  SEQ CHAPTER \h \r 1    

MEMORANDUM

DATE:		June 29, 2010

SUBJECT:	Control Costs for Existing Stationary SI RICE

FROM:	Bradley Nelson, EC/R, Inc.

		

TO:		Melanie King, EPA OAQPS/SPPD/ESG

1.0	PURPOSE

	The purpose of this memorandum is to present information on the costs
of control technology options for reducing hazardous air pollutants
(HAP) emissions from existing stationary spark ignition (SI)
reciprocating internal combustion engines (RICE).  The memorandum will
look at the cost of retrofitting control technology on existing engines.
 This information will be used to determine national impacts associated
with the final rule.

 

2.0	INTRODUCTION

	EPA has determined that oxidation catalysts for two-stroke lean burn
(2SLB) and four-stroke lean burn (4SLB) engines, and non-selective
catalytic reduction (NSCR) for four-stroke rich burn (4SRB) engines are
applicable controls for HAP reduction from existing stationary SI RICE. 
To determine the capital and annual costs for these control
technologies, equipment cost information was obtained from industry
groups and vendors and manufacturers of SI engine control technology. 
In some cases, the industry groups provided a breakdown of the capital
and annual cost components for each of the retrofit options.  Using this
cost data, annualized cost and capital cost equations for oxidation
catalysts and NSCR were developed.   3.0	CONTROL COST METHODOLOGY 

	The following sections describe the methodology used to derive the
total capital and total annual costs for each of the control technology
options.  These methodologies were used to calculate total capital and
total annual costs when only purchased equipment costs were available
(e.g., vendor equipment costs).  The methodologies were not used for
cost data provided by industry groups because they included a breakdown
of the actual total capital and total annual costs.  A summary of the
methodologies, equations, and assumptions used to estimate the total
capital and total annual costs for some of the costs data are described
in the following sections.

3.1 	Total Capital Costs

	The total capital cost includes the direct and indirect costs of
purchasing and installing the control equipment.  The direct cost
includes the cost of purchasing the equipment and instrumentation, cost
of shipping, and the cost of installing the control equipment.  The
indirect cost includes the costs for engineering, contractor fees,
testing costs, and also includes costs for contingencies, such as
additional modifications, or delays in startup.  The total capital cost
equation can be summarized as follows:

Total Capital Cost (TCC) = Direct Costs (DC) + Indirect Costs (IC)

The direct costs include the costs of purchasing and installing the
control equipment and can be summarized using the following equation; 

DC = Purchased Equipment Cost (PEC) + Direct Installation Costs (DIC).

A summary of the cost assumptions for PEC includes the following:

- Control Device and Auxiliary Equipment (EC);

- Instrumentation (10% of EC);

- Sales Tax (3% of EC);

- Freight (5% of EC);

and can be summarized as:

PEC = 118% EC.

A summary of the cost assumptions for DIC includes the following: 

- Foundations and Supports (8% of PEC);

- Handling and Erection (14% of PEC);

- Electrical (4% of PEC);

- Piping (2% of PEC);

- Insulation for Ductwork (1% of PEC);

- Painting (1% of PEC);

and can be summarized as:

DIC = 30% PEC = 0.3 PEC.

Therefore, the direct costs can be simplified using the following
equation:

DC = PEC + 0.3 PEC = 1.3 PEC.

The indirect costs include the costs of engineering and contractor fees
and contingencies and can be summarized using the following equation:

IC = Indirect Installation Costs (ICC) + Contingencies (C).

A summary of the cost assumptions for ICC includes the following:

- Engineering (10% of PEC);

- Construction and Field Expenses (5% of PEC);

- Contractor Fees (10% of PEC);

- Startup (2% of PEC);

- Performance Test (1% of PEC);

and can be summarized as:

IIC = 28% PEC = 0.28 PEC.

A summary of the cost assumptions for C includes the following:

- Equipment Redesign and Modifications;

- Cost Escalations;

- Delays in Startup;

and is assumed to be:

C = 3% PEC = 0.03 PEC.

Therefore, the IC can be summarized using the following equation:

IC = 0.28 PEC + 0.03 PEC = 0.31 PEC,

and the simplified TCC equation can be expressed as:

TCC = 1.3 PEC + 0.31 PEC = 1.61 PEC = 1.61 (1.18 EC) = 1.9 EC

3.2 	Total Annual Costs

	The total annual cost includes the direct and indirect annual costs of
operating and maintaining the control equipment.  The direct annual cost
includes the cost of the utilities, operating labor, and control device
cleaning and maintenance.  The indirect annual cost includes the
overhead costs such as spare parts for the control equipment,
administrative charges, and the capital recovery of the control
technology.  The total annual cost equation can be summarized as
follows:

Total Annual Cost (TAC) = Direct Annual Costs (DAC) + Indirect Annual
Costs (IAC).

The DAC includes the following parameters:

- Utilities; 

- Operating Labor;

- Maintenance;

- Annual Compliance Test;

- Catalyst Cleaning;

- Catalyst Replacement;

- Catalyst Disposal.

The IAC includes the following parameters:

- Overhead;

- Fuel Penalty;

- Property Tax;

- Insurance;

- Administrative Charges;

- Capital Recovery = {I(1+I)n/((1+I)n-1)*TCC} where I is the interest
rate, and n is the equipment life.

	To calculate DAC, the costs were broken up into three separate costs:
operation and maintenance materials cost, operation and maintenance
labor cost, and the cost for annual performance testing or downtime or
allowance for catalyst washing.  Actual annual cost data from the
industry groups were used to estimate the DAC for each of the control
technologies. The IAC was broken up into three separate costs:
administrative, fuel penalty, and capital recovery.  Again, cost data
from the industry groups was used to estimate these costs for each of
the control technologies.  No fuel penalty was estimated for the
oxidation catalyst control technologies, because this control technology
does not increase the fuel usage of the SI engine.

4.0	CONTROL COST EQUATIONS

	Control cost equations were developed for 2SLB oxidation catalyst, 4SLB
oxidation catalyst, and a NSCR for 4SRB engines using the total capital
cost and total annual cost data for each control technology.  Control
cost equations for 2SLB and 4SLB oxidation catalysts were developed
separately because the 2SLB oxidation catalyst requires a premium
catalyst to reduce the HAP compounds because of the low exhaust
temperature of 2SLB engines.

4.1	2SLB Oxidation Catalyst

	The 2SLB oxidation catalyst is an effective control technology that
reduces HAP emissions from a 2SLB SI engine by oxidizing organic
compounds using a catalyst.  The oxidation catalyst unit contains a
honeycomb-like structure or substrate with a large surface area that is
coated with a premium active catalyst layer, such as, platinum or
palladium.  The oxidation catalyst works by oxidizing carbon monoxide
(CO) and gaseous hydrocarbons (HAP) in the exhaust gas to carbon dioxide
(CO2) and water.  The reduction of CO and HAP varies depending on the
type of catalyst used and the exhaust temperature of the pollutant
stream.  

	The cost of retrofitting an oxidation catalyst to an existing 2SLB
engine was estimated using cost data obtained from vendors and industry
groups covering engines ranging from 58 horsepower (HP) to 4,670 HP.  An
equipment life of 10 years and an interest rate of 7 percent were used
to estimate the capital recovery of the control technology and the fuel
penalty was assumed to be negligible.  The cost equations are presented
in 2009 dollars.

The total annualized cost equation for retrofitting an oxidation
catalyst on a 2SLB engine was estimated to be:

2SLB Oxidation Catalyst Total Annual Cost = $11.4 x HP + $13,928

where;

HP = engine size in HP.

The linear equation has a correlation coefficient of 0.8046, which shows
the data fits the equation closely.  Therefore, this equation was used
to estimate annualized cost for an oxidation catalyst on a 2SLB engine. 


The total capital cost equation for retrofitting an oxidation catalyst
on a 2SLB engine was estimated to be: 

2SLB Oxidation Catalyst Total Capital Cost = $47.1 x HP + $41,603

where;

HP = engine size in HP.

A summary of the cost calculations, regression analyses, and graphical
representations of the annual and capital cost data are presented in
Appendix A.

4.2	4SLB Oxidation Catalyst

	The 4SLB oxidation catalyst is an effective control technology that
reduces HAP emissions from a 4SLB SI engine by oxidizing organic
compounds using a catalyst.  The oxidation catalyst unit contains a
honeycomb-like structure or substrate with a large surface area that is
coated with a premium active catalyst layer, such as, platinum or
palladium.  The oxidation catalyst works by oxidizing CO and gaseous
hydrocarbons (HAP) in the exhaust gas to CO2 and water.  The reductions
of CO and HAP vary depending on the type of catalyst used and the
exhaust temperature of the pollutant stream.  

	The cost of retrofitting an oxidation catalyst to an existing 4SLB
engine was estimated using cost data obtained from vendors and industry
groups covering engines ranging from 400 HP to 8,000 HP.  Again, an
equipment life of 10 years and an interest rate of 7 percent were used
to estimate the capital recovery of the control technology and the fuel
penalty was assumed to be negligible.  The cost equations are presented
in 2009 dollars.

The total annualized cost equation for retrofitting an oxidation
catalyst on a 4SLB engine was estimated to be:

4SLB Oxidation Catalyst Total Annual Cost = $1.81 x HP + $3,442

where;

HP = engine size in HP.

The linear equation has a correlation coefficient of 0.9779, which shows
the data fits the equation very closely.  Therefore, this equation was
used to estimate annualized cost for an oxidation catalyst on a 4SLB
engine.  

The total capital cost equation for retrofitting an oxidation catalyst
on a 4SLB SI engine was estimated to be: 

4SLB Oxidation Catalyst Total Capital Cost = $12.8 x HP + $3,069

where;

HP = engine size in HP.

A summary of the cost calculations, regression analyses, and graphical
representations of the annual and capital cost data are presented in
Appendix A.

4.3	Non-Selective Catalytic Reduction

	The NSCR or three-way catalyst is used to control HAP emissions from
4SRB engines.  In addition to HAP reductions, NSCR also reduces the
emissions of nitrogen oxides (NOx), CO, and other hydrocarbons (HC). 
The reduction of HAP and CO takes place through an oxidation reaction
that converts HAP to CO2 and water and converts CO to CO2.  The
conversion of NOx takes place through a reduction of the NOx to nitrogen
gas and oxygen.

	The cost of retrofitting an NSCR on an existing 4SRB engine was
estimated based on cost data received from vendors and industry groups. 
A linear regression analysis was done on the data set and the linear
equation for annualized cost was;

NSCR Annual Cost = $4.77 x HP + $5,679

where;

HP = engine size in HP.

The linear equation has a correlation coefficient of 0.7987, which shows
an acceptable representation of the cost data.  Therefore, this equation
was used to estimate annualized cost for retrofitting the NSCR control
technology on 4SRB engines.  

The capital cost equation for retrofitting an air-to-fuel ratio (AFR)
controller and NSCR on a 4SRB engine was estimated to be: 

NSCR Capital Cost = $24.9 x HP + $13,118

where;

HP = engine size in HP.

A summary of the cost calculations, regression analyses, and graphical
representations of the annual and capital cost data are presented in
Appendix A.

 

5.0	SUMMARY

The following table presents a summary of the annual and capital control
costs as a function of engine size for the control technologies
applicable to existing stationary SI engines, as discussed in this
memorandum.  

Table 1.  Summary of Annual and Capital Costs Equations 

for Existing Stationary SI Engines 

HAP Control Device	Annual Cost ($2009)	Capital Cost ($2009)

2SLB Oxidation Catalyst	$11.4 x HP + $13,928	$47.1 x HP + $41,603

4SLB Oxidation Catalyst	$1.81 x HP + $3,442	$12.8 x HP + $3,069

NSCR	$4.77 x HP + $5,679	$24.9 x HP + $13,118



6.0	References

Technical Report: RICE NESHAP Control Costs Background for "Above the
Floor Analysis", October 2009, Attachment N (EPA-HQ-OAR-2008-0708-0279).

Email from Bruce Chrisman, Cameron's Compression Systems to Tanya
Parise, EC/R, Subject: Existing RICE NESHAP - Information for EPA for
2SLB Engines, October 16, 2009.

Email from James Harrison, Exterran to Melanie King, EPA, Subject: 2SLB
- Cameron oxidation catalyst pricing, October 20, 2009.

Anadarko Petroleum Corporation Comments on the Proposed Revisions to the
National Emission Standard for Hazardous Air Pollutants for
Reciprocating Internal Combustion Engines, June 2, 2009, Case Study
(EPA-HQ-OAR-2008-0708-0186).

Email from Mike Leonard, Miratech Corporation to Brenda Riddle, AGTI,
RE: Clarification of SCR Cost Information for EPA, July 20, 2005.
(EPA-HQ-OAR-2005-0030-0086).

Email from Antonio Santos, MECA to Tanya Parise, EC/R, Subject: EPA
Proposed Existing RICE NESHAP - Cost of Aftertreatment, October 2, 2009.
Response #2.

Price quote from Charles Ball, Emissions & Silencer Technology for an
oxidation catalyst for a 500 HP 4SLB engine.

Memorandum from Tom McGrath, IES to Brad Nelson, EC/R, Request for
Additional Cost Detail for Gas-Fired Engines Emission Controls, April
19, 2010.

Technical Report: RICE NESHAP Control Costs Background for "Above the
Floor Analysis", October 2009, Attachment D (EPA-HQ-OAR-2008-0708-0279).

Email from Nick Huff, Miratech to Jennifer Synder, AGTI, SCR Questions
for RICE MACT, October 23, 2003 (EPA-HQ-OAR-2005-0029-0038).

Email from Mike Leonard, Miratech to Brad Nelson, AGTI, Information
Request, July 21, 2005 (EPA-HQ-OAR-2005-0030-0087).

Four Corners Air Quality Task Force Report of Mitigation Options,
November 1, 2007. Mitigation Option: Use of NSCR/3-Way Catalysts and
Air/Fuel Ratio Controllers on Rich Burn Stoichiometric Engines
(EPA-HQ-OAR-2008-0708-0009).

Appendix A

Control Cost Summary and Linear Regression Statistics







 Reciprocating Internal Combustion Engine National Emission Standards
for Hazardous Air Pollutants (RICE NESHAP) Proposed Revisions –
Emission Control Costs Analysis Background for “Above the Floor”
Emission Controls for Natural Gas-Fired RICE, Innovative Environmental
Solutions Inc., October 2009.  (EPA-HQ-OAR-2008-0708-0279) .

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