FTEK 2007 
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CORPORATE PROFILE Market Opportunities
The Company's suite of proprietary, low capital cost and retrofitable technologies is ideally suited to the numerous regulatory and financially driven market opportunities identified by Management and summarized below.
Air Pollution Control (APC) – In the United States, both regulatory and economic drivers affect the APC business. Currently, the principal regulatory driver for reducing ozone-derived smog is the NOx State Implementation Plan (SIP) Call program. SIP requires seasonal (May 1 - September 30) NOx reduction on an estimated 900 coal-fired utility boilers and 400-500 industrial units in 19 Northeast states. This regulation is expected to generate revenues through 2009 under its cap-and-trade marketable emissions scenario.
Other domestic regulatory drivers include the National Air Quality Ambient Standards (NAAQS) portion of the Clean Air Act, which requires that states comply with ozone and small particulate emissions standards. NOx emissions are a precursor to ozone formation and also contribute to fine particulate emissions (PM2.5). The NAAQS ozone and PM2.5 standards issued in 1997 were made more stringent in 2008, and all states are all required to create State Implementation Plans (SIPs) for these and other pollutants, with attainment dates for the more stringent standards starting in 2013.
The Clean Air Interstate Clean Air Visibility Rule (CAVR), also known as the Regional Haze rule, was also part of the Clean Air Act, was finalized in 2005. Under CAVR, NOx reduction regulations will be extended to Western states, affecting over 50 large coal-fired utility units and many large industrial boilers beginning in 2013. In addition, CAVR provided the states flexibility with their own NOx and PM2.5 SIP plans achieve progress towards reducing regional haze and meeting NAAQS.
The Clean Air Interstate Rule (CAIR) was vacated in July 2008. Compliance with the NOx limits defined in CAIR would have constituted compliance with CAVR, and the limits were designed to help the 28 CAIR affected states move towards compliance with the NAAQS. Without CAIR, individual states will be required to implement their own SIP requirements to ensure that they are making progress towards CAVR meet the NAAQS standards.
Two key economic drivers are at play in the U.S. market. First, competing high-NOx removal SCR systems are experiencing rapidly escalating capital costs due to rising concrete and steel prices and labor shortages, thereby improving the economic attractiveness of the Company's suite of low capital cost NOx removal technologies, in particular the NOxOUT CASCADE® process. Second, smaller existing coal-fired units will remain in service longer due to their cost-efficient operations, coupled with continued difficulty in securing permits for new power plants. As a result, cost-effective NOx control solutions specifically tailored to these existing units will be required.
Beyond regulatory emissions requirements, Fuel Tech's NOxOUT ULTRA® technology offers the Company new domestic and international revenue streams. This process, which converts urea, a non-hazardous material, to ammonia for on-site use in Selective Catalytic Reduction (SCR) systems, permits a lower risk approach to NOx reduction for utility and industrial customers alike. NOxOUT ULTRA systems are compatible with existing SCR systems as well as new grassroots coal-fired power projects.
Internationally, conditions exist for robust growth in the People's Republic of China (PRC).The PRC is the world's largest producer and consumer of coal, with approximately 70% of its electricity generation provided by coal-fired power plants. Moreover, the anticipated growth in electricity demand will require the construction of hundreds of new coal-fired power plants by 2020. Due, in part, to its heavy reliance on coal, severe air pollution problems continue to plague many regions of the PRC. This condition has long been recognized by the central government and is an area of particular concern with the 2008 Beijing Summer Olympics fast approaching.
These dynamics provide attractive business opportunities for Fuel Tech in the PRC, both short term and long term. As new power plants are constructed with NOx-reducing SCR systems during the next several years, the Company's NOxOUT ULTRA process is believed to be a leading candidate for the safe delivery of ammonia, particularly near densely populated cities, major waterways, harbors or islands, or where the transport of hazardous anhydrous ammonia is a safety concern. Longer term (beginning 2010/2011), environmental regulations are anticipated to create opportunities for some 1,800 retrofit units utilizing the Company's low capital NOxOUT® Selective Non-Catalytic Reduction (SNCR) and NOxOUT CASCADE systems. To help penetrate this vast market, Fuel Tech is actively establishing cooperative business arrangements with local entities, such as major electric utilities, boiler makers, coal producers and environmental engineering firms.
Other APC targets are being actively pursued in the Asia-Pacific region, including Hong Kong, Taiwan and Korea. The Company is also expanding its efforts in the European market, where NOx reduction systems are in demand for municipal solid waste and cement plants and where applications for urea-to-ammonia conversion systems are expected to grow.
FUEL CHEM® Technology — The market opportunity for the FUEL CHEM technology platform is broad and deep. Leveraging its patented TIFI™ Targeted In-Furnace Injection™ process, the Company has identified numerous opportunities for improving the efficiency, reliability and environmental status of plants in a wide variety of industries, with particular emphasis on controlling slagging, fouling, corrosion, opacity, acid plume and loss on ignition (LOI), as well as the formation of ammonium bisulfate (ABS), sulfur trioxide (SO3), carbon dioxide (CO2) and NOx.
The key market dynamic for this technology is the continued use of coal as the principal fuel source for global electricity generation. Coal accounts for approximately 50% of all U.S. electricity generation, with government projections calling for an increase during the next 25 years to approximately 57%. Coal's share of global electricity generation is forecast to remain at aproximately 41% through 2030.
Within the United States, there are several distinct coal-producing regions, each with its own coal characteristics. Western coals mined in the Powder River Basin (PRB) of Wyoming and Montana represent approximately 42% of all U.S. production and are characterized by low pollutant (i.e., sulfur) content; low energy (i.e., BTU) content; and high levels of slag-forming constituents, such as sodium, which can impair the operating performance of boilers not designed to burn such coals. Coals produced in the Illinois Basin region represent approximately 8% of domestic production and are characterized by high pollutant content; high energy content; and high levels of slag-forming constituents such as iron. Lignite, a low rank coal with slagging tendencies, is produced largely in North Dakota and Texas, representing approximately 7% of U.S. production. Coals mined in the Eastern United States (i.e., Appalachian coals) represent approximately 34% of total domestic production and can have varying characteristics, with some containing high levels of sulfur and most benefiting from high BTU content.
For some time, higher sulfur coals had been out of favor in the electric utility industry due to regulations governing SO2 emissions. With a further tightening of these regulations, many plants are now deploying, or plan to deploy, flue gas desulfurization units (scrubbers) as part of their SO2 compliance strategy. With scrubbers in place, plants can now opt to return to burning lower cost, higher sulfur coals. When such coals are utilized in plants equipped with NOx-reducing SCR systems, SO2 is chemically converted to SO3, which can react with moisture in the flue gas to form sulfuric acid. Under certain atmospheric conditions, sulfuric acid can lead to the formation of an acidic "blue plume." This condition often demands remediation by the power plant operator. SO3 is also responsible for other operating issues, such as air pre-heater fouling and corrosion, SCR fouling and the proclivity to suppress certain mercury removal processes.
The combination of slagging coals and SO3-related issues represents enormous market potential for Fuel Tech. The Company believes that the addressable market for coal- and lignite-fired utility and industrial boilers operating in the United states exceeds 1,500 units. In addition, the addressable market for non coal-burning combustion units is believed to exceed 600 units. (Click here for a breakdown of customer units.)
Internationally, TIFI technology is successfully treating combustion units burning low-quality foreign coals in Italy, while other European opportunities are being pursued vigorously. A potentially large fuel treatment market exists in Mexico, where heavy fuel oils containing vanadium and nickel are the primary source for electricity production, including the estimated 17,000 megawatts generated by the Mexican national utility, CFE. The presence of these metallic constituents promotes slag build-up, and the fuel properties may result in SO3 emissions in local combustion units. Fuel Tech has successfully treated such units with its TIFI technology.
New market opportunities are also being pursued in the Asia-Pacific region, including the PRC and India, where high-slagging coals are fueling a large and growing fleet of power plants. Fuel Tech is currently installing TIFI systems in China and India. In particular, TIFI initiatives in these vast markets are focusing on energy efficiency improvements in combination with reduced air toxic pollutants and CO2 emissions, the latter encouraged by provisions of the Kyoto Protocol, which facilitate the monetization of certified emission reduction CO2 credits. Although the United States is not a signatory to the Kyoto Protocol, Italy is, and the Company’s wholly owned subsidiary in Milan, Fuel Tech SrL, is spearheading these international efforts.