CHP: Cost- Effective, Technologically Feasible and Environmentally Beneficial

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CHP Cost- Effective, Technologically Feasible
and Environmentally Beneficial

• Kim Crossman
• U.S. EPA CHP Partnership
• Presented to the California Energy Commission
• Workshop on a Distributed Generation Roadmap
• May 7, 2008

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EPA Combined Heat and Power

• The EPA CHP Partnership is a voluntary program
  that seeks to reduce the environmental impact of
  power generation by fostering the use of
  highly-efficient CHP
• Through 2006, the CHPP has helped Partners put
  into operation more than 250 CHP projects
  representing over 3,500 MW of capacity, resulting
  in the cumulative emission reductions of over 10
  million tons CO2
• CHPP works with multiple CHP applications and
  with multiple fuel types

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What Is Combined Heat and Power?

• CHP is a highly efficient energy system that
• Is located at or near a building/facility (DG)
• Generates electrical and/or mechanical power
• Recovers waste heat for
• heating
• cooling
• dehumidification
• Can utilize a variety of technologies and fuels

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The Benefits of CHP

• Benefits
• Environmental - Well sited and sized systems
  reduce CO2, SO2 and NOx
• Technical - Fully commercialised technologies in
  proven applications nationwide.
• Economic High efficiency and power reliability
  benefits translate into compelling energy savings
  and avoided catastrophic losses.
• All benefits statements are dependent on a
  baseline Better than what?

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Environmental Benefits of CHP CO2 Emissions
Reductions
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Environmentally Beneficial in California

• CO2 performance combination of fuel and
  conversion efficiency
• Baseline in California CO2 Performance of New
  Gas-fired Combined Cycle Central Plant 80
  Efficient Gas Boiler
• When Does CHP Beat This Baseline?
• Gas-fired CHP must be thermally base loaded,
  sized to meet thermal demand and offset a portion
  of site electricity.
• The offset grid transmission and distribution
  losses should be included for the portion of
  power used on site.
• Biomass-fueled CHP regardless of system
  efficiency due to carbon neutral fuel and fuel
  cell projects due to ultra-low emissions profile.

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Quantifying Environmental Benefits

• The ENERGY STAR CHP Awards
• Performance- based award with review of one year
  of operating data. CHP must beat new gas combined
  cycle and 80 efficient boiler by at least 5.
• In 2005, EPA revisited methodology and now gives
  offset TD losses (7) to portion of power used
  on site.
• 22 winners nationwide in past 5 years.
• Caltech won in 2004 for 12.5 MW CHP plant, gt 70
  overall system efficiency and uses 30 less fuel
  than baseline.
• The EPA CHPP administers the ENERGY STAR CHP
  Awards and provides a CHP Emissions Calculator on
  our website.

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Technologically Feasible CHP

• Turbines, micro-turbines, engines, boilers are
  fully commercial/ proven with gt 95 availability.
  All available from multiple manufacturers.
• Fuel cells and gasifiers are becoming
  commercialised now. Some products available.
• Heat recovery/ thermal technologies are
  commercial ie, HRSGs, heat exchangers,
  absorption/adsorption chillers,
  thermally-activated dessicants.
• Controls switchgear are fully commercial and
  enable remote operation, safety and flexibility
  in grid connection or island operation.
• The EPA CHPP maintains a CHP Catalog of
  Technologies and is about to publish a Biomass
  CHP Catalog of Technologies with technology
  status, performance and cost information for
  commercial technologies.

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Technologically Feasible - Applications

• CHP is NOT a technology, it is an application.
  Best practices in system design integrate
  seamlessly into existing building systems or new
  construction.
• System sizing and technology selection must be
  focused on the end use application.
• The CHP industry has an excellent track record in
  successful projects in CA and nationwide.
• The EPA CHPP provides 3rd party technical
  assistance on best practices in design and
  project development to candidate sites
  nationwide.

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CHP Is Already Important to California

• 9,200 MW of CHP capacity installed at over 900
  sites
• Average capacity is 10 MW
• 55 of installed capacity is in systems greater
  than 50 MW
• 88 of installed capacity is in systems greater
  than 20 MW

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Existing California CHP Capacity Is Primarily in
Industrial Applications

• Existing CHP Capacity (2006) 9,196 MW

Source EEA
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But CHP Is Used by a Wide Variety of Users

• Existing CHP capacity (2006) 917 sites

Source EEA
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CHP Applications by Sector in CA

Source EEA
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Much Potential Remains Undeveloped

• Technical potential of over 30,000 MW at
  industrial and commercial facilities
  significant resource for California
• Two-thirds of the opportunity is in commercial
  and institutional applications
• Primary opportunity is within-the-fence systems
  sized for thermal loads
• Over 80 of the potential is in systems below 5
  MW
• Industrial fabrication and assembly
• Commercial hotels, schools, office buildings

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Cost-effectiveness and Sustainability

• Sustainability and CHP
• Efficiency cost effectiveness environmental
  benefits.
• The nexus of efficiency and economy naturally
  drives design towards the most beneficial
  systems.
• Power generated on site offsets retail
  electricity.
• Economic benefits of power reliability for some
  sites are included in investment decision.
• Cost-effectiveness test for on site power is
  dependent on the investor, ie risk vs benefit.
• The CHPP has a fact sheet on quantifying the
  reliability benefits of CHP to assist in
  investment decisions and may provide preliminary
  feasibility analysis to qualified candidate
  sites.

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What Makes CHP Possible in California

• Favorable spark spread cost of fuel vs power

Avg. retail cost of power to CI consumers in CA
.125
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The Impact of Market Factors on
Cost-effectiveness

• Rapidly changing market factors increase the
  perception of risk and result in a long and
  expensive project development cycle for all DG
  applications.
• May be either actual or perceived benefits or
  risks
• Fuel and electricity cost and volatility
• Grid and site electricity reliability
• Customer awareness acceptance
• Sector specific trends such as new construction
  or expansion, outsourcing, etc.
• The EPA CHPP provides information on current
  market factors and provides assistance to energy
  users and the CHP industry to overcome the
  barriers to investment caused by perceived risks.
  

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Market Opportunities for CHPIdentifying the
Low-hanging Fruit

• Traditional applications
• Industrial processes
• Hospitals
• Universities Colleges
• Emerging/strategic markets
• Hotels and casinos
• Municipal wastewater treatment
• Biorefineries ethanol production
• Biomass-fired CHP
• Utility-owned CHP
• Data centers
• The CHPP has conducted analyses, created
  collateral and provided outreach to these
  strategic market sectors. Information and
  materials are available on our website.

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The Impact of Enabling Policies on
Cost-effectiveness/ Customer Acceptance

• Incentives provide capital recovery, reduce
  operating costs, add revenue streams, increase
  acceptance
• Grants provide capital cost offset and
  demonstrate political recognition of public
  benefits
• Gas incentives such as cogeneration
  transportation rates reduce operating costs
• Environmental revenue streams provide value of
  environmental benefits to investor.
• Removing unintended barriers reduces uncertainty,
  capital and operating cost and development time.
• Simplified/ streamlined interconnection
• Output based emissions standards
• Fair and justifiable standby rates
• Exit fees or other departing load charges
  recognize reward public benefits of Clean DG.
• The EPA CHPP maintains a database of all state
  and federal enabling policies and provides
  analysis, best practices and technical assistance
  to local, state and federal policy makers.

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Policy Impacts on Cost-EffectivenessCogen gas
rates examples (from 2004)

• Application 250,000 sq ft Hospital
• Peak Demand 2,000 kW
• Average Demand 1,600 kW
• CHP System
• 925 kW Natural Gas Engine
• 33 net electric efficiency
• Thermally based system
• 3.3 MMBtu/hr hot water output
• Location Pacific Gas and Electric territory and
  Con Ed/Keyspan Energy territory

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PGE Gas Transportation Rate

• Boiler Transportation
• 0.75/MMBtu Summer
• 0.99/MMBtu Winter
• CHP Transportation
• 0.15/MMBtu

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Sensitivity of Payback to Gas Price PGE
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Keyspan Gas Transportation Rate

• Boiler Transportation (General Service
  Heating)
• 5.85/MMBtu up to 50 therms/month
• 3.03/MMBtu gt 50 therms
• CHP Transportation (Baseload DG lt 1MW)
• 1.13/MMBtu April through October
• 1.45/MMBtu November through March

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Sensitivity of Payback to Gas Price
ConEd/Keyspan
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Policy Impacts on Cost-EffectivenessEnvironmenta
l Revenue Streams
Environmental Revenue Streams Any number of
programs that reward clean power generation and
provide a one time or ongoing additional revenue
source.

• Emissions Programs
• Emission allowance trading programs (cap and
  trade)
• New source emission offset programs
• CO2 offset programs
• Generation Programs
• Energy portfolio standard programs
• Voluntary green market programs
• EPA CHPP will be publishing a Guide to
  Environmental Revenue Streams targeted towards
  project developers and candidate sites in June of
  2007.

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Project Economics
Sample Projects

• A 3 MW landfill power plant selling power to the
  grid
• A 10 MW CHP plant (with or w/o SCR) operating
  behind-the-fence to avoid the retail purchase of
  electricity and boiler fuel.

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Baseline Economics
Project Cost
Project Payback
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Added Value of Revenue Streams with Payback
Improvement
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For More Information
Kim Crossman, Team Leader Combined Heat and Power
Partnership U.S. Environmental Protection
Agency crossman.kim_at_epa.gov ph. [phone]
fax [phone] www.epa.gov/chp