The West Virginia Public Service Commission (PSC), on rehearing of an earlier rate order, has reduced the level of emissions control investment in rates for two electric operating subsidiaries of...
proposed rulemaking would create more flexibility for generating units by establishing a cap-and-trade provision similar to that proposed in Clear Skies. In choosing this direction, the EPA would rescind its Section 112 determination and regulate mercury under Section 111 of the CAA (see Figure 1).
Even though the EPA did not include a MACT standard in its proposed rulemaking, details of what the mercury MACT standard would have been were unclear. Compliance would be considerably more costly for industry because of the limits required under the MACT distinction, and because generators would not be allowed to use emission cap-and-trade programs. Instead, each unit that chooses to remain in operation must find a way to reduce mercury emissions. Furthermore, the restrictions on new units may differ considerably.
A feasible MACT level has not been easy to determine due to the inconsistency of measurement data studied by the EPA ,as well as the variability in both the mercury content and the difficulty of removing mercury from various coal types. For example, mercury in bituminous coals is considerably easier to remove than mercury in sub-bituminous and lignite coals. In addition, different combustion processes have been found to lead to different mercury removal levels. To accommodate these differences and uncertainties, the EPA has discussed the possibility of developing sub-categories of mercury limits by process and fuel type for a MACT standard.
The EPA's regulatory process and the ultimate outcome of the Clear Skies bill remain uncertain. Furthermore, the final level that would be required under a mercury MACT standard, as well as the difficulty of complying with that standard, remains unknown. Nevertheless, we can postulate several impacts on U.S. energy markets of a MACT standard versus any of the discussed cap-and-trade programs. These impacts can be divided into two categories: primary impacts to coal-fired and oil-fired generating units, and secondary market impacts.
Coal-fired and oil-fired generating units that will be required to meet the specific mercury emissions level required by the statute will be primarily affected. While the final standard of any MACT regulation is uncertain, many generators would find it necessary to install additional emissions control equipment. Some EPA studies suggest that the emission level achievable with the installation of Powdered Activated Carbon Injection (PACT) technology may be used in setting the final limit.
While final emission levels and different sub-categorization schemes may drastically alter the ability of individual generators to comply with the standards, installation of PACT technology alone may not be sufficient for many generators to remain in compliance. Many may have to install PACT in combination with other emission control technologies (upgraded electrostatic precipitators, fabric filters, scrubbers, etc.) to reach the discussed limits, as demonstrated in Figure 2.
For those units that already have installed these technologies to control SO 2, NO X, and particulate emissions, the marginal cost of complying with the mercury MACT standard will be reduced. For others that would have needed to install the additional control equipment, the marginal cost of compliance obviously will be greater. Initial estimates of PACT installation suggest it will