Valuation Study

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Net Benefit of Flue Gas Desulfurization

Attributes

Medium: Air

Country: Thailand

Analytical Framework(s): Dose-Response Approach, Economic Analysis

Study Date: 2006

Publication Date: 2006

Major Result(s)

Resource/Environmental Good THB, million currency units
(2006)
THB, million currency units
(2014)1
USD, million currency units
(2014)2
NPV of installing FGDs at Mar Moh power plant3 4,700.00 5,699.08 173.15
Total cost of the installation 13,800.00 16,733.47 508.41

About the Inflation Adjustment: Prices in Thailand (THB) changed by 21.26% from 2006 to 2014 (aggregated from annual CPI data), so the study values were multiplied by 1.21 to express them in 2014 prices. The study values could be expressed in any desired year (for example, to 2020) by following the same inflation calculation and being sensitive to directional (forward/backward) aggregations using your own CPI/inflation data.

Study Note: Electricity consumption in Thailand has increased by approximately 70 per cent over the past decade due to economic growth and increase in population. Lignite, which is one of the main indigenous sources of fuel used in electricity production, remains a significant source of energy in Thailand. However, lignite and other fossil fuels combustion in electricity generation cause environmental problems especially air pollution. The lessons that we learn from the case of the Mae Moh power plant indicate that careful strategic planning for appropriate environmental protection measures by government authorities is very important for future electricity development projects, not only in terms of technical capabilities but also in economic and social considerations.

Study Details

Reference: Varaporn Punyawadee et. al. 2006. Cost and Benefit of Flue Gas Desulfurization for Pollution Control at the Mae Moh Power Plant, Thailand. EEPSEA Research Report, No. 2006-RR4.

Summary: This study presents a detailed analysis of the economics of investments in the FGDs installed at the Mae Moh power plant in the northern region of Thailand to reduce the adverse environmental impacts resulting from sulfur dioxide emissions. The possible direct benefits associated with FGD controls investigated in this study include damage reductions in health morbidity, and agriculture and forest productivities, while gypsum is assessed as the byproduct of the abatement process. In addition to the direct costs of investments, the indirect costs of carbon dioxide emissions attributed to the FGD process are estimated. The incremental benefits and costs with and without the installation of the FGD equipment are analyzed by assuming an FGD lifespan of 25 years. The quantification of the health end points in physical terms was carried out using dose-response relationships developed in an epidemiological study by the College of Public Health, Chulalongkorn University. Monetization of these effects used the cost of illness approach. The results were then converted to willingness to pay equivalents to reflect the full costs of avoiding morbidity health risks, including pain and discomfort. The Organisation for Economic Co-operation and Development (OECD) dose response function was applied to quantify reductions in agricultural damages and those of nontimber forest products in association with improved ambient sulfur dioxide concentrations attributable to FGD investments. Changes in productivity of teak forest plantations were statistically assessed using the Forest Industrial Organization database. Emissions of carbon dioxide were estimated from the chemical FGD process and valued using the optimal carbon tax. Our findings of a negative net present value and a benefit-cost ratio of less than one suggest that FGD investments may not have reached economically efficient outcomes. The present value of benefits (calculated in 1994 prices) associated with the installation of FGDs at the Mae Moh power plant over their lifespan of 25 years is approximately 4,700 million baht, which is about a third of the present value of total costs (13,800 million bath). The estimates of benefits in FGD installation found that health impacts are a major component, accounting for almost 80 per cent of the total benefits. The increase in forest productivity contributes about 18 per cent, while benefits associated with agriculture and gypsum are less significant. On the composition of the FGD abatement cost, the initial capital costs account for almost 52 per cent while the operation and input costs contribute about 15 and 27 per cent of the total, respectively. As a result of the FGD chemical process, optimal marginal abatement costs of carbon dioxide emissions (which contribute to global warming) represent about 6.6 per cent of the total FGD costs.

Site Characteristics: The Mae Moh power plant is the largest lignite-fired thermal power plant in Thailand using lignite with high sulfur content as fuel. The high sulfur dioxide (SO2) emitted from the plant in 1992 caused severe impacts to human health and ecosystems in the area. To ensure reductions in SO2 emissions, eight units of wet scrubbing flue gas desulfurization systems (FGDs), which can absorb 92-97 per cent of SO2 prior to discharge into the atmosphere, were installed at the Mae Moh power plant from 1994 to 2000. FGDs absorb gaseous SO2 from flue gas and produce gypsum as a by-product which is collected for safe disposal or beneficial uses such as gypsum board. Since the complete installation of all the FGD systems in 2000, the recorded maximum hourly average ambient SO2 concentrations have significantly declined from more than 3,000 micrograms per cubic meter in 1992 to less than 500 micrograms per cubic meter.

Comments: A sensitivity analysis suggests that high uncertainties exist in the estimation. If the risk of premature mortality had been taken into account as suggested by most of the health science literature, the FGD investments at the Mae Moh power plant would be financially justified. However, in this study, premature mortality was not taken into account in the base case analysis because there was no strong scientific evidence to support the association between health mortality and exposure to high levels of ambient SO2 concentrations. Also, we did not have sufficient data for a detailed investigation.

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