NEWS RELEASE MARCH 2013
2000 Industrial Boilers Will Spend Between $4 and $12 Billion to Meet the New Industrial Boiler MACT Rule
In the next few months, operators of industrial boilers will have to decide whether to gamble on low gas prices for the next two decades or add air pollution control equipment to their existing systems. There are more than 10,000 boilers listed in the McIlvaine Industrial Air Emitters database and project tracking system. Less than 2000 will fall under the criteria for action set up by the new Industrial Boiler MACT rule.
Of these 2000 units, only 500 units will have to make major capital expenditures. These plants will have to decide whether to invest the funds to meet the new regulations or switch to natural gas or even retire the units and buy electricity. The Industrial Air Emitters program is tracking these decisions as they happen
A survey conducted by URS and funded by the Council of Industrial Boiler owners found that to meet the new limits coal-fired boilers would have to spend $5.6 billon. Liquid-fired units would have to spend $5.2 billion and biomass and other units would spend $1.2 billion.
At present, the cost of natural gas is low, so it would seem attractive for these owners to tear out the old boilers and replace them with new gas turbines. The capital cost of the replacement turbines compares favorably with the capital cost of the upgrades to the existing plants. The question is what will be the price of natural gas over the lifetime of the boilers?
A number of plants do not presently have access to sufficient gas. These owners are looking at an add-on cost of up to $3/MM Btu to offset the investment by the gas supplier in new transmission lines. So even at $2/MM Btu gas when the transmission add-on is included, the economic advantage disappears.
For the plants with gas access, now the question is, what will be the availability and price in the future? Europe is reducing its reliance on gas and moving back to coal. This is a scenario similar to the one in the U.S. in 2000 when gas prices soared. Can it happen again here?
Gas has a value much higher than coal. It can be converted to liquids and sold as gasoline and it can be compressed to LNG and transported around the world. It can be used for home and commercial heating without large capital investments in pollution control equipment. Fifteen billion dollars has already been allocated for gas-to-liquids plants in the U.S. Equally large sums are being invested to convert LNG regasification to liquefaction facilities. In the meantime, the supply of conventional natural gas is rapidly dwindling. This means unconventional, including shale gas, will have to fill the void and provide for the new demands. At some point it is inevitable that the price of gas will reflect its higher value and the world prices.
Industrial boiler owners will have to answer the tough question as to when that will occur. On one hand, the shale gas supply could be so large as to ensure longer term low gas cost. On the other hand, the depletion rates and other realities could make the gas supply only able to keep up with traditional markets and the new demand in those markets.
Unfortunately the boiler owners do not have the luxury to wait. Compliance is required by 2015. So decisions have to be made in the next few months. McIlvaine is tracking these decisions plus those dealing with the Cement MACT in Industrial Air Emitters.
For more information on U.S. Industrial Emitters click on: http://home.mcilvainecompany.com/index.php?option=com_content&view=article&id=93extsup1.asp