How the Clean Air Mercury Rule will affect coal prices.
In March 2005, Acting Administrator of the Environmental Protection Agency (EPA), Steve Johnson, signed into law the Clean Air Mercury Rule (CAMR), the first regulation to reduce mercury emissions from power plants in the United States. When fully implemented, CAMR will reduce electric utility mercury emissions by almost 70 percent from the 48 tons that were emitted in 1999.
Mercury is a toxic pollutant that is of greatest concern when it accumulates in the food chain. Concentrations of mercury in the air and land are typically low and do not pose any direct threat to human health. However, when airborne mercury deposits on the ground through precipitation, it eventually enters into rivers, lakes, and oceans. Once there, mercury may transform into methylmercury, its most toxic form to humans. Humans are exposed to methylmercury by eating fish from water where mercury is found. Predator fish in particular (, salmon, shark, tuna, etc.) tend to bioaccumulate the greatest concentrations of methylmercury at levels thousands or even millions times greater than found in the water. Most Americans are exposed to mercury through the consumption of fish. However, roughly 80 percent of the fish consumed in America comes from overseas in waters beyond our control. In regions where fish from local waters are consumed, mercury hotspots likely will become future clean-up targets.
Exposure to high levels of mercury has been associated with neurological, renal, respiratory, and developmental problems in humans. Health effects can include tremors, loss of sensory or cognitive ability, convulsions, and death. The developing fetus, infants and young children are most susceptible to the ill effects of mercury.
According to the EPA, U.S. power plants account for about 40 percent of total anthropogenic, or human-caused, mercury emissions in the United States (48 tons out of 120 tons). Mercury emissions from U.S. utilities contribute just 1 percent to the approximately 5,000 tons of annual global mercury emissions from all sources. As a comparison, Chinese power plants release an estimated 495 tons of mercury into the atmosphere per year, over 10 times the amount from U.S. plants. Overall, scientists estimate that up to 30 percent of mercury deposited in the United States originates in China. The large gap in mercury emissions between U.S. and Chinese power plants has led some economists and scientists to question whether reducing Chinese mercury emissions would more cost-effectively reduce mercury deposited in the United States than would reducing U.S. mercury emissions.
The Clean Air Mercury Rule impacts new and existing coal-fired electric generating plants through a market-based cap-and-trade program similar to the EPA's highly successful Acid Rain Program. The first phase of the program will be implemented in 2010 when mercury emissions are reduced to 38 tons. The second phase goes into action in 2018 with a final mercury emissions cap of 15 tons. The EPA's 1999 Mercury Information Collection Request (ICR) and other studies provided the data used to analyze mercury emissions from all power plants greater than 25 MW. Figure 1 shows total mercury emissions from U.S. power plants in 1999.
Currently, about two-thirds of the 75 tons of mercury entering coal-fired generators is emitted to the atmosphere. The 27 ton reduction is the co-beneficial result of existing air pollution control devices such as scrubbers, selective catalytic reduction (SCR) systems and particulate matter capture devices. Obviously, the implementation of CAMR will have an impact on coal-fired electric generation. The key question, however, is to what extent will the new rule reduce coal's dominance in the electric generation market.
Before one can assess how coal-fired generators will be impacted by the new rule, one must first understand the factors that have lead to coal's dominance in the electric generation market. Coal's appeal is largely due to low and stable prices resulting from its abundance in the United States. As shown in Figure 2, coal prices are stable compared to competing fuels. Since August 2002, a period of relative calm in the fuels markets, coal prices have increased by less than 50 percent, compared to natural gas' price increase of 150 percent and oil's price rise of 140 percent during the same period.
Coal prices are also low compared to competing fuels. For much of 2005, natural gas prices at the Henry Hub have hovered around $6.60/MMBtu. NYMEX-quality coal with a $10.00/ton transportation cost has a delivered price of roughly $2.90/MMBtu and coal from the Powder River Basin with a $12.00/ton transportation rate is only about $1.10/MMBtu. Even with an average $0.60/MMBtu environmental compliance cost added to the base price of coal, coal has an enormous price advantage.
Finally, coal's abundance also lends to its appeal. Energy security is important to any nation and over-reliance on foreign countries for fuel has lead to problems for the United States in the past. In the United States alone, the estimated amount of coal available (at current coal consumption rates) is:
17 years of recoverable reserves at active mines; 230 years of recoverable reserves at new mines; 1,100 years of coal reserves that are identified and inferred of any quality; and 2000 years of undiscovered coal. (Sources: Adapted by Global Energy from the Energy Information Agency, , 1997 and the Global Energy Intelligence Fuels database.)
Mercury Control Technology
The disadvantages of coal are primarily due to environmental issues. However, the sizeable cost advantage that coal enjoys allows for significant capital investment to address environmental concerns. Mercury emissions are currently controlled as a co-benefit through existing devices used to remove SO2, NOx, and particulate matter from flue gases. The species of mercury greatly influences the optimal removal method from the stack gases. Oxidized mercury (HG++, ionic mercury, mercury chloride, HgCl2), for example, can be removed using wet SO2 scrubbers. Particulate mercury can be collected by particulate matter control devices. Gaseous elemental mercury usually is more difficult to remove.
In general, the amount of mercury captured through existing control technology is greater for bituminous coal than for either lignite or subbituminous coal. The average capture of mercury in plants with a cold-side electrostatic precipitator (ESP), for example, is about 35 percent for bituminous coal, 3 percent for subbituminous coal and 0 percent for lignite.
The concentration of mercury in coal often depends on its geographical origin. Using data obtained from the U.S. Geological Survey CoalQual database, a comprehensive national coal information database that contains chemical analyses of more than 7,000 coal samples taken over a 20 year period, the distribution of mercury and other constituents can be seen. Bituminous coal from Northern and Central Appalachia, for example, tends to have higher concentrations of mercury. Western subbituminous coal typically has lower concentrations of mercury. Figure 3 shows the average mercury concentrations at coal producing counties across the United States.
During combustion, the mercury in coal is volatilized into elemental mercury vapor by the high temperatures in the boilers. As the flue gas cools, a series of complex reactions take place where the elemental mercury is speciated into elemental mercury, ionic mercury compounds, and mercury compounds. This partitioning can play a major role in the selection of mercury control approaches. As a rule of thumb, the emissions from bituminous coal-fired boilers are ionic mercury compounds and the emissions from subbituminous- and lignite-fired boilers are typically elemental mercury.
If the co-benefit from existing emissions control technology doesn't sufficiently reduce mercury emissions, other mercury specific options are available. Activated carbon injection (ACI) has been used successfully to remove mercury by up to 90 percent at municipal waste incinerators. The activated carbon is injected in the flue-gas stream prior to entry into the particulate matter control device, which typically is either an electrostatic precipitator or a fabric filter (FF) baghouse. The mercury binds with the activated carbon and is collected downstream in the particulate matter control device. Fabric filters generally remove a greater percentage of mercury because the sorbent builds up on the bags, allowing for more capture pathways for mercury.
Activated carbon injection removes mercury successfully from bituminous coals, but lignite and subbituminous coals tend to have lower mercury capture rates because the flue gas from burning these coals has a higher proportion of elemental mercury emissions. The flue gas from burning bituminous coal usually has less gaseous elemental mercury and a much higher proportion of particle-bound and oxidized mercury. Oxidized and particle-bound mercury are more readily adsorbed onto sorbents than elemental mercury. Oxidation of elemental mercury is improved with lower temperature combustion, higher halogen (, chlorine, iodine, bromine, fluorine, or astatine) content, longer residence time, and the absence of ammonia injection. While ACI successfully may reduce mercury emissions from bituminous coal, the presence of activated carbon in ash may prevent the sale of ash for use in concrete.
Subbituminous coals have higher elemental mercury concentrations in the flue gas because they have lower concentrations of halogens, such as chlorine. Figure 4 shows the average county level chlorine concentrations based on data obtained from the USGS CoalQual database. Northern, Central and Southern Appalachian coals all have relatively high concentrations of chlorine and halogens. Coal west of the Mississippi River typically has very low concentrations of chlorine and other halogens. The presence of halogens increases the formation of oxidized forms of mercury. To enhance the mercury capture efficiency in plants that burn subbituminous or lignite coals, halogenated sorbents can be added to the flue gas.
In addition to adding halogenated sorbents to the flue gas stream, coals with higher halogen concentrations can be blended with subbituminous or lignite coals with low halogen concentrations. Eastern bituminous coals with higher chlorine and bromine concentrations can be blended with western subbituminous coal to mimic the benefits of halogenated sorbent injection.
Besides blending fuels, there are developing technologies such as K-Fuel that use heat and pressure to lower the mercury concentration in subbituminous coal. According to initial reports, KFuel has reduced mercury concentrations by up to 70%.
How Will the Mercury Rule Affect Coal Prices?
Under the Clear Skies proposal which is currently in legislative limbo, mercury allowance emissions were intended to be capped at $35,000/pound. Assuming that 1 billion tons of coal is consumed by electric plants and mercury allowances reach the maximum price level set under the proposed Clear Skies price, the maximum cost of complying with the 10 ton reduction required by CAMR in 2010 would have added a maximum $0.70/ton of coal.
The actual added cost to coal likely will be much lower.
Directly controlling mercury emissions with sorbent injection is estimated to add the equivalent of between $1.00 and $2.00/ton of coal burned, depending on plant size. For a 300 MW plant, for example, capital equipment costs are roughly $1 million and operating costs add another $1-2 million per year.
There may be a slight premium added to coals with higher halogen concentrations that then can be blended with subbituminous and lignite coals. Subbituminous and lignite coals with naturally high halogen concentrations may enjoy a higher premium on the market. Coal derived from KFuel technology ultimately will be priced by what the market will bear, but if mercury emissions are a factor at some plants then the reduced mercury concentration in KFuel may add to its value.
Additional state and local mercury emissions rules intended to reduce localized hotspots will create further incentive to control mercury emissions. In states such as Minnesota, Wisconsin, and Mississippi where a higher percentage of consumed fish come from local waters, stricter mercury legislation may be necessary. For plants that must comply with stricter local regulations, mercury-specific capture devices may be installed. As plants in these regions comply with the stricter local rules, plants outside these local areas will find it less expensive to comply with CAMR. Why? Because the local plants will "overcomply" with CAMR requirements due to the added local regulations, freeing more mercury emissions allowances for the rest of the market.
The impact CAMR will have on the cost of burning coal will be minimal until 2018. It is unlikely that any utility will install SO2, NOx, or particulate matter control equipment solely to capture mercury. However, the co-benefit created from mercury capture may push some plants to invest in these emissions-control technologies sooner then would have otherwise occurred.
Overall, most emissions-control devices will be installed to comply with the Clean Air Act Amendments of 1990, the Clean Air Interstate Rule, and stricter local regulations, rather than to comply with CAMR. Mercury reduction will be a co-benefit of compliance with SO2, NOx, and particulate matter emissions requirements. In other words, compliance with CAMR will largely result as a co-benefit of existing and proposed SO2, NOx, and particulate matter control devices and will not result in significant increases in the cost of using coal.
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