United States Environmental Protection Agency Air and Energy Engineering Research Laboratory Research Triangle Park, NC 27711 Research and Development EPA/600/SR-94/017 May 1994 EPA Project Summary State Acid Rain Research and Screening System Version 1.0 User's Manual C. A. Bogart, S. J. Epstein, K. S. Piper, and A. S. Taylor This project summary describes Ver- sion 1.0 of EPA's STate Acid Rain Re- search and Screening System (STARRSS). The system was developed to assist utility regulatory commissions in reviewing utility acid rain compliance plans. This Project Summary was developed by EPA's Air and Energy Engineering Research Laboratory, Research Triangle Park, NC, to announce key findings of the research project that is fully docu- mented in a separate report of the same title (see Project Report ordering infor- mation at back). introduction The acid rain provisions included in Title IV of the 1990 Clean Air Act Amendments (CAAA) mandate that many electric utili- ties substantially curtail their sulfur dioxide (SO2) emissions by 1995with even more stringent environmental limits taking effect in the year 2000. These affected utilities must file compliance plans with EPA and state public utility commissions to indicate how they intend to reduce their SO2 emis- sions to allowable levels. As they review these compliance plans, state regulators will play a critical role in determining the success of the CAAA. Whether they are asked to formally preapprove compliance plans or not, commissions will have con- siderable influence over utilities' compli- ance decisions. Therefore, in determining what constitutes a "good" compliance plan, commissions will have to address the fol- lowing questions: Is the utility's preferred plan the least- cost solution? How risky is the utility's preferred plan? What other compliance strategies should the utility be considering? Should the utility be a buyer or a seller in the SO2 allowance market and to what extent? STARRSS is an integrated information/ modelling system that is designed to as- sist state regulatory commissions and utili- ties in answering these questions. A Compliance Planning Model Funded by EPA's Air and Energy Engi- neering Research Laboratory (in Research Triangle Park, NC), STARRSS is a screen- ing tool that allows analysts to compare the cost-effectiveness of a wide variety of acid rain compliance options, including: Scrubbing Repowering Fuel switching/blending Cofiring Combustion technologies (e.g., sorbent injection) Emissions allowance purchases Conservation New, cleaner resources Improved boiler efficiency Emissions dispatch Designed to run quickly on a personal computer (an IBM PC AT or IBM-compat- ible PC with an 80286 processor or bet- ter), STARRSS focuses on the compre- hensive analysis of many compliance strat- egies. As a decision support tool, STARRSS uses a multiple-scenario, risk- assessment approach. The model uses three user-specified forecasts (high, me- dium, and low forecasted values) for most input data items (e.g., price forecasts, tech- nology costs, and performance). Through Printed on Recycled Paper ------- a Monte Carlo process, STARRSS then simulates hundreds of different scenarios for a particular compliance strategy, se- lecting one of these three values during each scenario (based on user-specified probabilities). Therefore, a strategy is ex- posed to the uncertainties of future events (e.g., varying allowance prices, fuel prices, construction costs, generating unit operat- ing characteristics). These multiple simu- lations yield a distribution of cost esti- mates that represent the range of pos- sible costs for a compliance strategy. Working with this distribution, the user can see the level of economic or business risk that Is inherent in a particular compli- ance strategy. Just because a strategy has a low expected cost (as measured by the average of the cost distribution) does not necessarily make it a desirable plan. For example, a STARRSS analysis of Strategy A may have an expected value of $2 billion, plus or minus $0.5 billion. In other words, considering potential fluctua- tions In the fuel and allowance markets and other parameters, Strategy A is likely to cost between $1.5 and $2.5 billion. Strategy B has a cost of $2.1 billion, plus or minus $0.1 billion. If one simply chose the optimal strategy based on a compari- son of the plans' expected value for com- pliance costs, then one would pick Strat- egy A as the better plan. However, Strat- egy B is less risky, because it has less variance in its total costs. A utility or state commission may want to choose Strategy B, realizing that the likely economic expo- sure is capped at $2.2 billion, whereas there may be a substantial probability that Strategy A could cost as much as $2.5 billion. In terms of a graphical explanation, Fig- ure 1 shows the cost distributions for two hypothetical compliance strategies. While the Fuel Switch strategy has an expected (I.e., average) cost that is less than for the Scrub BlgCoal 1 strategy, it also has greater cost volatility. Comparisons such as these allow the user to identify the cost-versus-risk trade-offs that often arise in the course of compliance strategy de- velopment. Two examples of the many input and reporting screens in STARRSS follow. Fig- ure 2 shows one of the input screens in which the user specifies the following op- erational information for each of a utility's affected units: unit capacity, heat rate, and baseline heat consumption (the average annual fuel consumption for 1985-1987, which is used in the CAM as a baseline for calculating allowance allocations and bonus allowances). In addition, the user specifies the number of Phase I and Phase n Fuel Switch + Scrub BigCoal 1 200 I 400 I 600 « 800 100. 300 _., 500 _ _700.^ _ j $ Million ' Figure 1. Comparison of total cost distributions for two compliance strategies. Unit Name BIGCOAL 1 BIGCOAL 2 MEDCOAL 1 MEDCOAL 2 MEDCOAL 3 MEDCOAL 4 SMALLOIL 1 SMALLOIL 2 SMALLOIL 3 i Affentfiri Units snrean 1 nl 1 _ . Database Name: SULFUR POWER & LIGHT Baseline Calculated Capacity (MW) 650.0 650.0 350.0 350.0 350.0 350.0 50.0 50.0 80.0 Heat Rate 10000 10000 10500 10600 10400 10400 13800 13600 13500 Heat (TBTUs) 26.700 27.300 32.320 32.800 32.860 32.260 0.370 0.640 1.040 Enter Text SO2 Emis. (tons) 75293 84761 44656 46244 44424 7984 77 115 171 Allowances Phasel 36500 37000 44000 44500 45000 0 0 o 0 Phasell 14000 14500 17500 18000 18000 17500 200 330 600 F1 Help Figure 2. Display/edit affected units screen. II allowances in a unit's basic allocation. The Calculated |SO2 Emissions field is a calculated estimate of the unit's current SO2 emissions and is based on informa- tion specified on! this and other screens. To facilitate the process of database development arjd refinement, databases have been developed to model all of the major utilities affected under the CAAA. These databases contain publicly avail- able information^ for all of the above gen- erating unit characteristics and allowance allocations. Relevant databases will be in- cluded with each STARRSS delivery to serve as a starting point for further data- base development. State commissions will ESC Menu receive databases for all utilities within their jurisdictions, including multi-state holding companies and power pools. For any affected unit, the user can specify that the unit is a candidate for a limitless range of compliance activities (e.g., fuel switching, cofiring, repowering). For any compliance option, the user can dictate any of the following applicable en- tries: New fuel or fuel blend SO2 removal efficiency of a technol- ogy Capital costs ------- Increased non-fuel variable operating and maintenance (O&M) costs Increased fixed O&M costs Increased non-operating costs Capacity derations (or capacity in- creases) Boiler efficiency improvements or losses In-service year and option life Except for the first and last items, these data inputs can be entered as triple fore- casts (high, medium, and low), as dis- cussed earlier. STARRSS will determine the cost-effectiveness of different compli- ance strategies by analyzing each plan's present value of revenue requirements over a user-specified time period. Instead of just calculating a single cost for a plan, STARRSS will run hundreds of scenarios using different combinations of each data item's triple forecasts in order to develop a full range of costs. This multiple-sce- nario analysis is important considering that compliance costs are strongly dependent on future market conditions, which are inherently uncertain. STARRSS will ana- lyze the interaction of different combina- tions of options with the allowance mar- ket, bulk power market, and utility energy conservation efforts. STARRSS can be run in one of two operating modes: evaluation or optimiza- tion. In an evaluation run, the user speci- fies one or more compliance strategies to be evaluated and compared. In an optimi- zation run, the user lets STARRSS de- velop its own compliance strategies. How- ever, no single strategy can be declared optimal since exact future costs and per- formance are uncertain. Therefore, the STARRSS optimization approach involves the selection of a set of top plans from a list of potentially billions of compliance strategies. The number of plans in this set is determined by the user. STARRSS then evaluates these top plans under a range of economic and operational uncertainties (e.g., changing fuel prices, allowance prices, generating unit operations). That STARRSS ranks the plans based on the expected value of compliance costs does not imply that the least-cost plan is best. The risks that STARRSS quantifies (i.e., the cost ranges) also must be taken into consideration in determining the best strategy. The level of risk that a utility is willing to bear is a major factor in the decision to adopt an emissions reduction option. Therefore, STARRSS' No. 1 plan may not be the appropriate choice if the strategy's risks are too great. Figure 3 is an example of a STARRSS output report. The Compliance Strategies Detail Report shows the expected value of the costs and SO2 emissions reduction impacts for the compliance options in all of the top strategies. The first column of f numbers displays the total present value costs over the life of each option. The second column reports the average an- nual emissions reduction impact (or bo- nus allowance allocation) that is attribut- able to each compliance option. The final column is a measure of each option's $/ ton cost (on a levelized basis; therefore, it is not merely the first column's numbers divided by the second). Other reports show the range (and sta- tistical standard deviation) of the costs and impacts of compliance options and overall strategies. These statistics allow the user to assess the relative economic and performance risks among different compliance options and strategies. STARRSS also includes graphical report- ing features similar to those shown in Fig- ure 1 that displays the cost profiles and allowance trading activity of selected com- pliance strategies. Conclusion STARRSS is an acid rain compliance planning modelling system that provides decision-makers with a means of compar- ing the range of outcomes for a variety of utility compliance strategies. The central objective of the STARRSS system is not to identify the best compliance strategy for decision-makers, but to provide a deci- sion-support screening tool that will help organizations identify good strategies (i.e., low cost, combined with acceptable levels of risk) that deserve further detailed analy- sis. Compliance SULFUR POWER & LIGHT Evaluated 7/30/1992 at 14:15; Phase I Strategies 1: SCRUB BIGCOAL1 &2 BIGCOAL 1 WETFGD1 bonus allowances BIGCOAL 2 WETFGD1 bonus allowances Link BCOAL 1&2 GROUPFGD1 Base Conservation bonus allowances Allowance purchases (sales) Totals for strategy 1 : strategies ueiail hepon 1 Target Reduction 79809 Tons run with 250 iterations Total Cost ($M) 315 315 (44) (211) 376 Impact (tons) 63136 6695 63136 6695 266 45 (60165) 79809 Average $/ton 477 477 375 495 * - Allowance transactions meet or exceed user-specified limits ESC Main Menu PgUp/PgDn View Report F3 Print Report Figure 3. Compliance strategies detail report screen. ku.S. GOVERNMENT PRINTING OFFICE: 1*94 - 5M467/M2M ------- C. A. Bogart, S. J. Epstein, K. S. Piper, and A. S. Taylor are with RCG/Hagler, Bailly, Inc., Boulder, CO 80306. Christopher D. Geron is the EPA Project Officer (see belo\v). The complete report, entitled "State Acid Rain Research and Screening System Version 1.0 User's Manual," (Order No. PB94-152550; Cost: $36.50, subject to change) will be available only from: I National Technical Information Service '< 5285 Port Royal Road I Springfield, VA 22161 Telephone: 703-487-4650 The EPA Project Officer can be contacted at: Air and Energy Engineering Research Laboratory! U.S. Environmental Protection Agency \ Research Triangle Park, NC27711 United States Environmental Protection Agency Center for Environmental Research Information Cincinnati, OH 45268 Official Business Penalty for Private Use $300 EPA/600/SR-94/017 BULK RATE POSTAGE & FEES PAID EPA PERMIT No. G-35 ------- |