2013 Progress Report: Analysis of Dynamic, Flexible NOx and SO2 Abatement from Power Plants in the Eastern U.S. and Texas

EPA Grant Number: R835216
Title: Analysis of Dynamic, Flexible NOx and SO2 Abatement from Power Plants in the Eastern U.S. and Texas
Investigators: McDonald-Buller, Elena , Allen, David T. , Webster, Mort D.
Current Investigators: McDonald-Buller, Elena , Allen, David T. , Craig, Michael T. , Kimura, Yosuke , McGaughey, Gary , Webster, Mort D.
Institution: The University of Texas at Austin , Massachusetts Institute of Technology
Current Institution: The University of Texas at Austin , Massachusetts Institute of Technology , Pennsylvania State University
EPA Project Officer: Chung, Serena
Project Period: June 1, 2012 through May 31, 2016
Project Period Covered by this Report: June 1, 2013 through May 31,2014
Project Amount: $500,000
RFA: Dynamic Air Quality Management (2011) RFA Text |  Recipients Lists
Research Category: Air Quality and Air Toxics , Air

Objective:

Emissions cap and trade programs have been a preferred federal policy instrument for achieving reductions from power plants and reducing the interstate transport of precursors to tropospheric ozone and fine particulate matter. Such market-based instruments have demonstrated their flexibility and economic efficiency for achieving emissions reductions from power plants. Historically, however, such programs have regulated emissions through an undifferentiated approach with limited consideration of the temporal and spatial heterogeneity of impacts; yet disparities in damages have been associated with factors such as meteorology and population exposure patterns. In the future, states will likely be challenged with the higher marginal costs of additional permanent or annual emissions reductions in the context of increasingly stringent federal standards for ozone and fine particulate matter. This study is developing methods for evaluating the air quality effects and cost-effectiveness of time-differentiated trading of nitrogen oxides (NOx) and sulfur dioxide (SO2) from power plants alone and in combination with other technology- and undifferentiated market-based approaches. Case studies evaluate concentration and population-weighted air quality metrics and contrast the effects of alternative scenarios in the Electric Reliability Council of Texas (ERCOT) and the Mid-Atlantic Pennsylvania-New Jersey-Maryland (PJM) power systems, which differ in their generation fuel mixes. In 2012 ERCOT’s generation capacity was approximately 57% natural gas, followed by 23% coal, 13% wind, and 6% nuclear; in contrast during the same period, the Mid-Atlantic PJM’s generation capacity was approximately 33% coal, 30% natural gas, 20% nuclear, 9% oil, 4% hydroelectric, 2% wind, with the remainder predominantly biomass and solar.

Progress Summary:

A novel two-phase power system model has been developed to explore the short- and long-term responses of generators to time-differentiated pricing and other policies and the effects on emissions and costs within the Mid-Atlantic PJM and ERCOT regions during 2012. This approach utilizes a zonally-constrained unit commitment power system model, which accounts for operational constraints on generators, to determine hourly power generation dispatching and a game theoretic method that determines control technology installations in response to policies. In the first phase, decisions to install control technology are made at coal-fired power plants on the basis of profit maximization under a given policy. The potential for dependencies associated with market dynamics that impact a given generator’s decision to install control technology is determined using Nash equilibrium. In the second phase, emissions and costs are calculated under each policy, given decisions from the first phase over the summer season (June 1 – October 4).

Emissions from selected policies are processed with the Sparse Matrix Operator Kernel Emissions (SMOKE) system and used within the Comprehensive Air Quality Model with Extensions (CAMx) to evaluate concentration and population-based metrics for ozone and fine particulate matter. The emissions inventory used for the CAMx performance evaluation is based on the 2005v4_2 Emission Modeling Platform (2005as base case) developed by the U.S. Environmental Protection Agency (EPA) for analyses of the Transport Rule and Cross-State Air Pollution Rule (CSAPR) with extensive updates. Inventories for non-point anthropogenic sources and stationary sources other than those in the Mid-Atlantic PJM and ERCOT power systems have been replaced with the 2011v6 Emission Modeling Platform obtained from the EPA and Lake Michigan Area Director’s Consortium (LADCO) to reflect more recent conditions.

Numerous time-differentiated pricing schemes for NOx and to an initial extent SO2 have been evaluated to date. Time-differentiated pricing is implemented as a cost per ton of emissions applied over the entire 24-hour period on high ozone days. High ozone days are defined as those with a predicted region-wide average daily maximum (MDA8) ozone concentration greater than or equal to 60 ppb in the absence of any policy intervention. Redispatching and control technology installations (specifically Selective Catalytic Reduction or Flue-Gas Desulfurization) represent short-term and long-term, responses, respectively, to time-differentiated prices. In addition, time-differentiated pricing has been compared to undifferentiated pricing schemes in which a flat price is assessed for each ton of pollutant emitted over the entire summer, and technology-based standards in which Selective Catalytic Reduction is applied to a suite of generators in the absence of a market-based program. 

Time-differentiated pricing has been found to offer significant reductions in NOx emissions on high ozone days in two distinct power systems, which are coal- (PJM) or gas- (ERCOT) dominated in their generation capacity. NOx emissions within ERCOT decreased by 15% and 50% with time-differentiated prices of $5000/ton and $150,000/ton, respectively; these pricing schemes achieved NOx reductions of 20% and 75% within the Mid-Atlantic PJM system. Emissions reductions obtained through time-differentiated pricing are primarily driven by the substitution of gas- for coal-fired generation. At low and moderate emission prices (below $75,000/ton) these reductions result entirely from redispatching; while the number of generators selecting to install SCRs increases with higher NOx prices, redispatching remains the driving factor for emissions and costs. Systems relying on coal-fired generation, such as the Mid-Atlantic PJM, are likely to see greater penetration of SCR with a time-differentiated NOx price as well as greater emissions reduction from a time-differentiated program on high ozone days. 

Time-differentiated trading has been found to be more cost-effective on high ozone days than an undifferentiated approach or SCR implementation alone, while achieving substantial emissions reductions. However, season-wide emissions reductions are not competitive with an undifferentiated approach. These findings suggest that time-differentiated trading may be an effective complement to existing cap and trade programs aimed at NOx emissions reductions. 

Preliminary assessments indicate that SO2 pricing has substantial co-benefits for reducing NOx emissions and vice versa on high ozone days. No decisions to install FGD technology are driven by time-differentiated SO2 pricing in either the ERCOT or the Mid-Atlantic PJM systems. These results indicate that redispatching is the primary mechanism driving emissions reductions and producer and consumer costs. 

Initial air quality modeling assessments demonstrate reductions in 8-hour maximum daily average (MDA8) ozone concentrations of 0.5 ppb or greater on most high ozone days with time-differentiated NOx pricing of $50,000/ton and $150,000/ton across much of the Mid-Atlantic PJM region. The magnitude and spatial coverage of ozone reductions are larger over the Mid-Atlantic PJM system relative to ERCOT, and ozone reductions more often occur at the locations of ground monitoring sites, reflecting, in part, differences in generation fuel mixes and the proximity of generators to urban areas. NOx pricing strategies offer co-benefits for reducing predicted PM2.5 concentrations.

Future Activities:

During the third year of the project, the air quality modeling and assessments of policies using a variety metrics will be completed. Additional policy considerations will consider a layered approach of undifferentiated and time-differentiated pricing as well as pricing strategies based on the integrated impact of multiple pollutants to optimize abatement.

Journal Articles:

No journal articles submitted with this report: View all 11 publications for this project

Supplemental Keywords:

electricity generation, emissions trading, ozone, particulate matter, Texas, CAMx;

Progress and Final Reports:

Original Abstract
2012 Progress Report
2014 Progress Report
Final Report