Major FGD Project Schedule Changes with Bush Re-election
The Bush re-election makes it
unlikely that there will be many expedited FGD projects based on NSR litigation.
In McIlvaine’s Utility Upgrade Tracking Systems there is an estimated FGD
start date for more than 300 units. Many of the start dates are based on
information received directly from the utilities or from suppliers who have
orders or are bidding components or systems for specific start dates.
We also have estimated start dates based on the assumption that the average
utility system will not rely on buying significant allowances but will achieve
reductions through scrubbing. Some of these units were estimated for 2007 and
2008 start dates even though no apparent activity had commenced. Now with the
possibility of an aggressive new program eliminated with the Bush re-election,
it is very unlikely that these systems will be installed in this timeframe.
We have, therefore, moved the start dates for this category of systems to 2010.
We did this despite the realization that bunching a large number of startups
into one year is unrealistic. Therefore, a number of these dates will change
again in the coming months. Ultimately 100,000 MW of scrubbers will be needed to
meet the CAIR limits. The allowance bank, however, will provide some
opportunity to delay installation a few years beyond 2010.
On the other hand, here is still a good case to be made that more units will
start up in 2008 than are listed. In fact, we have confidential information on
some which are not posted. More than one utility is trying to move up its start
dates to take advantage of the SO2 allowance prices.
This week SO2 allowance prices rose to over $600/ton. The high price
of natural gas has led to greater use of coal than anticipated. There are also
circumstances which will prevent allowances from being available. States which
are mandating scrubbers are restricting the sale of allowances from those
plants. These factors will lead to maintenance of high allowance prices,
followed by scrubber installations to take advantage of those high
prices. Ultimately, the price of allowances will come down to the marginal cost
of scrubbing which averages close to $400/ton.
EPA estimates that the cost of either allowances or scrubbing will be $600/ton in 2008 and rise to $1,000/ton in 2015. This is because the cost of scrubbing is a function of the SO2 content, site, physical limits, and other factors. The assumption that costs will vary greatly from unit to unit are being verified by recent experience.
For more information on a system which provides all the plant by plant forecasts of both FGD and SCR projects click on: Utility Environmental Upgrade Tracking System http://www.mcilvainecompany.com/energy.html .
Bob McIlvaine
847-784-0012