Falling Coal Plant Utilisation Under Kyoto Protocol Makes Many Control Investments Unprofitable

LONDON, UK, June 21, 2004 — ICF Consulting announced today that in light of the European Union’s (EU) Large Combustion Plant Directive 2001/80/EC (LCPD), it advises coal-fired power stations in Member States to weigh carefully their options to meet new emissions limits.

EU LCPD Compliance Options

The LCPD has flexible options to meet the new emissions limits, and plant owners should analyze closely the costs and benefits of each alternative before acting. If plants operate at low load factors, postponing pollution control installations could be the best way to safeguard their bottom line. Together with the EU Emission Trading Scheme, which implements the EU’s Kyoto Protocol targets for carbon dioxide (CO₂) emission reductions, LCPD will drive critical new decisions in the EU power markets.

"As one of the largest emitters of CO₂, sulphur dioxide (SO₂), and nitrous oxides (NO_x), existing coal-fired power stations face an uphill struggle. The engineering solution would be to install the required pollution control technology such as flue gas cleanup or combustion alternatives. However, our detailed analysis suggests that in most cases, this is not the best option," says Simon Allen, Director of ICF Consulting’s London office. "To meet CO₂, SO₂, and NO_x challenges in the most cost-effective manner, we urge plant owners to postpone control installations and assess the combined impact of major air pollutants on their portfolios. This is the only way to avoid making unnecessary investments and the best way to protect shareholder value, as well as comply with government air regulations."

Kim Keats Martinez, Managing Consultant of ICF Consulting’s London office added, "It is the scarcity value of CO₂ allowances, rather than SO₂ or NO_x constraints, that will drive the operational profile for coal-fired plants. Greenhouse gas (GHG) constraints will favour less carbon-intensive technologies such as renewables and gas-fired combined cycle plants, and could force a significant reduction in the output of existing coal plants. Operating at low load factors, it will not make commercial sense to invest in flue gas cleanup equipment. With the uncertainty surrounding CO₂ allowance prices, governments and electricity producers should embrace the flexible mechanisms built into the LCPD such as the cap-and-trade option and the 20,000-hour derogation."

The LCPD sets new limits for the emission of SO₂, NO_x, and fine dust particles for all new plant builds 50MW or larger. New limits for "existing" plants, those 50MW or larger that were licensed before July 1, 1987, will be binding from 2008. In the case of existing plants, each Member State has two options to comply: cap-and-trade or emission rate limits. The cap-and-trade option, known as the National Emissions Reduction Plan, allows a Member State to define a fixed annual tonnage that can be emitted by affected installations. Where compliance costs are high, the owner has the option of purchasing allowances from other parties. Alternatively, a Member State can elect to have all plants adhere to an Emission Limit Value. These emission rate limits are site-specific and liabilities cannot be traded or exchanged.

Whichever scheme each Member State selects, existing power plants can be granted a derogation from their obligation. To qualify, owners have until 30th June 2004 to inform the authorities of their intention to "opt out," whereby the plant’s operating permit will be revoked after 20,000 hours of operation starting from January 1, 2008, or at the end of 2015, whichever comes first. At the end of the 20,000-hour derogation for opted-out plants or from January 1, 2016, for other existing plants, all affected plants will have to meet the new build standard or face closure.

Read the full report on EU LCPD Compliance Options.

ICF International (Nasdaq: ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, environment, transportation, social programs, defense, and homeland security markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 1,800 employees serve these clients worldwide. ICF’s Web site is http://www.icfi.com.

For Immediate Release United Kingdom Contact: Kim Keats Martinez Tel: 44 (0) 20.7092.3006 United States Contact: Douglas Beck Tel: 1.703.934.3820