................................................................... VIII LIST OF FIGURES .................................................................................................................... XII EXECUTIVE SUMMARY ..................................................................................................... ES-1 ES.1 INTRODUCTION ...................................................................................................................................... ES-1 ES.2 ANALYSIS .............................................................................................................................................. ES-1 ES.3 COMPLIANCE COSTS.............................................................................................................................. ES-6 ES.4 EMISSIONS CHANGES ............................................................................................................................ ES-7 ES.5 CLIMATE AND HEALTH CO-BENEFITS ................................................................................................. ES-10 ES.6 NET BENEFITS ..................................................................................................................................... ES-13 ES.7 ECONOMIC AND EMPLOYMENT IMPACTS ............................................................................................. ES-19 ES.8 LIMITATIONS AND UNCERTAINTY ....................................................................................................... ES-21 ES.9 REFERENCES ....................................................................................................................................... ES-24 CHAPTER 1: INTRODUCTION AND BACKGROUND ..................................................... 1-1 1.1 INTRODUCTION ............................................................................................................................................ 1-1 1.2 LEGAL AND ECONOMIC BASIS FOR THIS RULEMAKING ................................................................................ 1-1 1.2.1 Statutory Requirement ....................................................................................................................... 1-1 1.2.2 Market Failure ................................................................................................................................... 1-3 1.3 BACKGROUND .............................................................................................................................................. 1-3 1.3.1 Emission Guidelines and Revisions to New Source Review ............................................................. 1-3 1.3.2 Regulated Pollutant ............................................................................................................................ 1-4 1.3.3 Definition of Affected Sources .......................................................................................................... 1-4 1.4 OVERVIEW OF REGULATORY IMPACT ANALYSIS ......................................................................................... 1-5 1.4.1 Base Case ........................................................................................................................................... 1-6 1.4.2 BSER and Policy Scenarios ............................................................................................................... 1-7 1.4.3 Years of Analysis ............................................................................................................................... 1-9 1.5 BSER TECHNOLOGIES ................................................................................................................................. 1-9 1.5.1 Neural Network/Intelligent Sootblower ............................................................................................. 1-9 1.5.2 Boiler Feed Pumps ........................................................................................................................... 1-10 1.5.3 Air Heater and Duct Leakage Control ............................................................................................. 1-10 1.5.4 Variable Frequency Drives (VFDs) ................................................................................................. 1-11 1.5.5 Blade Path Upgrade (Steam Turbine) .............................................................................................. 1-12 1.5.6 Redesign/Replace Economizer ........................................................................................................ 1-12 1.5.7 Additional Documentation ............................................................................................................... 1-12 1.6 DEVELOPMENT OF ILLUSTRATIVE POLICY SCENARIOS ............................................................................... 1-13 1.6.1 Technical Basis ................................................................................................................................ 1-13 1.6.2 How HRI are Represented in the Policy Scenarios .......................................................................... 1-18 1.7 ORGANIZATION OF THE REGULATORY IMPACT ANALYSIS ......................................................................... 1-19 1.8 REFERENCES .............................................................................................................................................. 1-20 CHAPTER 2: ELECTRIC POWER SECTOR INDUSTRY PROFILE ............................... 2-1 2.1 INTRODUCTION ............................................................................................................................................ 2-1 2.2 POWER SECTOR OVERVIEW ......................................................................................................................... 2-1 2.2.1 Generation.......................................................................................................................................... 2-1 2.2.2 Transmission .................................................................................................................................... 2-10 2.2.3 Distribution ...................................................................................................................................... 2-11 2.3 SALES, EXPENSES AND PRICES ................................................................................................................... 2-12 2.3.1 Electricity Prices .............................................................................................................................. 2-12 2.3.2 Prices of Fossil Fuels Used for Generating Electricity .................................................................... 2-18 2.3.3 Changes in Electricity Intensity of the U.S. Economy ..................................................................... 2-18 2.4 DEREGULATION AND RESTRUCTURING ...................................................................................................... 2-20 v 2.5 EMISSIONS OF GREENHOUSE GASES FROM ELECTRIC UTILITIES ................................................................ 2-26 2.6 REVENUES AND EXPENSES ......................................................................................................................... 2-29 2.7 NATURAL GAS MARKET ............................................................................................................................ 2-30 2.8 REFERENCES .............................................................................................................................................. 2-34 CHAPTER 3: COST, EMISSIONS, ECONOMIC, AND ENERGY IMPACTS .................. 3-1 3.1 INTRODUCTION ............................................................................................................................................ 3-1 3.2 OVERVIEW ................................................................................................................................................... 3-1 3.3 POWER SECTOR MODELING FRAMEWORK ................................................................................................... 3-2 3.4 RECENT UPDATES TO EPA’S POWER SECTOR MODELING PLATFORM V6 USING IPM .................................. 3-4 3.5 SCENARIOS ANALYZED ...............................................................................................................................