EPA
TVA
U.S. Environmental
Protection Agency
Office of Research
and Development
Industrial Environmental Research
Laboratory
Research Triangle Park NC 27711
EPA-600/7-79-106
April 1979
Tennessee Valley
Authority
Office of Power
Emission Control
Development Projects
Muscle Shoals Al 3566O
ECDP  B-l
          Potential  Production and
          Marketing of FGD
          Byproduct Sulfur  and
          Sulfuric Acid in the U.S.
          (1983 Projection)

          Interagency
          Energy/Environment
          R&D Program  Report

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                 RESEARCH REPORTING SERIES


Research reports of the Office of Research and Development, U.S. Environmental
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This report has been assigned to the INTERAGENCY ENERGY-ENVIRONMENT
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                                     EPA-600/7-79-106
                                     ECDP   B-l
                                              April  1979
Potential  Production and Marketing
       of FGD  Byproduct  Sulfur
     and  Sulfuric Acid  in the  U.S.
            (1983   Projection)
                         by

               W E O'Brien and W. L. Anders
                 Tennessee Valley Authority
                    Office of Power
            Emission Control Development Projects
               Muscle Shoals, Alabama  35660

              Interagency Agreement No. D9 E721 BJ
                 Program Element No. INE 624A
              EPA Project Officer: Charles J. Chatlynne

            Industrial Environmental Research Laboratory
              Office of Energy, Minerals, and Industry
                Research Triangle Park, NC 27711
                      Prepared for

            U.S. ENVIRONMENTAL PROTECTION AGENCY
               Office of Research and Development
                   Washington, DC 20460

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                                 DISCLAIMER
     This report was prepared by the Tennessee Valley Authority and has been
reviewed by the Office of Energy, Minerals, and Industry, U.S. Environmental
Protection Agency, and approved for publication.  Approval does not signify
that the contents necessarily reflect the views and policies of the Tennessee
Valley Authority or the U.S. Environmental Protection Agency, nor does men-
tion of trade names or commercial products constitute endorsement or recom-
mendation for use.
                                     ii

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                                 ABSTRACT
     A computer-based marketing evaluation of sulfur and sulfuric acid as
flue gas desulfurization byproducts from U.S. coal-burning power plants was
updated to 1983 from the previous evaluation which used a 1978 base.   Least-
costs of compliance were calculated using comparisons between clean fuel
premiums of $0.50 and $0.70 per MBtu, limestone scrubbing, and scrubbing
systems with byproduct sulfur and sulfuric acid production.   Market potential
of sales to sulfur-burning acid plants was also determined.   At the $0.50
clean fuel premium, sulfuric acid production was the least-cost method at
five plants, four of which had combined sales of 800,000 tons per year.  At
the $0.70 premium, sulfuric acid production was the least-cost method at 26
plants, 7 of which had sales totaling 1,200,000 tons per year.  New boilers
coming online by 1983 accounted for 60% of the sales.  Market potential was
relatively insensitive to sulfur price.  Sulfur production was not selected
at any plant but reduction of total FGD costs by 3% to 24% would make it
competitive with sulfur delivered from Port Sulphur at 16 plants with a total
production of 266,000 tons.  The results indicate the need of a longer time
projection and continued update of the model data bases.
                                    iii

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                                 CONTENTS


Abstract	    i:Li
Figures	    vii
Tables	   viii

Executive Summary  	     ix

Introduction 	      1

Results  	      3
  FGD Byproduct Sulfuric Acid   	      3
    Potential  1983 Supply and Demand  	      3
    1983 $0.50 ACFL Solution	      3
    1983 $0.70 ACFL Solution	      4
    Comparison of 1978 and  1983 Results	     10

  FGD Byproduct Sulfur 	     14

Conclusions   ..... 	     20

Recommendations   	     22

References	     23

Appendix A  -  System Description  	     25
  Byproduct Marketing Computer  System  	     26
  FGD Process  Descriptions  	     29

Appendix B  -  Model Update	     31
   Scrubbing Cost  Generator  Update Through 1983 	     32
    Power Plant and  Boiler  Screen	     32
    New Power Plants  and Boilers Through 1983  	     32
    Updated Regulations  and Compliance Plans 	     33
    Cost Escalation	     33
   Transportation  Cost Generator Update Through 1983  	     35
    Actual  Rail Rate Increases, 1973-1977  	      35
    Projected Rail Rate Increases, 1978-1983 	      35
    Actual  and Projected Rail Rates	      36
     Actual  Barge Rate Increases, 1973-1977 	      36
     Projected Barge Rate Increases,  1978-1983  	      36
     Actual  and Projected Barge Rates 	      38
     Transportation Cost Inflation Over 1975	      38

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Acid Production Cost Generator Update Through 1983 	    4Q
  Sulfuric Acid Plant Demand Data Base	    40
  Sulfur Terminal Selection  	    40
  Sulfuric Acid Avoidable Costs  	    40
  Smelter Update 	    42
Market Simulation Linear Programing Model Update Through 1983  .  .    42
  Size Screen for Potential Power Plant Acid Producers 	    42
  Direct Comparison of ACFL and Magnesia-Scrubbing Costs 	    42
  Comparison of Previous and Current Model Generation  	    43
                                 vi

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                                  FIGURES
Number

   1

   2
 A-l
 A-2
 B-l
 B-2
Marketing sensitivity to FGD byproduct sulfur cost
 reduction - 1983 	
Marketing sensitivity to FGD byproduct sulfur cost
 reduction - 1983 (adjusted for byproduct sulfuric acid
 competition) 	
Byproduct marketing model 	
Railroad rate territories 	
Rail rate increases, actual and projected, 1973-1983
Barge rate increases, actual and projected, 1973-1983  .
17
19
27
28
37
39
                                    vii

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                                  TABLES
Number

   1     Four Power Plants Marketing Acid in the 1983 $0.50 ACFL
          Solution 	     4
   2     Twenty-Six Power Plants Included in 1983 $0.70 ACFL
          Solution for Analysis of Market Potential  	     5
   3     Seven Power Plants Marketing Acid in the 1983 $0.70 ACFL
          Solution 	     7
   4     Thirteen Eastern Smelters Marketing Acid in the 1983
          $0.70 ACFL Solution	     9
   5     Market Distribution of Canadian Incremental Acid in 1983
          $0.70 ACFL Solution	    10
   6     Twenty-Nine Power Plants Marketing Acid in the 1978 $0.70
          ACFL Solution	    n
   7     Incremental Costs of Six Power Plants With Sales in the
          1978 $0.70 ACFL Solution but No Sales in the 1983 $0.70
          ACFL Solution	    13
   8     Marketing Sensitivity to FGD Byproduct Sulfur Cost
          Reduction - 1983	    16
   9     Marketing Sensitivity to FGD Byproduct Sulfur Cost
          Reduction - 1983 (adjusted for byproduct sulfuric acid
          competition) 	    18
 B-l     Projected 1983 Unit Costs for Raw Materials, Labor, and
          Utilities	    34
 B-2     Major Elements of Sulfuric Acid Avoidable Costs 	    41
                                  viii

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         POTENTIAL PRODUCTION  AND  MARKETING  OF  FGD  BYPRODUCT  SULFUR

               AND SULFURIC ACID IN THE  U.S.  -  1983 PROJECTION


                              EXECUTIVE  SUMMARY
INTRODUCTION

     Flue gas desulfurization (FGD)  is the most practical approach for con-
trolling sulfur oxides (SOX)  emissions for both future and existing power
plants.  The use of a higher  cost clean fuel is another method,  but proposed
emission regulations are expected to begin to eliminate clean fuel as a
total alternative for future  plants.  [This study does not include, however,
the revised new source performance standards (NSPS) proposed in  the. September
19, 1978, Federal Register since it is an update to 1983 conditions and no
boilers online by 1983 will be affected by the new regulation.]   Most current
FGD processes are wet-scrubbing systems which produce a waste sludge or a
potentially salable byproduct such as sulfur or sulfuric acid.  Determination
of the most economical strategy for a particular application is  often a diffi-
cult decision involving many complexly interrelated factors.

     For several years the Tennessee Valley Authority (TVA), in  conjunction
with the U.S. Environmental Protection Agency (EPA) and others,  has conducted
economic studies related to FGD processes.  As a part of these studies a
computer-based byproduct marketing system was developed to evaluate the
potential of marketing sulfur byproducts.  It compared the economics of clean
fuel and several FGD processes, including limestone scrubbing with waste
sludge production, magnesia scrubbing with sulfuric acid production, and the
Wellman-Lord/Allied Chemical scrubbing system which produces sulfur.  The
computer system contains data on over 900 U.S. power plants and  the locally
applicable regulatory information required to calculate scrubbing costs for
each power plant.  In the case of sulfuric acid production, the marketability
of the acid  is determined using data on U.S. sulfur and sulfuric acid trans-
portation and the U.S. sulfuric acid manufacturing industry.  General or
specific cost comparisons can be made by assuming different alternative clean
fuel level  (ACFL) costs versus costs for the different scrubbing methods,
including the possibilities and effects of byproduct marketing.   The  ACFL  is
a  premium in dollars per MBtu assigned to  fuel costs  to represent  a  premium
paid for low-sulfur coal.  It includes additional  transportation costs  for
obtaining a  low-sulfur coal from a more distant source than  that  for  a
higher sulfur coal.
                                     ix

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     A definitive TVA report on system analysis of FGD byproduct sulfuric
acid economics projected to  1978, Potential Abatement Production and Marketing
of  Byproduct Sulfuric Acid in the U.S. (hereafter referred to as Potential
Abatement Production), was issued by EPA in 1978 (EPA-600/7-78-07(T,~TVA
Bulletin Y-122).  The study  is used as the basis for this update summary
report and should be used as background.

     Power plant abatement compliance decisions must be made to conform with
anticipated conditions several years in advance.  Securing regulatory agency
approval and increased construction periods combine to extend the effects
of  decisions into a more distant and less certain future.  In order to pro-
vide decision-making information, projects of this nature must use the latest
available data and project as far in the future as can be reasonably sub-
stantiated .

     This report is the first annual update report for Potential Abatement
Production, and incorporates the latest available data for continuing refine-
ment of the computer programs of the original byproduct marketing model.
The results reported here are projected to 1983, using data available through
September 1978.  In addition, a manual analysis of FGD byproduct sulfur mar-
keting as an alternate to FGD byproduct sulfuric acid marketing is included.
RESULTS

FGD Byproduct Sulfuric Acid

Potential 1983 Supply and Demand—
     For 1983, 94 power plants with 165 boilers were considered to be out of
compliance and were included in all model runs.  In the $0.50 ACFL solution
potential power plant supply was 800,000 tons, eastern smelter supply was
400,000 tons, and the western and Canadian supply was 700,000 tons and 200,000
tons respectively.  The total potential supply of the $0.50 ACFL run was
2,100,000 tons.  In the $0.70 ACFL solution potential power plant supply
increased to 4,600,000 tons; potential smelter supply was the same as for the
$0.50 ACFL solution.  Total potential supply for the $0.70 ACFL solution was
5,900,000 tons.  Total potential demand for both the $0.50 and the $0.70
solutions was 23,300,000 tons.

1983 $0.50 ACFL Solution—
     In the 1983 $0.50 ACFL solution only five power plants were candidates
for marketing.  The solution indicated a market potential for four of the
five plants considered.  Because the number of plants was limited and
because they were also included in the $0.70 ACFL solution, a detailed
analysis was limited to the $0.70 solution.

1983 $0.70 ACFL Solution—
     In the 1983 $0.70 ACFL solution 26 out of a total of 94 power plants
were considered for marketing analysis as follows-

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                                             Number  of  plants
              All clean fuel                        43
              All limestone scrubbing               24
              Mixed clean fuel and
               limestone scrubbing                   1
              Potential magnesia scrubbing          26

                   Total                            94
     The solution indicated a market potential for 7 of the 26 plants and
total sales of 1,200,000 tons.   At two plants market potential was limited
to a part of the projected production and a mixed magnesia-scrubbing and
clean fuel strategy was selected.   A summary of the strategy selection proc-
ess for plants in the solution is  shown below.

                                           Number of plants

                Magnesia scrubbing                 5
                Mixed magnesia scrubbing
                 and clean fuel                    2
                All clean fuel                     1
                All limestone scrubbing           18

                     Total                        26

     Projected new boilers were a factor at six of the seven plants selected
for marketing.  They contributed almost 60% of the sales even though they
constituted only 15% of the total number of boilers considered for marketing.
The eastern and Canadian smelter supply was  absorbed by the market in the
1983 solution.  No sales potential for the western supply through transship-
ment terminals was indicated because of higher transportation costs.

     The solution would be fairly stable in the event of a sulfur price
reduction.   Only 200,000 tons out of a total of 1,200,000 tons would be
affected by a $20 per long ton sulfur price reduction.

FGD Byproduct Sulfur

     There is considerable interest in elemental sulfur as a potential power
plant FGD byproduct.  Marketing advantages over sulfuric acid include over
three times the equivalent sulfur concentration; nonhazardous, noncorrosive
properties; easy stockpiling characteristics; less market competition in
many locations; and recoverable energy, in the production of  sulfuric acid,
of approximately 8 MBtu per short ton of sulfur.  The market  for  FGD byproduct
sulfur is wider and potentially greater than  the market for FGD byproduct
sulfuric acid.  Sulfur can be marketed as a raw material to all acid plants
regardless of their size and production costs.  FGD byproduct sulfuric  acid
marketing is  typically limited to relatively  small, high-production-cost
acid plants.


                                   xi

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     Although no byproduct sulfur sales were shown in either the 1983 or the
 1978 solutions, a sensitivity analysis showed that it would become competitive
 in certain locations with a relatively slight (10%) reduction in total FGD
 costs.  At one power plant, for example, a reduction of 8.5% (1.18 M$ per year)
 of the total FGD cost  (13.91 M$ per year) would result in the reduction in
 incremental cost required to enter the market in competition with sulfur
 delivered from Port Sulphur.

     Of 16 plants that have relatively low estimated sulfur production costs
 compared with limestone scrubbing, the first plant would become competitive
 with a reduction in total FGD costs of only 3.1%.  The other 15 plants would
 enter the market with reductions ranging from 5.4% to 23.7%.  The combined
 production of these plants would be 265,723 short tons per year, equivalent
 to over 800,000 tons of sulfuric acid.  This represents slightly over 3.0%
 of the projected 1983 sulfuric acid demand.

     Marketing sensitivity to FGD byproduct sulfur is based on sulfur
 delivered from Port Sulphur at $70 per long ton plus delivery and handling
 expenses escalated to 1983.  At the level of projected 1983 Port Sulphur
 delivered costs, Canadian sulfur recovered from sour gas could be more com-
 petitive in the Midwest and Great Plains where 6 of the 16 plants are located.
CONCLUSIONS

     The overall effect of the 1983 update was a reduction of power plant
FGD byproduct sulfuric acid sales compared with the 1978 projection.  An
increasing lead time associated with compliance strategy selection was
apparent.  A 5-year forecast appears to impose unjustified constraints on a
realistic analysis of future marketing potential.

     In the 5-year projection the relative marketing potential from projected
boilers as opposed to existing boilers was greater than expected.  Previous
projections of only 1.5 to 2 years  minimized the longer operating life
advantage of projected boilers over existing boilers.  Projected boilers
are expected to dominate future solutions.

     Although boilers reported to be in compliance are excluded from the
model on the basis that strategy selection is final, this will not be
necessarily true for projected boilers if the strategy selected is clean
fuel.   Proposed regulations, higher clean fuel premiums, and scrubbing
technology improvements will alter the choice of clean fuel as a total com-
pliance strategy for future boilers.

     A reduction in the total supply considered because of alternate strategy
selections as well as the higher FGD costs due to inflation were primarily
responsible for reduced sales in the 1983 solution.   Projections beyond the
strategy selection lead time for future boilers (which are expected to be
predominately coal fired) could increase future sales projections.   The
limited supply potential prevented a determination of the individual effect
of increased transportation costs on sales projections.  Nor could the
individual effect of the suppressed escalation of avoidable production costs
resulting from an updated steam credit be determined.
                                   xii

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     As FGD, transportation, and sulfuric acid avoidable production costs
increase, correspondingly higher ACFL values will be required to fully analyze
potential market interactions for extended projections to the extent that
clean fuel can be used as an SOX emission control approach.

     FGD byproduct sulfur is not yet competitive with FGD byproduct sulfuric
acid.  A relatively small reduction (10% or less at nine power plants) in
total FGD byproduct sulfur costs, however, could result in emergence of
competitive FGD sulfur production.  Sulfur is easier to store and handle
than sulfuric acid.  It also has marketing advantages in some locations.


RECOMMENDATIONS

     An extended time frame is needed to lend more practical meaning to FGD
byproduct marketing studies.  Lead time required between decision and plant
completion has increased substantially in recent years.  It is critical,
therefore, that projections be estimated as far  in the future as is practical.
Efforts should be made to obtain more recent data for better forecasts than
have been available through conventional channels.

     Emphasis should be placed on projected boilers since they dominate the
1983 solution and are expected to be the most likely candidates for FGD
byproduct marketing.

     Application of more stringent environmental regulations should be ana-
lyzed for effects on model solutions.  Use of clean fuel may be eliminated
as a single compliance strategy alternative for boilers coming online after
1984.

     The model should be expanded to calculate scrubbing and marketing eco-
nomics for projected boilers regardless of compliance by using clean fuel.
New technology and higher clean fuel costs could significantly alter the
economics of using clean fuel compared with the use of noncomplying fuels
and scrubbing.

     ACFL values greater than $0.70 per MBtu should be included in model
runs projected beyond 1983.

     Greater emphasis should be given to potential transportation advantages
by water traffic.  Backhaul potential should also be analyzed where applica-
ble.

     Projections of avoidable construction costs for future sulfuric acid
plants should be developed.  The current model only considers the costs that
can be avoided by shutting down an existing or projected sulfuric acid plant
operation.  For future considerations it should also include all costs that
can be avoided by not building and operating new plants.

     Updated analysis of the potential for FGD byproduct sulfur should be
continued.  Technological changes affecting this, and other FGD processes,
should be incorporated into the model as information becomes available.

                                    xiii

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         POTENTIAL PRODUCTION AND MARKETING OF FGD BYPRODUCT SULFUR

               AND SULFURIC ACID IN THE U.S. - 1983 PROJECTION


                                INTRODUCTION
     Air quality regulations have made it necessary for industries burning
fossil fuels to greatly reduce the quantities of pollutants emitted in flue
gas.  Sulfur oxides (SOX), the major gaseous pollutants in flue gas, have
received particular attention, especially in the power industry with its
many large, coal-burning plants (Kaplan and Maxwell, 1977).  The use of
naturally occurring low-sulfur fuel is not a universally applicable solution
and coal-cleaning processes are not technically mature; therefore, most
current emission control technology is directed toward flue gas desulfuri-
zation (FGD) processes.

     The majority of the FGD processes now in use are scrubbing systems
producing insoluble sulfites and sulfates which are either discarded as
waste or processed to produce sulfur or a useful compound.  The most widely
used and technically advanced scrubbing systems use limestone or lime as an
absorbent and produce a waste sludge of calcium sulfur salts.  Others, designed
to produce regenerated absorbent and a salable byproduct, include magnesia
scrubbing which produces sulfuric acid and the Wellman-Lord/Allied Chemical
system which produces sulfur.

     Determination of the most suitable and economical emission control
strategy for a particular application is often an important and difficult
decision based on many complexly interrelated factors.  For the past decade
the Tennessee Valley Authority (TVA), in conjunction with the U.S. Environ-
mental Protection Agency (EPA), has conducted design and economic evaluations
of FGD systems to develop a systematic analysis of scrubbing costs applicable
to general and specific situations in the power industry.

     An important portion of these studies has been the development of a
byproduct marketing analysis system to relate the effects of power industry
manufacture of sulfuric acid from flue gas SOX to FGD costs and to the U.S.
sulfuric acid manufacturing industry.  The first study  (Waitzman et al.,  1973)
developed a limited computerized production-transportation-marketing analysis
system which revealed both the complexity of such analytical techniques and
the great potential benefit of an expanded computerized system  in FGD studies.

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     In subsequent studies  (Bucy et al., 1976; Corrigan, 1974) the computer-
ized system was expanded and applied to other sulfur byproducts.  In 1978 the
result of a greatly expanded byproduct marketing system analysis was published
as Potential Abatement Production and Marketing of Byproduct Sulfuric Acid in
the U.S. (Bucy et al., 1978), hereafter referred to as Potential Abatement
Production.  This analysis  incorporated data on over 900 U.S. power plants,
comprehensive data on U.S.  air quality regulations, extensive rail and barge
transportation data, and manufacturing data on U.S. sulfuric acid producers.
The data were used in the integrated program system of the byproduct marketing
system to determine the economics of byproduct sulfuric acid manufacture in
comparison with other emission control strategies under specific conditions
in the power, transportation, and sulfuric acid industries.  The results were
based both on an analysis of FGD costs versus different clean fuel costs and
on a determination of the marketability of the byproduct acid at the condi-
tions used.  The system may thus be used to determine the economics of FGD
systems in a particular application or for a wide range of more general
studies involving different economic or regulatory conditions.

     The comprehensive Potential Abatement Production was based upon the
latest data available at the time of the study.  Federal Power Commission
(now FERC, Federal Energy Regulatory Commission) power plant data from the
period 1969-1973 were used.  Other information was generally from the period
1970-1975.  The data were projected by standard techniques to 1978 for use
in the byproduct marketing  system.  Potential Abatement Production thus
represents a projection to  1978.

     This report utilizes data available through late 1978 and projects
through 1983.  Boilers online by the end of 1983 are assumed to not be
affected by the revised new source performance standards (NSPS) proposed in
the September 19, 1978, Federal Register.  Since this report is based on pro-
jected 1983 conditions the new NSPS proposed regulations are not used.  It is
a summary report dealing only with the effects and results of the updated
system.  A full treatment of the background of the byproduct marketing system
and the U.S. sulfuric acid  industry is provided in Potential Abatement Pro-
duction.  The computer system is fully described in the Computerized FGD
Byproduct Production and Marketing System;  Users Manual (Anders, in press).
The design and economic premises used to calculate FGD system costs are
described in Detailed Cost Estimates for Advanced Effluent Desulfurization
Processes (McGlamery et al., 1975).

     A comprehensive description of the computer byproduct marketing system
is presented in Appendix A.  Also included in Appendix A is a brief descrip-
tion of the FGD processes included in the system.  A review of the system
description is essential to understanding the method by which the byproduct
marketing results are generated.

     A description of the data elements of the computer system that were
updated from the 1978 projection to the 1983 projection is given in Appendix B.
New boilers, updated regulations, capital and operating cost escalation, trans-
portation (rail and barge) cost projections, sulfuric acid plant demand data
base update, sulfur terminal selection, sulfuric acid avoidable cost update
(including a major change in steam credit), smelter update, and modifications
to the market simulation linear programing model are included.
                                     2

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                                   RESULTS
FGD BYPRODUCT SULFURIC ACID

Potential 1983 Supply and Demand

     For 1983, 94 power plants with 165 boilers were calculated to be out of
compliance and were included in all model runs.  The potential power plant
FGD byproduct sulfuric acid production considered in any model run is a
function of the alternative clean fuel level (ACFL) used.  At the 1983 ACFL
values of $0.50 and $0.70 per MBtu, the potential production considered from
power plants alone was 800,000 tons and 4,600,000 tons respectively.  The
surplus Canadian production considered was 200,000 tons.  The net western
smelter surplus considered was 700,000 tons and the eastern smelter incre-
mental production considered was 400,000 tons.   The total potential production
(supply) considered in the 1983 $0.50 and $0.70 ACFL solutions from all sources-
power plants, eastern smelters, western smelters, and Canada—was 2,100,000
tons and 5,900,000 tons respectively.  The total potential consumption (demand)
considered in the 1983 model runs was 23,300,000 tons at 86 acid plant loca-
tions .

1983 $0.50 ACFL Solution
     In the 1983 $0.50 solution only 5 power plants of the 94 estimated to
be out of compliance were candidates for marketing.  The solution indicated
a market potential for four of the five plants and total sales were indicated
to be 300,000 tons.  The four plants, along with the consumers selected, are
shown in Table 1.  The fifth plant was included on the basis of a direct com-
parison between magnesia-scrubbing costs and the ACFL (limestone-scrubbing
costs were higher than the $0.50 ACFL).  No sales potential for this plant
was indicated in the solution as a result of a $25.23 per ton incremental
cost.  The number of plants in the $0.50 ACFL solution was limited to five
and the same five plants were also selected for marketing in the $0.70 ACFL
solution.  Because of this, a detailed analysis of 1983 results was limited
to the $0.70 ACFL solution.

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 TABLE  1.  FOUR POWER PLANTS MARKETING ACID IN THE 1983 $0.50 ACFL SOLUTION

Plant
location
Tons
MWa of acid
Consumer
Location
Tons
of acid
NC
MI
TX
KY
1,440    67,000
  800    75,000
1,410
  500
     Total
102,000
 71,000

315,000
Royster
Swift
Weaver
American Cyanamid
American Cyanamid
Swift
Olin
American Cyanamid
Norfolk, VA
Wilmington, NC
Norfolk, VA
Joliet, IL
Kalamazoo, MI
Calumet City, IL
Pasadena, TX
Hamilton, OH
 15,000
 26,000
 26,000
 26,000
 19,000
 30,000
102,000
 71,000

315,000
a.  MW = megawatts = million watts.
1983 $0.70 ACFL Solution

Model Generation Prescreen Strategy Selection—
     In the $0.70 ACFL model, 26 power plants of the 94 estimated to be out
of compliance were candidates for marketing.  At 43 plants either limestone-
scrubbing costs were greater than $0.70 per MBtu or incremental costs based
on a magnesia-ACFL comparison were greater than $30 per ton.  A clean fuel
strategy was selected for these plants.  At 24 plants, limestone-scrubbing
costs were less than $0.70 per MBtu but the potential acid production was
less than 66,000 tons per year.  A limestone-scrubbing strategy was selected
for these plants.  At one plant, a mixed strategy of clean fuel and scrubbing
was indicated.  Because the potential production of acid from the partial
scrubbing was less than 66,000 tons per year, a mixed strategy of clean fuel
and limestone scrubbing was selected for this plant.  The remaining 26 plants
were selected for inclusion in the equilibrium solution for analysis of
marketing potential.   A summary of the results of the $0.70 ACFL model genera-
tion prescreen strategy selection is shown below.
              All clean fuel
              All limestone scrubbing
              Mixed clean fuel and limestone
               scrubbing
              Potential magnesia scrubbing

                   Total
                                  Number  of  plants

                                         43
                                         24

                                          1
                                         26

                                         94
The potential production from these 26 plants was 4,600,000 tons of FGD
byproduct sulfuric acid as shown in Table 2.

-------
 TABLE 2.   TWENTY-SIX POWER PLANTS INCLUDED IN 1983




$0.70 ACFL SOLUTION FOR ANALYSIS OF MARKET POTENTIAL

Plant
location
NC
IL
OH
OH
OH
IL
MI
MI
PA
KY
FL
TX
IL
IN
IN
KY
KY
KY
MS
PA
PA
IN
SC
TX
FL
MI
MW
considered
1,440
550
680
787
413
1,271
1,283
1,185
525
800
1,280
2,820
2,342
438
1,239
2,011
682
495
877
650
615
2,587
595
951
1,136
3,247
Incremental cost,
$/ton acid
0.00
22.61
37.76
28.34
27.70
26.31
22.59
13.09
51.66
26.27
12.15
0.00
20.24
46.35
25.96
6.43
40.22
24.37
37.84
24.65
37.44
13.39
29.51
27.77
27.83
13.26
Tons of acid
considered
67,592
74,394
137,133
363,075
67,243
321,051
197,390
117,946
69,209
132,361
196,573
156,384
402,939
73,221
156,607
338,976
161,584
99,482
67,862
82,161
68,664
334,927
100,205
159,425
226,708
449,826
   Total                                   4,622,938

-------
Equilibrium Solution—
     The  1983  $0.70 ACFL equilibrium solution indicated a market potential
for 7 of  the 26 plants considered and total sales of 1,200,000 tons.

     No market potential was indicated in the equilibrium solution for 19 of
the plants included in the solution and previously shown in Table 2.

     One  plant included in Table 2 was considered in the 1983 solution on
the basis of a direct comparison between magnesia-scrubbing costs and the
ACFL (limestone-scrubbing costs were greater than $0.70 per MBtu but incre-
mental unit costs for acid production compared with the ACFL were less than
$30 per ton).  No sales potential was indicated in the solution for this
plant; projected incremental unit cost of the acid was $24.37 per ton.  A
clean fuel strategy was selected for this plant.

     The  remaining 18 plants with no sales indicated were considered in the
solution  on the basis of an incremental cost resulting from a limestone-
versus magnesia-scrubbing cost comparison.  A limestone-scrubbing strategy
was selected for these plants.

     Two  of the seven plants selected for marketing had a potential market
for only part of their projected production.  In both cases there was an
acceptable match between the market potential and the use of a mixed scrubbing
and clean fuel strategy.  These plants (shown previously in Table 2) were
selected  for a combined magnesia-scrubbing and clean fuel strategy as shown
below.
Plant
location
MI
MI
MWa
scrubbed
800
2,430
MW using
clean fuel
385
817
Tons
of acid
75,000
335,000
                a.  MW = megawatts = million watts

A summary of the strategy selection for plants in the equilibrium solution
is shown as follows:

                                           Number of plants

                All clean fuel                     1
                All limestone scrubbing           18
                Mixed clean fuel and
                 magnesia scrubbing                2
                Magnesia scrubbing                 5

                     Total                        26

-------
Strategy Selection Summary—
     There were a total of 94 power plants considered in the 1983 $0.70 ACFL
model.  Of these, 68 plants were not candidates for marketing analysis.  After
the model was solved and the foregoing equilibrium solution generated the
strategies for the remaining 26 plants, the strategy selection for all 94
plants became:
                All clean fuel
                All limestone scrubbing
                Mixed clean fuel and
                 limestone scrubbing
                Mixed clean fuel and
                 magnesia scrubbing
                Magnesia scrubbing

                     Total
Number of plants

       44
       42

        1
       _5

       94
     The seven power plants with marketing potential indicated were ranked
using the following four criteria:  (1) the balance between the production
capacity of each power plant and its potential market, (2) the balance
between the acid capacity of each consumer and the byproduct acid supply
from both power plants and smelters, (3) the potential sales margin per ton
of acid from each power plant, and  (4) the sales indicated in the $0.50
solution.  The power plants and acid plants selected and the projected sales
are shown in Table 3.  The order of the power plants in the table reflects
the results of the ranking analysis.

TABLE 3.  SEVEN POWER PLANTS MARKETING ACID IN THE 1983 $0.70 ACFL SOLUTION
Ranked
order
1


2



3
4


5


6

7
Plant
location
NC


KY



TX
MI


MI


FL

IL
MW
1,440


2,011



2,820
800


2,430


1,280

550
Total
Tons
of acid
67,000


339,000



156,000
75,000


335,000


197,000

74,000
1,243,000
Consumer
Royster
Swift
Weaver
Allied
American Cyanamid
Army Ammun. Plant
Marion
Olin
American Cyanamid
American Cyanamid
Swift
Du Pont
Du Pont
Allied
Kerr-McGee
Royster
USI Chemical

Location
Norfolk, VA
Norfolk, VA
Norfolk, VA
Nitro, WV
Hamilton, OH
Radford, VA
Indianapolis, IN
Pasadena, TX
Joliet, IL
Kalamazoo, MI
Calumet City, IL
North Bend, OH
Cleveland, OH
Cleveland, OH
Cottondale, FL
Mulberry, FL
Tuscola, IL

Tons
of acid
15,000
26,000
26,000
101,000
71,000
125,000
42,000
156,000
38,000
7,000
30,000
131,000
150,000
54,000
11,000
186,000
74,000
1,243,000

-------
Projected Boilers—
     There were 26 projected boilers at 22 plants included in the 165 boilers
at 94 power plants considered in the 1983 model.  Of the 26 boilers, 9 were
eliminated from consideration in the model generation prescreen.  They were
at five plants selected for limestone scrubbing because of limited production
potential and at four plants selected for clean fuel.  The remaining 17 pro-
jected boilers were at 13 of the 26 plants included in the equilibrium solu-
tion.

     Projected boilers were a factor at six of the seven plants selected for
marketing.  At the 7 plants a total of 10 projected boilers were selected
for magnesia scrubbing compared with 7 existing boilers selected.  The pro-
duction and sales from projected boilers considered in the equilibrium solu-
tion was 700,000 tons and from existing boilers only 500,000 tons.

     The remaining seven projected boilers considered in the equilibrium
solution were at plants with no sales indicated.  One of the seven boilers
was at the plant with incremental costs based on a magnesia-ACFL comparison
and therefore selected for clean fuel.  The remaining six boilers were at six
plants selected for limestone scrubbing.

     In summary, projected boilers contributed almost 60% of the 1983 sales
even though they made up only 15% of the total number of boilers considered
for acid sales.  Existing boilers were 85% of the total number of boilers
considered in 1983 but they contributed only 40% of projected sales.

Smelter Sales—
     The eastern smelter incremental production projected for 1983 was
absorbed by the market in the equilibrium solution.  The eastern smelters
and the consumers selected are shown in Table 4.  The Canadian incremental
production projected for 1983, also absorbed by the market as before, is
shown in Table 5.

     No marketing potential through transshipment terminals for the western
smelter projected production was indicated in the solution.  This loss of
market potential for the western supply is a result of the relatively higher
rate of increase in projected rail costs compared with projected avoidable
production costs of sulfuric acid.

-------
              TABLE 4.  THIRTEEN EASTERN  SMELTERS MARKETING ACID  IN  THE 1983  $0.70 ACFL SOLUTION
vo

Smelter
N.J. Zinc
St. Joe Minerals
AMAX
AMAX
Engelhardt Zinc
St. Joe Minerals

Cities Service




ASARCO
AMAX
ASARCO
ARMCO
Climax Molybdenum
Climax Molybdenum
Location
PA
MO
IL
MO
OK
PA

TN




TX
IL
-TX
OH
PA
IA
Tons
of acid
26,000
14,000
12,000
7,000
9,000
54,000

200,000




16,000
48,000
13,000
2,000
8,000
10,000
Consumer
Du Pont
Monsanto
Monsanto
Monsanto
Pennsalt
Eas tman
3-M
Army Ammun. Plant
Army Ammun. Plant
Reichold
Home Guano
Columbia Nitrogen
El Paso Products
Monsanto
Stauf fer
Allied
Allied
USI Chemical
Location
Gibbstown, NJ
E. St. Louis, IL
E. St. Louis, IL
E. St. Louis, IL
Tulsa, OK
Rochester, NY
Copley, OH
Tyner, TN
Radford, VA
Tuscaloosa, AL
Do than, AL
Moultrie, GA
El Paso, TX
E. St. Louis, IL
Ft. Worth, TX
Cleveland, OH
Cleveland , OH
Dubuque, IA
Tons
of acid
26,000
14,000
12,000
7,000
9,000
5,000
49,000
99,000
34,000
41,000
8,000
18,000
16,000
48,000
13,000
2,000
8,000
10,000
                 Total
419,000
419,000

-------
         TABLE 5.  MARKET DISTRIBUTION OF CANADIAN INCREMENTAL ACID

                         IN 1983 $0.70 ACFL SOLUTION

Terminal
Buffalo




Detroit
Total
Tons
of acid
200,000




0
200,000
Consumer
American Cyanamid
Du Pont
Essex
Du Pont
Cities Service


Location
Bound Brook, NJ
Cornwell Hgts. , PA
Newark, NJ
Gibbstown, NJ
Monmouth Jet . , NJ


Tons
of acid
49,000
56,000
12,000
57,000
26,000

200,000

Sensitivity of the Sulfur Price—
     The 1983 $0.70 solution was based on a sulfur price of $70 per long
ton ($62.50 per short ton) f.o.b. Port Sulphur.  Analysis showed the solution
to be fairly stable even if the sulfur price were to be reduced by $20 per
long ton.  Only two of the seven power plants producing and marketing sulfuric
acid would be affected.  A $20 per long ton sulfur price reduction would
affect 1983 solution markets amounting to 200,000 tons of the 1,200,000 tons
in the solution.

Comparison of 1978 and 1983 Results

     Revisions to the marketing model (explained in Appendix B) to allow 5-
year projections to 1983 produced results that were significantly different
from 1978 results.  Projected scrubbing cost escalations eliminated the 1983
$0.35 ACFL model.  Updated compliance status reduced the number of candidates
in the $0.50 and $0.70 ACFL models.  Both the 1978 and 1983 $0.70 ACFL models
contain the same plants included in the respective $0.50 ACFL models.  For
these reasons, detailed comparisons between the 1978 and 1983 models were
limited to the $0.70 ACFL.

Model Generation and Equilibrium Solutions—
     In the 1978 model, 187 plants with 833 boilers were considered to be out
of compliance and were included in all model runs.  Limestone-scrubbing costs
greater than the $0.70 ACFL and potential sulfuric acid production of less
than 66,000 tons per year eliminated 127 plants (the direct magnesia-ACFL
comparison was not used).  The remaining 60 plants with a total potential
production of 10,800,000 tons were included in the equilibrium solution.  The
solution indicated a market potential for 29 of the 60 plants and total sales
of 5,600,000 tons.  These plants are shown in Table 6.
                                     10

-------
TABLE 6.  TWENTY-NINE POWER PLANTS MARKET-




ING ACID IN THE 1978 $0.70 ACFL SOLUTION

Plant
location
NY
IL
IL
IL
TX
OH
IL
NC
FL
GA
GA
KY
NY
PA
PA
PA
IN
AL
TX
FL
TN
TN
KY
TN
OH
MO
MO
VA
MO
MW
1,200
616
590
602
836
1,255
1,271
2,286
964
1,792
1,820
1,011
1,511
650
1,600
940
1,062
910
634
1,136
1,482
1,723
2,558
2,660
1,831
1,150
1,100
845
527
Tons
of acid
75,016
126,448
77,549
96,692
125,523
379,768
281,208
105,209
192,742
253,367
255,939
148,978
126,735
72,342
241,426
72,786
147,606
68,824
95,195
250,963
301,246
223,146
628,358
572,320
254,335
67,997
176,480
68,606
108,149
             Total         5,594,953
                     11

-------
     Only nine plants with sales in the 1978 solution were included in the
1983 solution and only three of the nine had sales indicated.  Boilers pro-
jected for 1983 were a factor in the 1983 sales at the three plants having
sales in both 1978 and 1983.  At two of the three plants, boilers projected
for 1983 were the sole basis for 1983 sales, rather than the existing boilers
that were the basis for sales in 1978.

     The 26 plants with 1978 sales excluded from 1983 sales can be grouped
by compliance status, scrubbing cost escalations, the size-age screen, and
insufficient production potential.  In the first group, 12 plants were pro-
jected to be in compliance in 1983 because of adoption of other scrubbing
strategies, use of complying fuels, or application of less stringent regula-
tions.  These 12 plants had sales of 2,800,000 tons in 1978.  Updated com-
pliance status therefore eliminated 50% of the 1978 sales from the 1983
model.  Six plants were considered in the 1983 solution but had no sales.
In the 1978 solution these six plants had sales of 1,200,000 tons, 21% of
the 1978 total.  Five plants did not pass the 1983 $0.70 ACFL screen.  Sales
at these plants were 600,000 tons, 11% of the 1978 total.  Escalated scrubbing
costs therefore eliminated 33% of the 1978 sales from the 1983 model.  Two
plants with sales of 500,000 tons were excluded by the size-age screen.
The size-age screen thus eliminated 9% of the 1978 sales from the 1983 model.
One plant with sales of 100,000 tons in 1978 had a potential production in
1983 of less than 66,000 tons; insufficient production thus eliminated 2%
of the 1978 sales from the 1983 model.

     The plants with projected 1978 sales that were excluded from sales in
the 1983 model are summarized as follows:

Number of         Reason for exclusion from          1978 sales,   % of total
 plants	1983 consideration or sales	tons	1978 sales

12          Alternate strategies, complying fuels,    2,800,000        50
            or less stringent regulations

 6          Included in solution but no sales         1,200,000        21
            because of incremental costs

 5          1983 limestone-scrubbing costs >$0.70       600,000        11
            per MBtu or magnesia-ACFL incremental
            costs >$30 per ton

 2          Size-age screen                             500,000         9

_^          Potential production <66,000' tons per       100,000        _2
            year

26          Total                                     5,200,000        93


     The 1983 sales were about 22% of the 1978 sales.  The total loss of 1978
sales described above amount to 93%.  The 93% loss of 1978 sales was partially
offset by a gain of 15% from the plants added for 1983.

                                    12

-------
Projection and Cost Escalation Effects—
     The supply and demand patterns for both the power plants and smelters
(Tables 3-5) In the 1983 solution emphasize the localized nature and limited
amount of market interaction compared with the 1978 solution.  These were
due to the continuing effects of the relatively higher projected rates of
cost escalation for scrubbing and transportation as compared with avoidable
production costs.

     In addition to the direct effects of cost escalation, an indirect effect
on the 1983 projection resulted from the fact that boilers online or scheduled
to be online before the end of 1978 had 5 fewer years remaining life in 1983.
The individual effects of escalation and aging are difficult to identify
separately but the combined effects can be illustrated by incremental costs.
Six power plants that had sales indicated in the 1978 solution were included
in the 1983 solution but had no sales.  These plants with their comparative
incremental costs per ton of acid for 1978 and 1983 are shown in Table 7.
Even if transportation costs had been held constant the changes in FGD incre-
mental costs alone would probably have eliminated these plants from any mar-
ket potential.


              TABLE 7.  INCREMENTAL COSTS OF SIX POWER PLANTS

          WITH SALES IN THE 1978 $0.70 ACFL SOLUTION BUT NO SALES

                      IN THE 1983 $0.70 ACFL SOLUTION

Plant
location
OH
IL
PA
PA
TX
FL
Incremental
1978
12.47
11.47
8.85
18.47
16.12
16.72
cost, $/ton
1983
28.34
26.31
24.65
37.44
27.77
27.83

Strategy Selection Summary, 1978 and 1983—
     The 1983 projection can be summarized as being a reduction in both the
number of plants and the potential sales compared with the 1978 model.  The
reasons for the reduction have been discussed in detail.  A summary of the
strategy selections made on the basis of the 1978 and 1983 byproduct marketing
model results at the $0.70 ACFL is shown as follows:
                                    13

-------
                                           Number of plants
                                             1978   1983

               All clean fuel                 71     44
               All limestone scrubbing        77     42
               Mixed clean fuel and
                limestone scrubbing           10      1
               Mixed clean fuel and
                magnesia scrubbing             0      2
               Magnesia scrubbing             29      5

                    Total                    187     94


FGD BYPRODUCT SULFUR

     There is considerable interest in elemental sulfur as a potential power
plant FGD byproduct.  It has marketing advantages over sulfuric acid which
include:

   1.  Over three times the equivalent sulfur concentration, resulting in
       significant freight and storage cost reductions.

   2.  Nonhazardous, noncorrosive properties.

   3.  Easy stockpiling characteristics for prolonged periods of low demand.

   4.  Less market competition than with a sulfuric acid FGD byproduct in
       many locations.

     It also has an added value of recoverable energy, in the production of
sulfuric acid from sulfur, of approximately 8 MBtu per short ton of sulfur
converted to sulfuric acid.  Thus far, however, the FGD costs for producing
sulfur by the Wellman-Lord/Allied Chemical system have been higher than
those for the limestone-scrubbing process or the magnesia-scrubbing process
with byproduct sulfuric acid.  There were no markets for FGD sulfur in
either the 1983 or 1978 solutions.  Its marketing potential, however,
warrants closer analysis.

     The market for FGD byproduct sulfur is wider and potentially greater
than the market for FGD byproduct sulfuric acid.  Sulfur can be marketed as
a raw material to all acid plants regardless of their size and production
costs.  FGD byproduct sulfuric acid marketing is typically limited to rela-
tively small, high-production-cost acid plants.
                                    14

-------
     In this 1983 projection there were 16 power plants whose  FGD byproduct
sulfur incremental costs (above the limestone-scrubbing  cost)  were projected
to be under $250 per short ton.  These plants were selected  to illustrate
the FGD sulfur marketing sensitivity to potential cost reductions.

     The incremental FGD byproduct sulfur cost of the 16  lowest plants in the
1983 projections does not look promising as compared with 1983 Port Sulphur
Frasch sulfur projected at $62.50 per short ton ($70 per  long  ton).  All of
these plants would have to reduce their incremental sulfur production costs
to less than 50% of the 1983 projection in order to compete with sulfur from
Port Sulphur.

     On the other hand, a closer look at the actual FGD  costs  involved indi-
cates a more encouraging future potential for FGD byproduct sulfur produc-
tion.  Basing the needed cost reduction on unit incremental costs can be
misleading.  Consider, for example, a power plant producing FGD byproduct
sulfur which would have to reduce its incremental cost to less than one-third
of the 1983 projection in order to compete with Port Sulphur sulfur on a
delivered cost basis.  On the basis of the total costs of FGD  (13.91 M$ per
year in this example), however, a reduction of only 8.5%  (1.185 M$ per year)
of the total production cost of the FGD process producing byproduct sulfur
will accomplish the reduction  in incremental cost required to  enter the
elemental sulfur market in competition with sulfur delivered from Port Sulphur.

     Table  8 lists the  1983 projected power plants with the lowest sulfur
production  costs, cumulative tonnage  from these plants if they adopt a
sulfur-producing FGD system, and the  reduction  in total FGD cost  required
to enter the market competitively.

     The first plant is shown  to become competitive with  a reduction  in
total FGD costs of only 3.1%.  The  other  15 plants  progressively  enter the
market with reductions  in their respective total  FGD  costs ranging from  5.4%
to 23.7%.   The combined market of  these plants  at the cost reduction  levels
shown is 265,723  tons  per year, equivalent to over  800,000 tons  of sulfuric
acid.  This represents  approximately  3% of the  1983 projected  sulfur  demand.
Table 8 also shows  that almost half of  this  annual  tonnage becomes competi-
tive with reductions in total  FGD  costs of less than  10%.  A  graphic  presen-
tation of  these data is shown  in  Figure  1 which is  a  plot of  percent  reduction
in total FGD  costs versus cumulative  sulfur  tonnage competitive  with  estimated
1983 Port  Sulphur  delivered  cost.

      It should  be noted that three of the power plants are  projected  to  be
marketing  FGD byproduct sulfuric  acid in  1983.   Two of these  plants  have a
significant annual net revenue from these sales and the  third has a  very
small net  revenue.   In order to meet  the  competitive alternative of  byproduct
sulfuric acid  in these three cases, the sulfur  delivered price would have to
be additionally reduced by  the amount of  net revenue from projected  byproduct
sulfuric acid.   This  results in an adjustment in the required reduction in
FGD  costs.
                                     15

-------
                   TABLE 8.  MARKETING SENSITIVITY TO FGD

                   BYPRODUCT SULFUR COST REDUCTION - 1983





State
KS
IL
IN
TX
FL
WV
IA
NC
MM
NC
TX
WI
DE
KY
IL
UT
Cumulative
potential
1983 sulfur
market,
short tons
30,029
45,751
58,236
69,489
74,981
85,821
87,713
94,677
102,332
122,593b
169,469b
184,876
196,643
226,463
248,763b
265,723C
% reduction in total
FGD costs
required to market
byproduct sulfur
production3
3.1
5.4
6.0
6.2
6.2
7.3
7.9
8.5
8.3
9.0
11.2
14.9
15.1
18.1
18.2
23.7

                 a.  Not adjusted to compete with alterna-
                     tive of FGD byproduct sulfuric acid.
                 b.  Marketing FGD byproduct sulfuric acid
                     in 1983 model solution.
                 c.  Includes only marketable portion (46%)
                     of potential FGD byproduct sulfur
                     production from this power plant.


     In one instance this adjustment increases the required FGD cost reduction
from 9.0% to 12.8%.  Another power plant must reduce costs by 15.8% to reflect
this adjustment from a required reduction of 11.2% to meet sulfur competition
only (as shown in Table 8 and Figure 1).  Table 9 shows the effects of this
adjustment for competitive byproduct sulfuric acid sales.  Figure 2 is a
graphic presentation of these data.

     It should be noted that marketing sensitivity to FGD byproduct sulfur
data is presented primarily for illustration purposes.  Competition is based
on sulfur delivered from Port Sulphur at $70 per long ton plus delivery and
handling expenses escalated to 1983.
                                     16

-------
 (-1
 3
CO
     O


     O

     O,

     P3

     I

     CO
     4J
     CO
     O


.-    Q
CO
co
CTv
C
O
O
3
0)
OS
    20.0
    15.0
    10.0
     5.0
                   O  Individual power plant entrance into sulfur market
                                                        I
                        50            100             150              200            250

                          Cumulative Potential  1933 Market  -  Thousand Short Tons Sulfur
         Figure  1.   Marketing sensitivity to FGD byproduct  sulfur cost reduction - 1983.

-------
                 TABLE 9.   MARKETING SENSITIVITY TO FGD

                 BYPRODUCT SULFUR COST REDUCTION - 1983

           (Adjusted for byproduct sulfuric acid competition)




State
KS
IL
IN
TX
FL
WV
IA
NC
NM
NC
WI
DE
TX
KY
IL
UT
Cumulative
potential
1983 sulfur
market,
short tons
30,029
45,751
58,236
69,489
74,981
85,821
87,713
94,677
102,332
122,593
138,000
149,767
196,643
226,463
248,763
265,723
2 reduction in total
FGD costs
required to market
byproduct sulfur
production
3.1
5.4
6.0
6.2
6.2
7.3
7.9
8.5
8.8
12. 8a
14.9
15.1
15. 8a
18.1
18. 4a
23.7

            a.   Adjusted to compete with alternative  of FGD
                byproduct sulfuric acid.
            b.   Includes only marketable portion (46%)  of
                potential FGD production from this power plant.


     At the level of projected 1983 Port Sulphur delivered costs,  Canadian
sour gas recovered sulfur could be more competitive than the Port  Sulphur
source.  This is especially true of Midwestern and Great Plains  locations.
Six of the 16 plants in the illustration are in these areas and  may be in
the range of competitive Canadian sulfur supplies.
                                     18

-------

g 20.0
41_l
~ Byproduct Sul
K-
Ln
O
CO
CO
o
c_>
o
Cu
ro
oo
2 10.0
c
•H
C
o
•H
u
c
3
•u
cu
Pi
s^ 5.0
1 1 1
O Individual power plant entrance into sulfur market
—





™~
















i















•e-

•e-
1









-e-

















i
e











i
r~
-





—
Figure 2.
   50             100            150            200            250
     Cumulative Potential 1933 Market - Thousand Short Tons Sulfur

Marketing sensitivity to FGD byproduct sulfur cost reduction - 1933,
for byproduct sulfuric acid competition.)
                                                                                 (Adjusted

-------
                                 CONCLUSIONS
     The overall effect of the 1983 update was a reduction of power plant
FGD byproduct sulfuric acid sales compared with the 1978 projection.   The 1978
model was generally based on data from the period 1970 to 1975.  Although the
1983 model was based on updated data through late 1978, the model structure
itself was essentially unchanged.  Some of the assumptions and constraints
used for the 1970 to 1978 time period may be unnecessarily limiting for
extended future projections.

     The time period of model development and prior model runs was character-
ized by uncertainty.  Many power plants developed a "wait and see" posture
until more stable conditions evolved.  Much of the uncertainty has been
resolved and previous sales candidates have chosen other strategies as indi-
cated in the update.  At the same time, again as a result of more stable
conditions, alternate compliance strategies for projected boilers are being
selected concurrently with construction plans.  (Based on the updated data,
23 projected boilers that have already selected limestone scrubbing and 49
projected boilers that have already selected clean fuel would otherwise have
been included in the model.)  The elimination of candidates, because of
alternate strategy selection, affected the 1983 solution more than all of the
other updated conditions.  The limited potential production for marketing
that resulted made the effects of other changes difficult to assess.

     An increasing lead time associated with compliance strategy selection
was apparent from the 1983 projection.  Even a 5-year forecast appears to
impose unjustified constraints on a realistic analysis of future marketing
potential.

     The 5-year projection to 1983 illustrated, as expected, that projected
boilers are more likely candidates than existing boilers for the potential
production and marketing of FGD byproduct sulfuric acid.  Existing boilers
have fewer remaining years of useful life over which to amortize FGD capital
costs.  In addition, capital investment is higher for FGD retrofit installa-
tions.  The 1983 model in effect delayed FGD implementation 5 years for the
boilers in the 1978 model.  This delay significantly altered the economics of
strategy selection for existing boilers.  They are expected to contribute
even less to sales in extended future projections.  Based on the 1983 results,
the relative marketing potential of projected boilers was greater than expected
and they should completely dominate more extended projections.  The greater
than expected effect can be attributed to previous model projections of only
1.5 to 2 years in which the advantages of projected boilers were minimized.
                                     20

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     In the current model boilers for which a strategy has already been
selected are not considered; strategy selection is assumed to be final.
While the selection of a scrubbing strategy may be final,  this is not nec-
essarily true of a clean fuel strategy, especially for future plants.  There
are several factors that could greatly alter both the choice and the economics
of a clean fuel strategy.  For example, improvements are being made in existing
technology and new scrubbing processes are emerging, regulations recently
proposed by EPA will eliminate clean fuel as a total compliance alternative
for future plants (power plants projected to come online after 1984 will
come under the revised NSPS proposed in the September 19,  1978, Federal Register)
and clean fuel premiums are expected to increase.

     In addition to a reduction in the total supply considered, higher FGD
costs due to escalation were also responsible for the reduced sales indicated
in the 1983 solution.  Projections beyond the strategy selection lead time for
projected boilers, which are expected to be predominately coal fired, could
increase future sales projections.  Transportation costs were also escalated
but the escalation in avoidable production costs that would be expected was
suppressed by the updated heat credit.  The limited supply potential prevented
a determination of the overall effects on sales projections of either the
escalated transportation costs or the suppressed escalation of avoidable
production costs resulting from the updated steam credit.

     As FGD, transportation, and avoidable production costs for sulfuric acid
increase, correspondingly higher ACFL values will be required to fully analyze
potential market interactions for extended projections.  Limiting the 1983
model to the $0.70 ACFL is not estimated to have affected sales.  At a $1.00
ACFL value only 14 additional plants would have been included in the model.
The incremental costs of these plants made additional sales highly unlikely.

     The 1983 solution was relatively insensitive to a $20 per long ton
potential sulfur price reduction.  The distribution of 200,000 tons of acid
from two power plants would be affected by such a reduction.  Sales could
possibly be obtained for this 200,000 tons at other less profitable demand
points.

     As in the 1978 solution, no byproduct sulfur was produced and marketed
in the 1983 solution.  There are, however, indications that it is not as
noncompetitive as it appears from an examination of incremental FGD byproduct
sulfur costs above limestone-scrubbing FGD costs.  There were only 16 power
plants in the 1983 projection with incremental costs of less than $250 per
short ton of sulfur (compared with $62.50 per short ton at Port Sulphur).
However, a 10% reduction in total FGD costs could make nine of these plants
competitive with Port Sulphur or FGD byproduct sulfuric acid.  A technological
advance in FGD byproduct sulfur production which reduced total FGD costs by
10% or more could result in commercial feasibility at some locations.

     Transportation is already a major factor in FGD byproduct marketing con-
siderations.  The advantage of barge over rail transportation is increasing
and access to water transportation is becoming increasingly important.  A
reduction in acid transportation costs by the use of barge shipments could
offset some of the effects of other cost escalations and increase future pro-
duction and marketing potential.
                                      21

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                               RECOMMENDATIONS
     Projections should be developed to a more extended time frame.   The
increasing lead time required to analyze options and implement decisions
almost mandates a minimum of 10-year forecasts.   Emphasis in the next 2  years
should be directed toward obtaining the best available data for a 1990 pro-
jection.

     Efforts should be made to obtain more recent data for forecasting
(including power plant projections) than have been available through conven-
tional channels.

     Emphasis should be placed on projected boilers.  They dominate the  1983
solution and are expected to be the most likely candidates for FGD byproduct
marketing.

     Application of more stringent environmental regulations should be
analyzed for their effects on model solutions.

     The model should be expanded to calculate scrubbing and marketing eco-
nomics for projected boilers regardless of compliance as a result of clean
fuel usage.  There are several factors that could significantly alter the
economics of using clean fuel compared with the use of noncomplying fuel and
scrubbing.  Foremost among these factors is the future application of the
revised NSPS calling for 85% to 90% sulfur removal from the fuel supply.
Decisions based on current information and technology should not preclude
the consideration of future possibilities  involving clean fuel and scrubbing
strategies.

     ACFL values greater than $0.70 per MBtu should be included in future
model runs.

     Greater emphasis should be given to potential transportation advantages
by water traffic.  Backhaul potential should be analyzed where applicable.

     Projections of avoidable construction costs for future sulfuric acid
plants should be developed.  The current model only considers the costs  that
can be avoided by shutting down an existing or projected sulfuric acid plant
operation.  For future considerations it should also include all costs which
can be avoided by not building and operating new plants.  Purchase of FGD
sulfuric acid byproduct is, of course, an alternative to the construction of
new sulfuric acid plants as demand increases.

     Updated analysis of the potential for FGD byproduct sulfur should be
continued.  Technological changes affecting this and other FGD processes
should be incorporated into the model as information becomes available.

                                     22

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                                 REFERENCES
Anders, W. L. (In Press), Computerized FGD Byproduct Production and Marketing
     System:  Users Manual.  TVA, Office of Power, Emission Control Development
     Projects, Muscle Shoals, Alabama.

Bucy, J. I., J-  L. Nevins, P. A.  Corrigan, and A.  G. Melicks (1976),
     The Potential Abatement Production and Marketing of Byproduct Elemental
     Sulfur and Sulfuric Acid in the United States.  Report S-469, TVA,
     Office of Agricultural and Chemical Development, Muscle Shoals, Alabama.

Bucy, J. I., R.  L. Torstrick, W.  L. Anders, J. L.  Nevins, and P. A. Corrigan
     (1978), Potential Abatement Production and Marketing of Byproduct Sulfuric
     Acid in the U.S.  Interagency Report, Bull. Y-122, TVA, Office of Agri-
     cultural and Chemical Development, Muscle Shoals, Alabama; EPA-60Q/7-78-
     070, EPA, Office of Research and Development, Washington, DC.

Bureau of Business and Economic Research, Memphis  State University  (1978),
     Impacts of a Waterways User Charge on the Economy of Tennessee.
     Memphis, Tennessee.

Corrigan, P. A.  (1974), Preliminary Feasibility Study of Calcium-Sulfur
     Sludge Utilization in the Wallboard  Industry.  Report  S-466,  TVA,
     Office of Agricultural  and Chemical  Development, Muscle Shoals, Alabama.

Current  Industrial Reports,  U.S. Department of Commerce  (1978), Inorganic
     Fertilizer Materials  and Related Production.   U.S. Government  Printing
     Office, Washington, DC.

Economic Indicators  (1974,  1975,  1976)  Chem.  Eng., Vols. 81, 82,  83.

Gregory, N.,  G.  Isaacs,  B. Laseke, M. Melia,  A. Patkar, and M.  Smith  (1978),
     EPA Utility  FGD Survey:  February-March  1978.   EPA-600/7-78-061b,  EPA,
     Industrial  Environmental Research  Laboratory, Research Triangle Park,
     North  Carolina.   (Prepared  by PEDCo  Environmental,  Inc.,  Cincinnati,
     Ohio)

Herlihy, J.  (1977),  Flue Gas Desulfurization  in Power Plants.   Status  Report,
     EPA,  Department of  Stationary Source Enforcement,  Washington, DC.

Johnson, J.  E.  (1978), Finite Capital  Resources  Limit Conversion from  Oil to
     Coal.   Hydrocarbon  Processing, pp.  107-110.

Kaplan,  N., and  M.  A. Maxwell  (1977),  Removal of  SO? from  Industrial  Waste
     Gases.  Chem.  Eng.   Deskbook Issue,  pp.  127-135.

                                     23

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McGlamery, G.  G., R. L. Torstrick, W. J. Broadfoot, J. P. Simpson, L. J.
     Henson, S. V. Tomlinson, and J. F. Young (1975), Detailed Cost Estimates
     for Advanced Effluent Desulfurization Processes.  Interagency Report,
     Bull. Y-90, TVA, Office of Agricultural and Chemical Development, Muscle
     Shoals, Alabama; EPA-600/2-75-006, EPA, Office of Research and Develop-
     ment, Washington, DC.

Public Law 94-210, Railroad Revitalization and Regulatory Reform Act of 1976
     (1976), Statutes at Large, Title 90, U.S. Government Printing Office,
     Washington, DC.   [Quotations are from Title I, Sec. 101 (b), Items (3)
     and  (5)]

Waitzman, D. A., J. L. Kevins, and G. A. Slappey (1973), Marketing H^SQ^
     from SOp Abatement Sources - The TVA Hypothesis.  Interagency Report,
     Bull. Y-71, TVA, Office of Agricultural and Chemical Development,
     Muscle Shoals, Alabama; EPA-650/2-73-051, EPA Control  Systems Laboratory,
     Research Triangle Park, North Carolina.
                                    24

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                                 APPENDIX A




                             SYSTEM DESCRIPTION







                                  CONTENTS





Figure                                                                 Page




 A-l     Byproduct marketing model 	     27




 A-2     Railroad rate territories	     28
                                     25

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                                 APPENDIX A

                             SYSTEM DESCRIPTION
BYPRODUCT MARKETING COMPUTER SYSTEM

     The byproduct marketing system consists of a number of integrated com-
puter programs, data bases, and models which can be used to compare costs of
different emission control strategies.  Five strategies are now programed in
the system:  the use of clean fuel instead of FGD, limestone scrubbing with
sludge waste disposal, limestone scrubbing with gypsum production, magnesia
scrubbing with sulfuric acid production, and the Wellman-Lord/Allied Chemical
system which produces sulfur.  In the case of magnesia scrubbing the system
determines the marketability of the acid produced using programs and data
bases on sulfuric acid transportation costs and on the U.S. sulfuric acid
manufacturing industry.  In this investigation the use of clean fuel, lime-
stone scrubbing with sludge waste disposal, and magnesia scrubbing with sul-
furic acid production were compared and costs for the Wellman-Lord/Allied
Chemical system were determined.

     The byproduct marketing system is shown diagrammatically in Figure A-l.
It can be divided into four subsystems.  The supply subsystem consists of
data bases and programs which provide data on power plants, emission control
regulations, raw material costs, and FGD design and cost data.  These can be
used to determine scrubbing costs on a boiler-by-bailer basis for each power
plant in the data base.  The demand subsystem consists of programs and data
bases on sulfur transportation costs and acid plant operating costs which
are used to determine acid plant avoidable production costs.  The transporta-
tion subsystem consists of data bases and programs to provide rail mileages,
tariffs, and rate-basing information as well as data from the other subsystems.
It is used to calculate acid transportation costs.  The fourth subsystem con-
sists of a linear program model generator, a linear program model solution
generator, and various optional report generators.  It uses the results of
the other three subsystems to select the least-cost option for each power
plant included in the system.

     The data used in the system have been compiled from a wide range of
U.S. Government, TVA, and published sources (Bucy et al., 1978; McGlamery
et al., 1975).  The data include over 3,500 boilers representing over 900
power plants and all acid plants and smelters in the 37 Eastern States for
which there exists a railroad rate-basing system (Figure A-2)  necessary to
the transportation subsystem.  Excess acid supply from the 11 Western States
and Canada is included in the linear programing model as a manually calculated
factor.  The calculation of scrubbing costs is based on design and economic
premises developed by TVA and EPA to compare the economics of scrubbing
systems (McGlamery et al., 1975).
                                     26

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     SUPPLY
   DATA BASE
 TRANSPORTATION
   DATA BASE
       DEMAND
     DATA BASE
   POWER PLANTS,
    REGULATIONS,
  COST ESTIMATES
      TARIFFS
   RAIL MILEAGE
   BARGE MILEAGE
      ACID
     PLANTS
SCRUBBING
  COST
    GENERATOR
TRANSPORTATION
  COST
    GENERATOR
ACID PRODUCTION
  COST
    GENERATOR
                            MARKET SIMULATION
                                LINEAR
                              PROGRAMING
                                 MODEL



V
EQUILIBRIUM
SOLUTION
RESULTS

^


^
                 Figure A-l.  Byproduct marketing model.
                                    27

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NJ
CJ
• COMMITTEE
    ;...y
              TRANS-CONTINENTAL
                 TERRITORY
                                         SOUTHWESTERN

                                           TERRITORY

                                            SWL 5
                                                                                                  ' V -
                                                                                                *£>/;
                                                                                                sR--' /
                                    Figure A-2.   Railroad rate territories.

-------
     The byproduct marketing system is designed on the basis  of  several
assumptions important to a conceptualization of the evaluation process.
(1) The cost of sulfuric acid produced in the magnesia-scrubbing system is
based on the incremental cost difference between the magnesia system and
the limestone (including sludge disposal) or clean fuel strategy used for
comparison, plus the cost of transportation to the consumer.   (2) All byprod-
uct acid is assumed to be sold to acid plants manufacturing acid from sulfur
which can reduce their costs by buying acid, at a price determined as des-
cribed above, instead of manufacturing it themselves.  (3)  It is assumed that
total acid consumption is unaffected by byproduct acid production.  All byprod-
uct acid is assumed to replace acid manufactured from sulfur.  As a corollary,
smelters are assumed to be producers of necessity.  All smelters are assigned
an acid production based on their compliance with applicable emission regula-
tions and this is included in the total supply.   (4) The marketing model does
not consider elements of profit or maximization of benefits for a particular
industry.  Each model solution is an optimum situation in which all acid
producers, transportation networks, and acid plant consumers are integrated
into a system that provides for the greatest byproduct acid revenue within
the restrictions imposed by the program design.   (5) The additional cost
assigned to the ACFL as compared with noncomplying fuel is also used as a
screening technique in  the model.  By assigning particular ACFL values  the
structure of the model, in terms of power plants  included and comparisons
made, can be varied to  compare the effects  of  different costs of  compliance.
 FGD  PROCESS DESCRIPTIONS

      All  of the  FGD  systems used  in  this  evaluation  are  scrubbing processes
 in which  the  flue  gas  is  contacted with a suspension or  solution of absorbent
 in water.  The SOX in  the flue  gas reacts with  the absorbent  to form  sulfur
 salts.  A purge  stream is removed and  fresh  absorbent added to maintain
 equilibrium concentrations in the scrubber system.   All  of the processes  are
 in use  or have been  tested in full-scale  operation  (Herlihy,  1977).   The  FGD
 systems are assumed  to be installed  downstream  from  existing  air heaters  and
 particle  removal equipment.  All  FGD equipment  is provided, including raw
 material  handling  systems, auxiliary processing equipment  to  produce  and
 store byproducts,  and  waste disposal facilities.

      The  limestone FGD system consists of a  scrubbing system  in, which a  sus-
 pension of finely  ground  limestone  is  contacted with the flue gas  to  form
 calcium sulfite  and  calcium sulfate.  The purge stream is  pumped  to a dis-
 posal pond without further treatment.   The system  is characterized  by large
 raw  material  and land  requirements,  and relatively  low energy,  capital,  and
 operating costs.

      The  magnesia  FGD  system is a similar scrubbing process  using magnesia
 as the  absorbent.  The magnesium sulfite formed is removed from the purge
 stream, dried,  and calcined to  regenerate magnesia and sulfur dioxide.  The
 magnesia  is returned to the scrubber system and the sulfur dioxide is pro-
 cessed  to sulfuric acid in an onsite acid plant.  The system is characterized
 by lower  raw material  and land  requirements and higher energy, capital, and
 operating costs, relative to the limestone system.

                                     29

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     The Wellman-Lord/Allied Chemical system uses a sodium sulfite-bisulfite
solution as the absorbent.  Sodium carbonate is used as the raw material to
replace sodium losses due mainly to oxidation of sulfite to sulfate in the
scrubber system.  Sodium sulfate is removed as a purge stream by selective
crystallization.  The bisulfite-rich stream is then thermally treated  to
regenerate sodium sulfite and sulfur dioxide.  The sulfur dioxide is con-
verted to sulfur by an onsite Allied Chemical proprietary reduction process.
The characteristics of the system are similar to the magnesia system.
                                     30

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                                 APPENDIX B

                                MODEL UPDATE


                                  CONTENTS


Table                                                                  page

 B-l    Projected 1983 Unit Costs for Raw Materials, Labor, and
        Utilities	   34

 B-2    Major Elements of Sulfuric Acid Avoidable Costs 	   41
Figure

 B-l    Rail rate increases, actual and projected, 1973-1983  ....   37

 B-2    Barge rate increases, actual and projected, 1973-1983 ....   39
                                    31

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                                APPENDIX B

                               MODEL UPDATE


SCRUBBING COST GENERATOR UPDATE THROUGH 1983

Power Plant and Boiler Screen

     During the continuing expansion and refinement of the overall model it
became apparent that some limitation should be placed on the calculations of
compliance and scrubbing costs for power plants in the data base.   Elimina-
tion of plants that could be predetermined to be very poor candidates for a
scrubbing strategy would allow computing costs to be reduced and at the same
time allow additional emphasis to be placed on the more logical candidates.
A size and age screen was developed to accomplish this.  All individual
boilers of less than 25 MW or over 20 years old in the 5-year model projected
to 1983 were automatically eliminated from consideration.  In addition, all
plants of less than 100-MW total capacity were also eliminated from consid-
eration.  In the 1978 projection model runs, 800 power plants with 3,382
boiler units were included in the power plant data base.  All of these plants
and boilers were considered in scrubbing cost calculations.  Of these, 187
plants with 833 boiler units were projected to be out of compliance.  In
the 1983 projection model runs, after adding the power plants and boiler
units scheduled to come online between 1978 and the end of 1983, 896 plants
with 3,830 boiler units were included in the power plant data base.  Because
of the size-age screen, only 363 power plants with 712 boiler units were
considered for scrubbing cost calculations.  Of these, 94 plants with 165
boilers were projected to be out of compliance.

New Power Plants and Boilers Through 1983

     In support of the scrubbing cost generator projection of FGD costs to
1983, the power plant data base was updated to include power plants and
boilers projected from the data to come online between the end of 1978 and
the end of 1983.  There were 147 projected boilers identified at 108 plant
sites.  The plant site location for 13 boilers was not identified.  Because
location is mandatory for marketing analysis (primarily for transportation
costs) these 13 boilers were eliminated from the model.  Location in the 11
Western States eliminated 25 projected boilers from direct consideration.
Transportation rates within the 11 Western States and between these states
and the 37 Eastern States were impractical to automate.  Therefore transpor-
tation rates for western locations cannot be determined by the transportation
cost generator.  A separate manual analysis for western supply and demand
locations is required so they are eliminated from the automated model.  The


                                   32

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summary results of the manual analysis are included for marketing considera-
tion in the equilibrium solution using transshipment terminals that are
within the automated transportation area.   According to PEDCo, Environmental,
Inc., (Gregory et al., 1978) 23 boilers were already committed to other FGD
processes and were eliminated.  Incomplete fuel data resulted in the elimina-
tion of 10 projected boilers.  The total plant size screen eliminated one
projected boiler.  Finally, 49 boilers were eliminated because they were cal-
culated to be within the applicable emission limits based on the reported
fuel to be used.  The net result was the elimination of 121 boilers at 86
plants leaving 26 projected boilers at 22 plant sites for consideration in
the model.

Updated Regulations and Compliance Plans

     In the 1978 model, regulations from EPA were based on June 30, 1976,
data.  In the 1983 model, regulations were updated to July 15, 1977 , the
latest state regulations available from EPA at the time of the power plant
data base update.

     The compliance status of power plants was also updated.  A special
emissions and compliance report from the EPA emissions data base was used
for the compliance status update.  This report was based on regulations
assumed to be in effect December 31, 1978.

     The revised NSPS as proposed  in the September  19,  1978,  Federal Register
was  not used in this update.  The data are projected  only through  1983.
Few, if any, of  these boilers will be under the revised NSPS  regulation.
The pre-September  1978 NSPS  was, therefore, used  in conjunction with applic-
able State Implementation Plans  (SIP).

     Compliance  status and  applicable regulations are  important  factors  in
any byproduct marketing model.  All power  plants  reported by  EPA  to be in
compliance are  automatically eliminated from  the  model regardless  of data
base regulations and  fuel  data.  Power plants  are also eliminated  that are
calculated to be in  compliance based on the applicable regulations  and the
reported  fuel to be  used.

Cost Escalation

     Capital  cost  escalation to  1983 was based upon projections  of  the
Chemical  Engineering (1974,  1975,  1976) cost  indexes.   The  same  data and
projection method  was used  as for  the  1978 projection  models.   Operating
costs  escalated to 1983 were based on  TVA  projections  of  individual operating
costs  shown  in  Table B-l.

     Because  of the  different raw  materials,  utilities,  and  operating  costs
required  for  each  of the  scrubbing processes,  the escalated  cost data
increased magnesia-scrubbing costs to a  greater  degree than limestone-
scrubbing costs.   Magnesia scrubbing  is  an energy-intensive process as
compared  with limestone scrubbing, which is a raw material intensive
                                     33

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process.  The costs shown in Table B-l illustrate that magnesia process
energy costs (No. 6 fuel oil, for example) are projected to increase at a
greater rate than limestone process raw material costs (limestone, for
example).
                 TABLE B-l.  PROJECTED 1983 UNIT COSTS FOR

                    RAW MATERIALS, LABOR, AND UTILITIES
           Raw Materials
                                                    Unit cost, $
           Limestone                                  Variable1
           Lime                                      50.00/ton
           Magnesium oxide                          315.00/ton
           Vanadium pentoxide catalyst              2.90/liter
           Sodium carbonate                         119.00/ton
           Antioxidant (sodium process scrubbing)       3.50/lb
           Sulfuric acid                             62.50/ton
           Labor
           Operating labor
           Analyses
                                           12.50/hr
                                           20.00/hr
           Utilities

           Fuel oil,  No.  6
           Natural gas
           Steam (500 psig)
           Process water
           Electricity
           Heat credit  (coal-fired  basis)
           Water treatment
           Sludge transportation  fee
            (offsite  disposal  variation)
                                           0.49/gal
                                           3.50/kft3
                                           2.50/klb
                                          0.14/kgal
                                          0.036/kWh
                                          2.50/MBtu
                                          1.20/kgal
                                                   a
                                           Variable
               Site-specific  data  determined  from  programed
               calculations.
a.
                                   34

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     The net result was a higher incremental cost  for magnesia scrubbing
in comparison with limestone scrubbing in the 1983 projection.  No detailed
analysis was made of scrubbing costs for 1978 compared with those projected
for 1983, but there was a general increase in limestone-scrubbing costs of
approximately 0.02 mills per kWh for the plants in the 1983 projection com-
pared to the same plants in the 1978 projection.   The corresponding increase
in magnesia-scrubbing costs for these plants was  0.03 mills per kWh.
TRANSPORTATION COST GENERATOR UPDATE THROUGH 1983

     Transportation costs have escalated significantly in recent years.   This
escalation is expected to continue at an increasing rate through 1983.  The
bases for projecting transportation rate increases from 1975 (the base year
used for the 1978 projection) to 1983 are as follows.

Actual Rail Rate Increases, 1973-1977

     Increases in rail rates for the 5-year period were as follows:

                          Year   Rate increase, %
1973

1974



1975



1976
1977

3.0
1.9a
1.9
4.0a
3.3a
10. Oa
7.0
0
5.0a
2.5a
7.0
4.0
5.0a
                          a.  Multiple rate increases
                              in the same calendar
                              year.


The rail rate increases shown over the 5-year period amount to a historical
average annual increase of  11.2%.

Projected Rail Rate Increases,  1978-1983

     Advice from the TVA Division of Navigation Development and Regional
Studies indicates  that rail rate increases will accelerate in  the next  few
years.  This information is based primarily on the expected impact  of the
"Railroad Revitalization and Regulatory Reform Act of  1976" (PL 94-210).
                                    35

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This act, commonly referred to as the "4-R Act," is designed to ".  .  .  permit
railroads greater freedom to raise or lower rates for rail services in com-
petitive markets" and "... promote separate pricing for distinct rail and
rail-related services" (PL 94-210).

     The average annual rail rate increases from 1978 through 1983 has been
projected at 13.5%.  The increase in special rates for separate commodities
may be significantly higher.


Actual and Projected Rail Rates

     A graphic presentation of actual and projected rail rate increases is
shown in Figure B-l.  The 11-year increase from 1973 through 1983 is 246%.
Using January 1, 1973, as the index year at 100, the 1983 rate becomes 346
as shown.

Actual Barge Rate Increases, 1973-1977

     Increases in barge rates over this period were as follows:

                          Year   Rate increase, %
1973
1974
1975
1976
1977
0
21.4
0
9.0
8.0
These recent historical rate increases are equivalent to an average annual
increase of 7.4%.

Projected Barge Rate Increases, 1978-1983

     It is anticipated that barge rate increases will accelerate somewhat
in the next few years because of general inflationary trends.  The projected
annual rate from inflation is 8.5%.

     Recent legislation of October 24, 1978, will further increase the cost
of barge transportation.  The law imposes a fuel tax on users of the inland
waterways system.  Application of this tax is contingent upon the U.S. Corps
of Engineers' Alton Project (Lock and Dam 26) being in progress by October 1,
1980.  It provides for a user tax on fuel used for commercial traffic on the
inland waterways system in the following schedule.
                                    36

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                            Actual 1973-1978
                	X	:   Projected 1978-1933
    350
    300  -
>:

I   250
O
O
an
    200  -
w
H
    150  -
    100
I	I	I
           /3    74   75     76    77    78    79    30    31    82    83
        Figure B-l.  Rail rate increases, actual and projected, 1973-1983.


                                          37

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                                          Users fuel tax,
                  Effective date of tax	cents /gal

                  October 1, 1980                4
                  October 1, 1981                6
                  October 1, 1983                8
                  October 1, 1985               10

This tax expense will undoubtedly be passed along in barge rates.  A recent
study, Impacts of a Waterways User Charge on the Economy of Tennessee,
(Memphis State University, 1978) surveyed the towing industry to determine
the effects of various user fuel tax levels on their costs.  It revealed the
following aggregate results.

           Estimated effect of fuel tax on barge operating costs

           Tax, cents per gallon                 8     24     40

           Increase in operating costs, %      7.3   22.3   36.4
            (mean of 14 respondents)

Each cent of user fuel tax is seen to amount to almost a 1% increase in
towing cost.  For this study, a 1% cost increase for each cent per gallon
of tax is assumed.

     The cost increase due to the proposed user fuel tax, coupled with the
projected inflation increase, results in the following annual barge rate
increases.

                      Year   Barge rate increases, %
1979
1980
1981
1982
1983
12.84
8.50
10.67
10.67
10.67
Actual and Projected Barge Rates

     The actual and projected barge rates from 1973 through 1983 are shown
in Figure B-2.  The increase over the 11-year period is 137%.   Using January
1, 1973, as the index year at 100, the 1983 rate is seen to be 237.

Transportation Cost Inflation Over 1975

     The 1978 projection used a transportation inflation factor of 1.15
over 1975.  The 1983 rail transportation cost projection is 2.37 times the
1975 rate.  The 1983 barge transportation cost projection is 1.95 times
the 1975 rate.  This is an average transportation cost increase of approxi-
mately 88% over the 1978 projection.  It represents an average annual increase
of 13.4% from 1978 through 1983.

                                    38

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                            Actual 1973-1978
                 	X	:   Projected 1978-1983
    350  r-
    300
ro
    250
CO
oo
w
o.
    200
     150
     100
            73    74     75      76    77    78    79    80    81    82    83



                                          YEAR




          Figure  B-2.   Barge rate increases, actual and projected, 1973-1933.





                                           39

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ACID PRODUCTION COST GENERATOR UPDATE THROUGH 1983

Sulfuric Acid Plant Demand Data Base

     The projection for 1983 indicates that there will be 86 sulfur-burning
sulfuric acid plants representing a potential demand of 23,300,000 tons.
The 1978 projection included 90 sulfur-burning plants with a potential demand
of 32,200,000 tons of sulfuric acid.

     The reduction of potential sulfuric acid demand from the 1978 projection
to the 1983 projection amounted to 8,900,000 tons.  It resulted from two up-
date changes in the 1983 projection.  The first involved identification of
five acid plants which will have been shut down and the addition of one new
plant.  The second update change was a reduction of the potential demand to
75% of sulfur-burning acid plant capacity.  This is a reflection of current
market conditions projected to 1983.  The total U.S. production of sulfuric
acid for the fiscal year ending June 30, 1978, was reported at 35,076,000
tons by the U.S. Department of Commerce (1978).  This is less than 69% of
capacity.  The projected market growth is estimated to increase the output
(demand) to 75% of capacity in 1983.

Sulfur Terminal Selection

     Previously the sulfur barge terminal selection for rail delivery to
each sulfur-burning acid plant was based on the lowest rail cost from the
terminal to the acid plant.  The 1983 projection model was modified to
choose the barge terminal which results in the lowest combination of barge
plus rail freight from Port Sulphur to the acid plant.

Sulfuric Acid Avoidable Costs

     Some very significant changes resulted from the updating of the avoid-
able production costs associated with sulfur-burning acid plants.  The
adjustment of byproduct steam credit had the most effect.  This update
recognizes the projected 1983 equivalent energy cost for replacement of
byproduct steam and the necessity of installing and operating a boiler to
replace the acid plant byproduct steam required in other operations at the
acid plant site.

     The boiler to replace acid plant byproduct steam requirements could be
oil or coal fired.  An analysis of investment and operating cost require-
ments (Johnson, 1978) indicated the selection of an oil-fired boiler for the
steam production capacities involved.  Capital and maintenance cost disadvan-
tages of the coal-fired boiler option more than offset potential fuel cost
savings.  Fixed annual conversion costs (operating labor, supervision, over-
head) eliminated by termination of sulfuric acid plant operations are offset
by the new fixed annual steam production cost of the replacement boiler,
resulting in a net fixed, annual conversion cost of zero.
                                    40

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     Other process utilities which, with the byproduct steam credit, consti-
tute the "variable conversion cost/ton ($/ton)" element of avoidable cost
in the 1978 projection were updated to 1983 projected values.   The net
variable conversion cost (termed "fixed conversion cost/ton" in the 1978
projection) was reduced to a minus $6.33 per ton of sulfuric acid in the
1983 projection as a result of the updated value for byproduct steam produc-
tion.  This generally offset other avoidable production cost increases and
thus had the effect of reducing demand for FGD byproduct sulfuric acid.

     Sulfur consumption per ton of acid produced was updated from the 1978
projection value of 0.30 to 0.33.   This reflects conversion from long to
short tons and improved recoveries resulting from compliance regulations
and design improvements.

     Plant investment was updated  to reflect a greater proportion of newer,
higher cost plants.  The scale factor was decreased from 0.734 to 0.65 because
of the emergence of higher capacity, single-train plants with a greater
investment advantage per ton of capacity over smaller plants constructed in
the same time period.

     The sulfur price per short ton at Port Sulphur was escalated to $62.50
($70 per long ton) from the 1978 projection of $53.57 ($60 per long ton).
The transportation cost inflation  update from 1.15 over 1975 in the 1978 pro-
jection to 2.16 over 1975 for 1983 was discussed in detail in the Transporta-
tion Cost Generator Update section.

     Table B-2 lists the values used in the 1983 projection.

        TABLE B-2.  MAJOR ELEMENTS OF SULFURIC ACID AVOIDABLE COSTS


                                                            Example
        No'	Description of variable	value

         1    Tons of S/ton H2S04                              0.33
         2    H2S04 plant investment ($/ton/yr)              34.75
         3    Capacity for this plant (kton/yr)              247.5
         4    Scale factor for determining investment for
               other sized plants                              0.65
         5    Variable conversion  cost/ton ($/ton)           -6.33
         6    Fixed annual conversion cost ($/yr)                0
         7    Taxes and insurance  rate                       0.025
         8    Time preference rate for money                  0.10
         9    Compound maintenance rate                       0.05
        10    Economic useful life (yr)                         30
        11    Port Sulphur price ($/ton S)                   62.50
        12    Proportion of 330 ton/day capacity estimate     0.75
        13    Year considered                                 1983
        14    Transportation cost  inflation over 1975         2.16
        15    Retrofit cost for compliance                    4.41

        NOTE:  All tons are short  tons.

                                     41

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Smelter Update

     Sulfuric acid plants burning smelter off-gas are included in the sul-
furic acid data base along with sulfur-burning acid plants.  Although they
are considered in the equilibrium solution as producers in competition with
power plant FGD byproduct acid rather than potential consumers, they are
processed by the acid production cost generator and were included in the
update.

     The projection for 1983 included 13 eastern smelters representing a
potential supply of 400,000 tons.  The 1978 projection included 14 eastern
smelters with a potential supply of 800,000 tons.  The reduction of potential
incremental smelter production resulted from two update changes.  The first
involved identification of one smelter projected to be shut down.  This
accounts for the reduction in the number of smelters from 14 to 13.  The
second update involved projected smelters and the market equilibrium position
which is discussed in detail in Potential Abatement Production.  The 1978
model solution was based upon a 1975 market equilibrium position.  Smelters
existing in 1975 were projected to have an incremental production in 1978
based on capacity and compliance.  Smelters coming online after the 1975 base
of market equilibrium were projected to have an incremental production in
1978 of 60% of capacity compared with the 1975 base.

     The 1983 model solution was based upon a 1978 market equilibrium posi-
tion.  Because no new smelters were projected to come online between 1978
and the end of 1983, all incremental smelter production in the 1983 solution
was based solely on existing plant capacity and compliance status.  The net
effect of shutting down one smelter and of projecting no new smelters between
1978 and the end of 1983 was a reduction from 800,000 to 400,000 tons.
MARKET SIMULATION LINEAR PROGRAMING MODEL UPDATE THROUGH 1983

Size Screen for Potential Power Plant Acid Producers

     In generation of the model it is possible (because of power plant size,
fuel usage, or because a mixed strategy of clean fuel and scrubbing is used)
that a magnesia-scrubbing process with a low, uneconomical sulfuric acid
output could be adopted.  To eliminate this possibility, a size screen was
included which excludes all magnesia-scrubbing options producing less than
66,000 tons per year of sulfuric acid.  These plants revert to a limestone-
scrubbing option and are not included in the equilibrium solution.  This
screen was used in both the 1978 projection and the 1983 projection.

Direct Comparison of ACFL and Magnesia-Scrubbing Costs

     In the 1978 projection models, a plant was considered in the equilibrium
solution only if limestone scrubbing was less than the ACFL.   Incremental
costs for market analysis were always on the basis of magnesia-scrubbing
                                    42

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costs compared with limestone-scrubbing costs.   When limestone-scrubbing
costs exceeded the ACFL, the plant was preselected for a clean fuel strategy
regardless of the incremental cost of magnesia  scrubbing compared with the ACFL.

     In the 1983 projection models generated for this report,  a plant was
considered in the equilibrium solution under an additional condition.  If
the ACFL was less than limestone-scrubbing costs, the ACFL was then compared
directly with magnesia-scrubbing costs.  If the resulting incremental unit
cost of acid did not exceed $30 per ton, the plant was included for consider-
ation in the equilibrium solution.  This change was made to allow for the
possibility that a power plant could recover the difference between magnesia-
scrubbing and using clean fuel by the sale of byproduct sulfuric acid.

Comparison of Previous and Current Model Generation

     Three separate models were generated for the 1978 projections based on
ACFL values of $0.35, $0.50, and $0.70.  Only two models using $0.50 and
$0.70 were generated for 1983.  The $0.35 ACFL was not used in this study
because of projected scrubbing cost escalations.

     The manual analysis of potential Canadian and western market interaction
that was done for the 1978 projection models was essentially the same for
1983.  A potential net supply was considered in the equilibrium solution.
The net Canadian projected production in the 1983 projection models was
200,000 tons and the net western projected production was 700,000 tons.
                                     43

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                                       TECHNICAL REPORT DATA
                               (Please read Instructions on the reverse before completing)
1. REPORT NO.
 EPA-600/7-79-106
                                                                  3. RECIPIENT'S ACCESSION NO.
4. TITLE ANDSUBTITLE
  Potential Production and Marketing of FGD Byproduct Sulfur and
  Sulfuric Acid in the U.S. (1983 Projection)
                                       5. REPORT DATE
                                         April 1979
                                       6. PERFORMING ORGANIZATION CODE
7. AUTHOR(S)

 W. E. O'Brien and W. L Anders
                                       8. PERFORMING ORGANIZATION REPORT NO.

                                          ECDP B-1
9. PERFORMING ORGANIZATION NAME AND ADDRESS
 Tennessee Valley Authority
 Office of Power
 Emission Control Development Projects
 Muscle Shoals, Alabama 35660   	
                                       10. PROGRAM ELEMENT NO.

                                          INE624A
                                       11. CONTRACT/GRANT NO.

                                          IAG-D9-E721-BJ
 12. SPONSORING AGENCY NAME AND ADDRESS
  EPA, Office of Research and Development
  Industrial Environmental Research Laboratory
  Research Triangle Park, NC 27711
                                                                  13. TYPE OF REPORT AND PERIOD COVERED
                                          Final,-6/76- 12/78
                                       14. SPONSORING AGENCY CODE
                                          EPA/600/13
15. SUPPLEMENTARY NOTES

  IERL-RTP project officer is Charles J.Chatlynne, MD-61, 919/541-2915
 16. ABSTRACT
      The report updates to 1983 a 1978-base, computerized marketing evaluation of sulfur and H2SO4
  as  flue  gas  desulfurization (FGD)  byproducts from  U.S. coal-burning power  plants.  Least-costs of
  compliance were calculated using comparisons of clean fuel  with 50d and 70V/million Btu premiums,
  limestone  scrubbing, and  scrubbing systems with  byproduct sulfur  and H2S04  production. Market
  potential of sales to sulfur-burning  H2S04 plants was also determined. At the 50tf premium, H2SO,,
  production was  the  least-cost method at five plants, four of which had combined sales of 800,000
  tons/yr. At the 70tf premium, H2S04 production was the least-cost method at 26 plants, 7 of which had
  sales totaling  1.2 million  tons.  New boilers coming online by 1983  accounted for 60%  of the sales.
  Market potential was relatively  insensitive to sulfur price. Sulfur production  was not selected at any
  plant, but reduction of total FGD costs by 3-25% would make it competitive with sulfur delivered from
  Port Sulphur at 16 plants with a total production of 266,000 tons. Results indicate the need of a longer
  time projection and continued updating of the model data bases.
17.
                                   KEY WORDS AND DOCUMENT ANALYSIS
                    DESCRIPTORS
                                                   h.lDENTIFIERS/OPEN ENDED TERMS  C.  COSATI Field/Group
  Pollution
  Flue Gases
  Scrubbers
  Desulfurization
  Byproducts
  Sulfur
  Limestone
Sulfuric Acid
Marketing
Forecasting
Mathematical
  Models
Coal
Combustion
Pollution Control
Stationary Sources
Clean Fuel
13B
21B
07A,13I
07D
148
07B
08G
05C
                                          12A
                                          21D
18. DISTRIBUTION STATEMENT
  Unlimited
                        19. SECURITY CLASS (ThisReport)
                          Unclassified
                                                                                  21.
                                                                                    NO. OF PAGES
                                                                                     57
                        20. SECURITY CLASS (This page)

                          Unclassified
                                                                                 22. PRICE
EPA Form 2220-1 (9-73)
                                                 44

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