mCHP Current Status & Future Opportunities 9/20/18Micro-CHP (mCHP) appliances are cogeneration...

© 2018 Energy Solutions Center Inc. – All Rights Reserved

mCHP Current Status & Future Opportunities9/20/18

Eric BurgisEnergy Solutions [email protected]

2© Energy Solutions Center Inc. – All Rights Reserved

▪ What is mCHP

▪ Why mCHP?

▪ Best Locations for mCHP

▪ CHP Technologies

▪ Current and Future mCHP Products

▪ Federal tax Incentive & Bonus

Depreciation

▪ Case Studies

Presentation Outline

https://www.michigan.gov

© Energy Solutions Center Inc. – All Rights Reserved 3

What is mCHP?

Combined Heat and Power (CHP) by definition is the generation of two forms of energy from one common source of fuel also known as Cogeneration.

ElectricityFuel Prime Mover & Generator

Waste Heat Recovered

Heat & Hot Water

Micro-CHP (mCHP) appliances are cogeneration systems less than or equal to 50kW in size, larger systems are CHP.

The difference between CHP and mCHP is that most large commercial & industrial CHP applications are Electricity-led where electricity is the main output and heat is a byproduct. Micro-CHP systems in residences or smaller commercial applications are more often Heat-led. Heat is the main output and electricity is the byproduct


How it works

▪ Micro Combined Heat & Power systems provide power independence with around 80% overall system efficiency


Varies by region but may include one or more of the following:

▪ Economics – saving money

▪ Greenhouse Gas Emissions Reductions

▪ Improve Grid Stability

▪ Reducing congestion and constraints

▪ Dispactable power to help meet peak demands

mCHP Driving Forces


Why Micro CHP?

*EIA data. Uses 1032 BTU/CF Natural Gas and 3412 BTU/KWH Electric. (2017 & 2018 are from EIA STEO)

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Average Retail U.S. Residential and Commercial Energy Prices including Short Term EIA Outlook ($/MMBTU)

Residential Natural Gas Residential Electric Commercial Electric Commercial Natural Gas

Residential Gas = $10.75

Residential Electric = $38.63

Commercial Gas = $8.05

Commercial Electric = $31.18

2018 Retail Forecast ($/MMBTU)

Electric costs more than 3 X the cost of Natural Gas in the U.S

Natural Gas

Electricity


Source to Site Efficiency

Reduce Generation Losses and T&D Line Losses with CHPAGA Policy Handbook


mCHP is Efficient

Fuel Furnace/Boiler

80% Efficient

Conventional

Heating & Electric

Fuel

125

units

100

units

56

units

Power Plant

32% EfficientmCHP

85%

EfficiencyFuel

Heat

Electricity

45

units

40

units

Micro-CHP

System

System

Efficiency ~85%

System

Efficiency ~47%

Compared to purchasing electric from the grid and producing heat with a furnace or boiler for the home or business, mCHP is much more efficient.


North American Natural Gas Production

Source: www.eia.gov/oiaf/aeo/tablebrowser/#release=IEO2011&subject=0-IEO2011&table=6-IEO2011&region=0-0&cases=Reference-0504a_1630

0

5

10

15

20

25

30

35

40

2005 2010 2015 2020 2025 2030 2035

Vo

lum

es

(Tc

f) Mexico

Canada

UnitedStates

Historic Projected

The Time is Right for mCHP?

From wide range of sources -Gas prices are stable.Plenty of gas for the future. Good Signs for success of CHP !


▪Why Combined Heat & Power?

▪ Help Stabilize the Grid

▪ Economical

▪ Efficient

▪ Quality Power

▪ Environmentally Sound

▪ PA’s Act 129

Conventional Power Generationvs. Combined Heat & Power


▪ CHP is good for business - Economical

▪ Improves overall energy efficiency and fuel utilization - thereby lowering electric and overall energy costs

▪ Offers reliability during outages – less downtime

▪ Enhances power quality

▪ Equipment to meet virtually every need – size to fit your need

Combined Heat & Power


Best Locations for CHP

The leading criteria to evaluate the ‘best’ location for micro-CHP are:

1. Spark spread

2. Interconnection standards

3. Net metering

4. Special gas rates

5. Local Incentives

13© Energy Solutions Center Inc. – All Rights Reserved 13© Energy Solutions Center Inc. – All Rights Reserved

Best Locations for CHP

Spark Spread > 3Interconnection PoliciesNet Metering for all CHPCHP Tariff RateState or Local Incentives

KEYDC

VTNHRICT

The ‘Best’ locations for CHP have at least

3 of the following attributes:

Pennsylvania:• PA Spark Spread = 3

• Philly ~ 4.5• Interconnection policies up to

5MW• Net metering: <50 kW

Residential, <3 MW for Non-residential

• CHP Tariff from PGW• Local Incentives

• PGW offers CHP Incentives• PECO offers a CHP tiered

capacity up to 50% of project cost, $2M max


mCHP Technologies

Prime Movers:▪ Engine Drives, Internal Combustion (IC)

▪ Microturbines▪ Fuel Cells


Engine Driven mCHP


▪ Reciprocating engines are available for power generation applications in sizes ranging from a ~1 kW to several MW

▪ All current mCHP IC Engines are spark ignition engines

▪ Low first cost

▪ Fast start-up

▪ Proven reliability when properly maintained

▪ Excellent load-following characteristics

▪ Significant heat recovery potential

Engine Drives – Facts


Engine Heat

Exhaust GasHeat Exchanger

Jacket WaterHeat Exchanger

Lube OilHeat Exchanger

ColdWater

Steam /Hot

Water Exhaust

Air

Generator

AC ElectricityPiston

ExhaustValve

IntakeValve

IgnitionSource

Crankshaft

Natural Gas

Turbocharger


▪ Black-Start (not available on all units)

▪ The use of a permanent magnet generator and inverter together can provide the CHP unit with added “black-start” capability to come on line when the utility grid is down

▪ Generator units without “black-start” capability can only operate when the electric utility is on line.

▪ Provides the facility with “supplemental/stand-by” generation during utility outages

Black Start Capability


▪ Microturbines – 30 kW (available)

▪ Run at high speeds

▪ Used in power-only generation or in combined heat and power (CHP) systems

▪ Able to operate on a variety of fuels, including natural gas, sour gases (high sulfur, low Btu content), and liquid fuels such as gasoline, kerosene, and diesel fuel/distillate heating oil

Microturbines


Schematic of Microturbine System

20

Fuel Compressor(if necessary)

Generator

AC Electricity

Recuperator(most units)

InverterRectifier

TurbineCompressor

Combustor

Natural Gas

Low TemperatureWater / Air

Heat to User

Exhaust

Air inlet


▪ Fuel cell systems are composed of three primary subsystems:

▪ Fuel cell stack that generates direct current electricity

▪ Many include a Fuel processor that converts the natural gas into a hydrogen rich feed stream

▪ The power conditioner that processes the electric energy into alternating current or regulated direct current

▪ Fuel cells produce power electrochemically from hydrogen delivered to the negative pole (anode) of the cell and oxygen delivered to the positive pole (cathode)

Fuel Cells


Schematic of Fuel Cell System

Fuel Processor

Fuel Cell Stack

Hydrogen

Gas

ExhaustCO2 & N2

Cooling Loop

CustomerLoad

H

E

A

T

Heat

Exchanger

-

+

DCInverter

AC

93%CH4

Air

Water


Current and Future mCHP Products

50 kW IC Engine,

Tedom 35 kW IC Engine

23.5 kW IC Engine 4.4 kW IC Engine

1.5 kW IC Engine 5& 10 kW IC Engine, plus cooling

30 kW Micro turbine 5, 10, & 35 kW IC Engine


mCHP – Working on Commercialization

1.4-15KW steamturbine1KW Rankine Steam cycle

20-25 kW IC Engine

1 kW Stirling Engine

2-4 kW Thermal Acoustic 1.5 kW Solid Oxide Fuel Cell


Future mCHP Products – Coming Soon

MTT - 3 kW Micro Turbine

25 kW Fuel Cell

Micro CHP Combi Boiler(1kW Stirling - eVita)

1 kW Fuel Cell (U.S.)Working on residential product

1-8 kW Engine (U.S.)Opposing Piston Engine

6 kW Engine(Canada)

© Energy Solutions Center Inc. – All Rights Reserved

Help with funding CHP

This Photo by Unknown Author is licensed under CC BY-ND

http://www.flickr.com/photos/myfuturedotcom/6053042392/

https://creativecommons.org/licenses/by-nd/2.0/


CHP Tax CreditConstruction begins after

Construction begins before

Investment tax Credit (ITC)

12/31/2008 1/1/2022 10%

Bipartisan Budget Act of 2018 (Page 211-214):

https://www.appropriations.senate.gov/imo/media/doc/Bipartisan%20Budget%20Act%20of%202018.pdf

• A 10% investment tax credit for CHP property, applicable to only the first 15MW of CHP property & systems must be less than 50MW.

• CHP system must be 60 percent efficient (on a lower heating value basis), producing at least 20% of its useful energy as electricity and at least another 20% as useful thermal energy.

• Construction must begin by 1/1/2022

https://www.appropriations.senate.gov/imo/media/doc/Bipartisan Budget Act of 2018.pdf


Micro-Turbine Tax CreditConstruction begins after



12/31/2008 1/1/2022 10%



• Credits are for 10% of the cost, up to $200 per kW of power that can be produced.

• To qualify, systems must have an efficiency of at least 26% and must have a capacity of less than 2,000 kW.



Fuel Cell Tax CreditConstruction begins after



12/31/2008 1/1/2020 30%

12/31/19 1/1/2021 26%

12/31/20 1/1/2022 22%



• Credits are for 30% of the cost, up to $3,000 per kW of power that can be produced (Legislation states $1,500 max per .5kW)

• To qualify systems must have an efficiency of at least 30% and must have a capacity of at least 0.5 kW.

• Must be placed in service before 1/1/2024 or 0% incentive



▪ Section 178 of the Tax code allows for 100% depreciation in the 1st year of capital expenses.

▪ Most businesses pay around 21% federal tax.

▪ Assuming the business earns more than the cost of the CHP system, the entire cost of the system can be written off against income the first year and the net effect is you get 21% of the cost back.▪ Add to that the 10% ITC for CHP the business gets

31% of the cost returned in the first year.

Bonus Depreciation


▪ CHP System costs $200K installed. Assume 21% tax rate.

▪ Under a 20 year depreciation, the business writes off $200K/20 years = $10K/Year which is worth $2,100 per year.

▪ Under Section 179 rules of the tax code, the business writes off $200K in year 1, and at 21% tax rate, this is $42K.▪ This assumes the business earns more than the $200K CHP system cost.

▪ Add to either scenario a 10% Tax Credit for CHP which is worth $20K and the business receives $62K of the $200Kexpense back the first year.

▪ Total returned from bonus depreciation & ITC = 31% of the installed cost of the CHP system.

Bonus Depreciation Example


ESC’s CHP Consortiumwww.UnderstandingCHP.com


Case Studies


▪ Large residence –13,000 sq ft.

▪ Goal - reduce the electric bill, heat

the pool/tub, and provide backup

power.

▪ 10 kW mCHP provides 85% of the

power for the residence as well as

the hot water for domestic use.

▪ The swimming pool (8 months/year)

and hot tub (all year) are heated by

the mCHP.

▪ Average operation time per month is

694 hours.

▪ Average power usage: 6.9 kW/mo.

▪ Annual energy savings: $14,000 and

offering a 3 year payback.

Micro-CHP in Greenwich, Conn


Micro-CHP in Greenwich, Conn

▪ 9,000 sq.ft.

▪ Full in-floor radiant heating

system in the house. Sept to

May.

▪ 28,000 gallon pool @ 85°F

(Grandkids) May - Sept

▪ Geothermal system as

backup.

▪ In 20 months of mCHP

usage -- generated 40 Mwh

of electricity @ $0.23/Kw

savings of $9,000


SportSchloss Velen Hotel (Velen, Germany)

Fuel Type: Natural Gas CHP Application: Pool Heating and hot water Size: 50 Kw

-102 Rooms and Suites, 19 event rooms, and 2 restaurants-Estimated Savings of $4,000 per month


Newspaper Printer (Essen, Germany)

Fuel Type: Natural Gas CHP Application: Hot water Size: 50 Kw

-Prints varies newspapers daily


Soccer Stadium (Apeldoorn, The Netherlands)

Fuel Type: Natural Gas CHP Application: Hot water Size: 50 Kw

-Hot water is used for turf heating (when needed) and domestic hot water

mCHP Current Status & Future Opportunities 9/20/18Micro-CHP (mCHP) appliances are cogeneration...

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