In a study commissioned by the Midwest Independent Transmission System Operator (MISO), economists at The Brattle Group evaluated the feasibility of the large number of simultaneous environmental retrofits and new generation that may be needed for coal plants to comply with the EPA’s Mercury and Air Toxics Standards (MATS) rule. The study finds that compliance with the MATS rule poses significant challenges. The feasibility assessment took into account the historical level of actual retrofits and new generation construction, typical timelines to complete various types of projects, potential bottlenecks in specialized types of labor, and the required planned outages in coal plants to install and test the environment control equipment. The study finds that the projected amount of retrofits on coal units and the amount of new generation to replace retiring coal units in the MISO region will exceed the historical maximum achieved for simultaneous deployments of retrofits and new builds by 51% to 162%, based on MISO’s current projections of retrofit requirements and announced projects. For nationwide retrofits, the requirements imposed by MATS would be 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,” noted Dr. Metin Celebi, a Brattle principal and lead author of the study. With respect to the timeline needed for retrofits, the study finds that some types of upgrades can be completed before 2015 without difficulty, including activated carbon injection (ACI) and dry sorbent injection (DSI), which can be implemented within approximately a year and a half. Most projects, however, have a longer lead time of approximately three to four years, including wet and dry scrubber, baghouse, electrostatic precipitator (ESP), and selective catalytic reduction (SCR), as well as new gas combustion turbines (CTs) and combined cycles (CCs). Some of these longer lead time projects may not be completed by the MATS compliance date (April 2015, with a potential one-year extension) to the extent they have not already started. The study evaluated the potential for craft labor to become a bottleneck that could introduce project delays and increase costs. Comparing the 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 currently employed in the Utility System Construction Industry. Therefore, meeting the projected demand for boilermakers will likely require a combination of adjustments on the supply side, including training new labor, relocation, extending work hours, and attracting craft labor from other industries. With respect to the incremental outage periods necessary to implement the projected retrofits, the study estimates that some upgrades, such as dry scrubber, 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, baghouse, and SCR retrofits are likely to require that outages be extended by approximately 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, assuming that many plants will gain a one-year compliance extension. These additional outage requirements appear to be feasible to implement under MISO’s low-retirement scenarios without causing system reliability concerns. The study notes, however, that implementing the incremental outages under scenarios with higher coal retirement scenarios (12 GW and 19 GW) would likely require a combination of extending the six-month outage season to nine months and requesting an additional one-year reliability extension to 2017 for MATS compliance. “Overall, it will be a major challenge for the industry, states, and MISO to comply with MATS for a number of reasons,” said Dr. Celebi. “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 study, “Supply Chain and Outage Analysis of MISO Coal Retrofits for MATS,” was prepared by Brattle economists Metin Celebi, Kathleen Spees, and Quincy Liao, with assistance from Steve Eisenhart at the VATIC Associates. It is available for download below.
Metin Celebi|Kathleen Spees|Quincy Liao|Steve Eisenhart