AEP favors cap-and-trade system for mercury

The word “mercury” has always symbolized speed and quickness. Recently, however, AEP and the nation’s other electric utilities have been playing a waiting game regarding rules for mercury emissions from coal-fired power plants.

By March 15, 2005, the U. S. Environmental Protection Agency will announce long-awaited new regulations requiring substantial reductions in mercury emissions from such plants. The EPA will be choosing between two vastly different approaches: a cap-and-trade program and a Maximum Achievable Control Technology (MACT) plan.

AEP strongly favors the cap-and-trade approach because it would allow the company to make the required reductions in mercury emissions in what it considers to be a flexible and cost-effective manner. Company officials would prefer to see the EPA set a national cap on mercury emissions and establish a system for trading allowances, as is now being done very successfully for SO2 and NOx emissions.

The MACT plan, on the other hand, would require specified reductions at each and every generating unit, or at best, at each generating plant. A MACT program is a much more costly approach to reducing mercury that would likely result in AEP and other companies considering the possibility of early retirement for older, smaller generating units where it doesn’t make economic sense to add new control technology.

The proposed cap-and-trade program, AEP believes, makes more sense economically and is environmentally superior. EPA’s proposed MACT standards would reduce mercury emissions from coal-fired electric utilities to 34 tons per year nationwide by Dec. 31, 2007, with the possibility of a one-year extension to the compliance deadline. This would be a 29 percent reduction from 2001 emissions levels.

By contrast, the cap-and-trade program would achieve a nationwide reduction of almost 70 percent from 2001 levels. The program would proceed in two phases, with the first phase projected by EPA to achieve the 34-ton control level by 2010. The second phase would cap nationwide emissions of mercury at 15 tons by 2018.

AEP officials have pointed out that reducing mercury emissions is a tremendous challenge because there are no commercial technologies presently available that can capture or remove mercury emissions from a wide range of coal-fired units and a variety of coal types. New technologies are being developed, but they are still in their early stages, although they should be ready in time for the second phase of the cap-and-trade program.

If the MACT option is selected, company officials believe it will be nearly impossible for the industry to meet the EPA’s compliance deadline, regardless of whether it is the end of 2007 or the end of 2008. This is due to both an extremely short compliance period and a lack of available, commercially-demonstrated control technologies. A number of utilities have warned that reliability issues could arise from plants being taken off-line to have emission-reduction technology retrofitted or prematurely retired without sufficient time to build replacement generating capacity. Company officials also doubt whether there are enough skilled craftspeople available to complete all the needed retrofits in a three- or four-year period.

In contrast, the cap-and-trade approach holds significant potential to achieve the desired reduction in mercury emissions more cost-effectively by taking advantage of the expectation that conventional pollution-control technology can reduce mercury emissions in certain circumstances. Oxidized mercury can be more easily removed from flue gas than elemental mercury because it is soluble in water. Studies have indicated that, by installing a combination of scrubbers and a selective catalytic reduction (SCR) system on a coal-fired generating unit burning bituminous coal, mercury emissions could be reduced by as much as 85 percent. The SCR system helps oxidize a significant amount of the mercury, and then most of the oxidized mercury can be removed in the scrubber. However, results can vary somewhat from plant to plant, depending upon the characteristics of the coal being burned.

At power plants where construction of scrubbers and SCR systems does not make economic sense, company officials have noted that installation of activated carbon injection systems with fabric filters might be the optimum choice. They emphasized that prematurely retiring any generating unit is an especially distasteful option because it would present a number of other challenges, such as the economic impact on that area and the question of how the company would replace that generation.

Company officials pointed out that the debate over the relative merits of cap-and-trade vs. MACT has overshadowed the issue of public health. They noted that U.S. coal-fired power plants account for only about 1 percent of the total amount of mercury released into the air, worldwide. Given that fact, the same public health objective of reducing exposure to mercury can be achieved with the cap-and-trade approach much more efficiently and cost-effectively.

AEP officials are “cautiously optimistic” that the EPA will select the cap-and-trade program, but obviously it is a regulatory decision of tremendous importance not only to AEP, but all of the nation’s coal-burning electric utilities.

McManus is AEP’s vice president of environmental services, with oversight of environmental support for all AEP generation and energy delivery facilities..

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