A bottom-up method to develop pollution abatement cost curves for coal-fired utility boilers Samudra Vijay a,b , Joseph F. DeCarolis c,n , Ravi K. Srivastava a a U.S. Environmental Protection Agency, National Risk Management Research Laboratory, Air Pollution Prevention and Control Division, Research Triangle Park, NC 27711, USA b Oak Ridge Institute for Science and Education (ORISE), Oak Ridge, TN 37831-0117, USA c North Carolina State University, Department of Civil, Construction, and Environmental Engineering, Raleigh, NC 27695, USA article info Article history: Received 27 July 2009 Accepted 3 December 2009 Available online 4 January 2010 Keywords: Air pollution control Nitrogen oxides Marginal abatement cost curves abstract This paper illustrates a new method to create supply curves for pollution abatement using boiler-level data that explicitly accounts for technology cost and performance. The Coal Utility Environmental Cost (CUECost) model is used to estimate retrofit costs for five different NO x control configurations on a large subset of the existing coal-fired, utility-owned boilers in the US. The resultant data are used to create technology-specific marginal abatement cost curves (MACCs) and also serve as input to an integer linear program, which minimizes system-wide control costs by finding the optimal distribution of NO x controls across the modeled boilers under an emission constraint. The result is a single optimized MACC that accounts for detailed, boiler-specific information related to NO x retrofits. Because the resultant MACCs do not take into account regional differences in air-quality standards or pre-existing NO x controls, the results should not be interpreted as a policy prescription. The general method as well as NO x -specific results presented here should be of significant value to modelers and policy analysts who must estimate the costs of pollution reduction. & 2009 Elsevier Ltd. All rights reserved. 1. Introduction Energy models exploring future scenarios of technological change in the electric sector must quantify the economic trade-off between the cost to retrofit existing coal-fired power plants with control technologies and the cost to build newer, cleaner electric power plants. Often, a challenge for energy modelers is to develop marginal abatement cost curves (MACCs) of pollution. MACCs represent the estimated cost of abatement as a function of the emissions level and are an important tool for energy modeling and environmental policy analysis. However, MACCs are often generated using economic techniques that do not include explicit technological considerations, which can lead to an inaccurate characterization of abatement cost. This paper sets out to answer the following question: can detailed technology cost and performance data be used to create MACCs from the bottom up? We present a new method to create MACCs that applies a unit-level engineering-economic assessment tool to determine retrofit costs and abatement levels associated with specific NO x controls on a large subset of US coal-fired utility boilers. The boiler-level retrofit data is then used as input into an integer linear program (Murty, 1995), which determines the optimal distribution of retrofits across all boilers as a function of the NO x abatement level. The result is a MACC that reflects the minimum system-wide cost to achieve a particular level of NO x reduction. We chose to demonstrate the new method by building an abatement cost curve for NO x emissions. NO x formation is complex and abatement costs depend, in part, on a complex combination of coal type, coal composition, boiler design, plant size, and plant utilization factor. In addition, several mature NO x retrofit technologies exist for coal-fired utility boilers. The focus on NO x emissions provides a rich decision space in which marginal abatement costs depend on complex technical details. Since the analysis presented here does not account for pre- existing controls, state or federal air-quality standards, the need to apply tighter controls in air-quality hot spots, or existing markets for emissions trading, the MACCs developed here should not be treated as a policy prescription, but as an illustration of a novel methodology for developing bottom-up, technology- based MACCs. While changes in the electric power sector will likely be driven by a future climate policy, the timing and extent of new capacity installations in the electric sector will depend in part on the pollution control retrofits that may need to be installed on existing coal-fired power plants in response to increasingly stringent air pollution regulations. Emissions of nitrogen oxides (NO x ) have been associated with various environmental and ARTICLE IN PRESS Contents lists available at ScienceDirect journal homepage: www.elsevier.com/locate/enpol Energy Policy 0301-4215/$ - see front matter & 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2009.12.013 n Corresponding author. Tel.: + 1 919 515 0480; fax: + 1 919 7908. E-mail addresses: jdecarolis@ncsu.edu, decarolis.joseph@epa.gov (J.F. DeCarolis). Energy Policy 38 (2010) 2255–2261