1. IPM Overview Elliot Lieberman U.S. Environmental Protection Agency Washington, D.C. 20460

2. Documentation on Web www.epa.gov/airmarkets/epa-ipm

3. What is IPM? u The Integrated Planning Model (IPM) is a tool developed by ICF Consulting and used by EPA for policy analysis. u IPM is a long-term capacity expansion and production costing model for analyzing the electric power sector. u It is a multi-regional, deterministic, dynamic linear programming model. u IPM finds the least-cost solution to meeting electricity demand subject to environmental, transmission, fuel, reserve margin, and other system operating constraints.

4. Linear Program Advantages u Finds optimal solution u Comprehensive, integrated approach u Bottom-up detail –Allows fine grain parameter variations –Analysis based on detailed disaggregate information

5. Typical IPM Constraints and Variables u Electricity Demand Constraints u Reserve Margin Constraints u Environmental Constraints u Transmission Constraints u Fuel Constraints u Other Operational Constraints u Model plants –Existing Units –Planned/Committed Units –Potential Units u Retrofit options u Repowerings and retirements 140,225 Constraints 1,980,251 Variables (x load segments x coal or fuel types x run years x seasons)

7. Model Regions

9. Reserve Margin Assumptions Reserve margin is a measure of the system’s generating capability above the amount required to meet peak load requirements. Planning Reserve Margins

10. Generating Resources u Existing units u Planned/committed units u New potential units that the model can build u Repowerings, relicensings, and retirements Categories represented

11. Potential Units u Pulverized Coal u Integrated Gasification Combined Cycle u Combined Cycle u Combustion Turbine u Nuclear u Biomass Gasification Combined Cycle u Wind u Solar u Geothermal u Landfill gas u Fuel cells

12. Emission Control Technologies u SO 2 Scrubbers –Limestone Forced Oxidation (LSFO) –Magnesium Enhanced Lime (MEL) –Lime Spray Dryer (LSD) u NO x Post-Combustion Controls –Selective Catalytic Reduction (SCR) –Selective Non-catalytic Reduction (SNCR) –Gas Reburn u Mercury Removal –Activated Carbon Injection (ACI) –By-product of SO 2, NO x, and particulate controls u Other –Combustion Optimization –Biomass cofiring

13. First Stage Retrofit Assignment Scheme in EPA Base Case 2000

14. Run Year Mapping in EPA Base Case 2000

15. Model Plant Aggregation

16. Categories Used in Aggregation Scheme u Model Region u Unit Technology Type u Fuel Demand Region u Environmental Regulations –NO x SIP Call Participation –State Specific Regulations in CT, MO and TX u State –Texas –Connecticut –Missouri u Unit Configuration –Boiler Type –Firing Type –SO 2 Pollution Control –NO x Pollution Control –Particulate Matter Control u Heat Rate –Low Efficiency Group –Mid Efficiency Groups –High Efficiency Group u Size –Coal Steam Units »Less than 25 MW »From 25 MW to less than 100 MW »100 MW or greater –Non-coal fossil units and other non-coal emitting units »Less 25 MW »25 MW or greater

20. Typical Model Plants

21. Financial Assumptions

22. u Discount Rate –Represents the time value of money –Allows for inter-temporal analysis u Capital Charge Rate –Allows annualized capital payments to be calculated for an investment

23. Discount Rate u Capital structure u Pre-tax debt rate u Post-tax equity rate Key parameters considered:

24. Capital Charge Rate u Capital structure u Pre-tax debt rate (or interest cost) u Debt life u Post-tax return on equity u Taxes and insurance u Depreciation schedule u Book life Key parameters considered:

25. Factors Affecting the Financing Of Different Technologies u Risk profile –Medium risk –High risk u Financing scheme –Project financing –Corporate financing