Combined Heat and Power and the Clean Power Plan

Bruce Hedman,

Institute for Industrial Productivity

National Conference of State Legislatures

Clean Power Plan Policy Workshop

November 10, 2015

CHP is an integrated energy system that:

• Is located at or near a factory or building

• Generates electrical and/or mechanical power

• Recovers waste heat for

– heating,

– cooling or

– dehumidification

• Can utilize a variety of technologies and fuels

What Is Combined Heat and Power?

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• User - Reduced energy costs and improved power reliability

• Environment – Reduced energy use and lower emissions (CO2, NOx, SOx, CO and PM)

• Public Safety – Keep critical infrastructure operating and support the grid in times of emergency

What Are the Benefits of CHP?

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Fuel

Fuel

94 units

56 units

30 units

Power Plant32% efficiency

Boiler/Furnace80% efficiency

45 units

Electricity

Heat

Combined Efficiency~ 50%

CHP Captures Heat Lost in Power Generation, Increasing Overall Efficiency of Energy Services

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Fuel

Fuel

Fuel100

units

94 units

56 units

30 units

Power Plant32% efficiency

Boiler/Furnace80% efficiency

CHP75% efficiency

45 units

Electricity

Heat

Combined Efficiency~ 50%

Combined Efficiency~ 75%

CHP Captures Heat Lost in Power Generation, Increasing Overall Efficiency of Energy Services

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Fuel

Fuel

Fuel100

units

94 units

56 units

30 units

Power Plant32% efficiency

Boiler/Furnace80% efficiency

CHP75% efficiency

45 units

Electricity

Heat

Combined Efficiency~ 50%

Combined Efficiency~ 75%

…. and Reducing CO2Emissions

30 to 55% less CO2 emissions

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CHP’s Higher Efficiency Results in Energy and Emissions Savings

Category10 MW

CHP10 MW

PV10 MW Wind

Annual Capacity Factor 85% 22% 34%

Annual Electricity, MWh

74,446 19,272 29,784

Annual Useful Heat Provided, MWhth

114,544 None None

Capital Cost, $ million $19.8 m $35.6 m $22.1 m

Annual Energy Savings, MMBtu

317,981 196,400 303,527

Annual CO2 Savings, Tons 43,227 17,857 27,598

Based on: 10 MW Gas Turbine CHP - 27% electric efficiency, 69% total efficiencyElectricity displaces National All Fossil Average Generation (eGRID 2010 ) -

9,572 Btu/kWh, 1,745 lbs CO2/MWh,, 6% T&D losses

Thermal displaces 80% efficient on-site natural gas boiler 7

• 82.7 GW of installed CHP at over 4,400 industrial and commercial facilities

• 8% of U.S. Electric Generating Capacity; 12% of annual generation

• Avoids more than 1.8 quadrillion Btus of fuel consumption annually

• Avoids 240 million metric tons of CO2 compared to separate production of heat and power

Sources: DOE/ICF CHP Installation Database (U.S. installations as of December 31, 2014);

Chemicals28%

Refining19%

Paper14%

Food8%

Metals5%

Other Mfg.6%

Other Industrial

6%

Commercial/Institutional

14%

CHP Is Already an Important U.S. Energy Resource

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Natural Gas is the Preferred Fuel for Existing CHP (Based on Capacity)

Estimated Natural Gas Load of 4.2 Tcf

69%Natural Gas

Coal 15%

Oil 1%

Waste 9%

Wood 2%Other 1%

Biomass 3%

Sources: DOE/ICF CHP Installation Database (U.S. installations as of December 31, 2014);

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Industrial Process Integration, PA

Food Processing, CT

University Campus, NJ

Hospital, NY

Office Building, CA

100 MW CHP plant will provide most of the plant’s electric and thermal energy needs driven by local Shale Gas.

Food processing plant gets 90% of its power and 80% of its thermal energy from a 4.6 MW CHP plant.

The 15 MW CHP plant provides steam and chilled water and is integrated with the wholesale and transmission markets.

500 kW Reciprocating Engines CHP plant designed to island from grid during outage. Provided 100% of electric and thermal needs for 15 days during and after Hurricane Sandy.

1 MW Reciprocating Engine Plant with 320 Ton Chiller providing power, space heating and space cooling. Reduces grid peak loads with chiller output as well as generator output.

Typical CHP Installations

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CHP Is Used in Every State

• Natural gas based CHP concentrated in Northeast, Gulf Coast, Midwest and California

• Northwest and Southeast have high concentration of sites in forest products and paper industries

Source: AGA CHP Market Study 2013

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CHP Is a Cost-Effective Resource

Source: Bloomberg Sustainable Energy Factbook 2014

Reliability/Resiliency• According to the EIA, electric

grid outages have increased significantly over the past 20 years.

• Total losses due to Superstorm Sandy estimated between $30 to $50 billion including a two-day shutdown of the NY Stock Exchange, costing an estimated $7 billion from halted trading.

• Rutgers estimates economic losses of $11.7 billion for New Jersey GDP significantly impacting state tax income.

• CHP, when properly configured can work without the grid to provide power to critical facilities, government services and industrial facilities.

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CHP Can Provide Critical Energy Reliability and System Resiliency Benefits

• Traditional backup generators do not always perform during emergencies, a system operating on a daily basis (CHP) is more reliable

• CHP provides continuous benefits to host facilities, rather than just during emergencies

• CHP systems kept running during Sandy:

– South Oaks Hospital (LIH) - Amityville, NY, 1.25 MW– The College of New Jersey - Ewing, NJ, 5.2 MW– Public Interest Data Center - New York, NY, 65 kW– Bergen County Wastewater – Little Ferry, NJ, 2.8 MW– New York University – New York, NY, 14 MW– Princeton University - NJ, 15 MW – Sikorsky Aircraft Corporation – Stratford, CT, 10 MW

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The Remaining Potential for CHP Is Large

Source: ICF internal estimates

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The Potential for Additional CHP Is Nationwide

Source: ICF Internal Estimates

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• Financial uncertainty

• CHP cost and performance uncertainty

• Regulatory uncertainty

• Electric utility uncertainty– Utility goal is affordable and reliable power

– Generally neutral to negative on CHP

– CHP represents a loss of revenue to the utility and can result in the deferral of investment

– This often results in unfavorable tariffs, drawn out interconnect and other roadblocks to CHP

Hurdles to Increased Use of CHP

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• Possible federal policies– Continuation of investment tax credit

– Include CHP as a qualified compliance option under the CPP

– Federal procurement requirements

– Encourage CHP participation in ancillary services markets

• Possible state policies– Include CHP as a qualified resource in energy efficiency resource

standards and rate-payer efficiency programs

– Standardized interconnection requirements

– Reasonable standby rates

– Consider utility ownership

– Include as a CPP compliance option in state plans

Policy actions can reduce perceived risks of CHPand expand the economic potential

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CHP as a Compliance Option

“Electric generation from non-affected CHP units may be usedto adjust the CO2 emission rate of an affected EGU, as CHPunits are low-emitting electric generating resources that canreplace generation from affected EGUs.”

• CHP meets EPA’s requirements for an approvable compliance option

• CHP offers efficiency, air quality, economic and reliability benefits

• CHP is a cost-effective resource

• CHP produces low-cost CO2 reductions

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• States have specific emission rate target specified in terms of lbs CO2/MWh

• EE reduces demand from affected generating units, thereby reducing emissions

• CHP systems reduce demand from affected units by generating electricity on-site at a lower effective emissions rate

• Both EE and CHP can receive emission reduction credits (ERCs) that affected EGUs can buy to reduce their apparent emissions rate

• States have specific emission rate target specified in terms of tons of CO2 emitted per year

• When properly accounted for, deployment of EE and CHP systems should yield fewer total emissions by reducing generation from affected EGUs

• Under a mass-based approach, Allowances are generated and allocated by states; Allowances have monetary value

• States can use allowances to promote specific goals or programs:

– Allocating allowances directly to EE/CHP

– Using auction proceeds to support EE/CHP incentive programs

– Allocating set-asides to EE and CHP

Rate-Based Approach Mass-Based Approach

How Does CHP Help Compliance?

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Stakeholder Engagement Is Key• The CPP presents an opportunity to address the barriers to CHP

deployment

• Achieving these goals will require stakeholder input to help develop and implement the mechanisms to qualify and promote CHP as a compliance option:

Assistance in assessing the opportunity for CHP

Guidance in designing effective programs to promote increased investment in large user efficiency and CHP

• Effective rate-payer and market-based programs

• Effective ERC markets

• Effective allowance programs

Support for rationalizing policies, legislation and regulatory requirements to support increased investment, and to produce the results needed to achieve CPP goals

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• DOE CHP Technical Assistance Partnershttp://energy.gov/eere/amo/chp-technical-assistance-partnerships-chp-taps

• EPA CHP Partnershiphttp://www3.epa.gov/chp/

• CHP and Resiliency− NYSERDA, “The Contribution of CHP to Infrastructure Resiliency in New

York State,” April 2009

− “Combined Heat and Power: Enabling Resilient energy Infrastructure for Critical Facilities,” March 2013, ICF International

− U.S. Department of Energy, “Guide to Using Combined heat and Power for Enhancing Reliability and Resiliency in Buildings,” Sept. 2013

CHP Resources

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Contact:

Bruce Hedman

Institute for Industrial Productivity

202-697-9358

Bruce.hedman@iipnetwork.org

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CHP Case Studies

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Frito-Lay CHP System

Killingly, Connecticut Facility

– 400 employees

– Processes 250,000 lb/day of corn and potatoes

CHP System

– 4.6 MW Gas Turbinewith SCR for NOx Control

– Provides 90% electricity needs and 80% of site steam needs

Start-up March 2009

Killingly Facility and CHP System

Centaur 50 Gas Turbine

Duct Burner and Heat Recovery Boiler

Arrow Linen Supply CHP System

Laundry service for restaurants in New York

Two 150 kW reciprocating engine packages

– Peak demand of 370 kW

Hot water thermal recovery forwashers and processing

Electric Load Following

– CHP system provides 70% of facility’s power

Arrow Linen Supply

Project Economics• Annual energy costs of $900,000

before CHP

• CHP installed cost $700,000

• CHP savings of $115,000 per year

• 6.25 year payback based on typical costs

• 3.7 year payback for project with incentives

Government Example – National Institute of Health

75 buildings, 300 acres, 8 million ft2

laboratories, hospitals rooms, teaching facilities and offices

CHP system installed 2004

– 23 MW natural gas combustion turbine,

– 180,000 lb/hr steam for space heating and cooling, and lab support

$62 million project

– $16 million for energy efficiency and energy management systems upgrades

Annual energy savings:– 640 billion Btus

– $4 million

Jesse Brown VA Medical Center

Veterans Administration Hospital, Chicago, IL

– 200 beds, 1,800 staff, 62,000 local vets

CHP system installed 2003

– 3.4 MW natural gas combustion turbine

• 100% winter peak

• 90% summer peak

– 50,000 lb/hr steam for space heating and cooling, and sterilization

Enhanced Use Lease Project– ESG designed/built & maintains the

Energy Center

– Estimated savings to VA of $25 million over 25 years

U.S. Coast Guard Shipyard

Curtis Bay (Baltimore), Maryland– Builds, repairs, renovates ships

– 112 acre site, 110 years old

– Houses other USCG tenants

– Annual budget of $88 million

CHP System installed 2009– Four 1 MW low NOx recip engines

– Fueled by landfill gas (1.5 mile pipeline)

– 2000 lb/hr 95 psi steam from each engine

DOE ESPC Contract– Ameresco

– Project offsets 18,000 MWh and 71,000 Dthrm

– Energy security was an important driver

– Achieved entire DHS renewable energy goals through 2012