Update on Combined Heat and Power

(CHP) – Regional Perspective Presentation to:

2013 Fall Meeting of ASERTTI

October 2nd, 2013

Presentation by:

John Cuttica – Energy Resources Center

University of Illinois at Chicago

&

Isaac Panzarella,- North Carolina Solar Center

North Carolina State University

o Combined Heat & Power (CHP) – What is it &

Why should I be interested

o Recent Activities

– CHP and Portfolio Standards

– CHP and Critical Infrastructure

– CHP and Emission Compliance Strategies

• Industrial Boiler MACT & Utility GHG Emission Rules

– Utility Participation in CHP Markets

• Standby rates, a Key Barrier

Presentation Outline

Combined Heat & Power

What is it & Why should I be

Interested

Defining Combined Heat & Power (CHP) The on-site simultaneous generation of two forms of energy

(heat and electricity) from a single fuel/energy source

Conventional CHP (also referred to as Topping Cycle CHP or Direct Fired CHP)

Separate Energy Delivery:

• Electric generation – 33%

• Thermal generation - 80%

• Combined efficiency – 45% to 55%

CHP Energy Efficiency (combined heat and power)

70% to 85%

Defining Combined Heat & Power (CHP) The on-site simultaneous generation of two forms of energy

(heat and electricity) from a single fuel/energy source

Conventional CHP (also referred to as Topping Cycle CHP or Direct Fired CHP)

Simultaneous generation of heat

and electricity

Fuel is combusted/burned for

the purpose of generating heat

and electricity

Normally sized for thermal load

to max. efficiency – 70% to

>85%

Minimum efficiency of 60%

normally required

Normally non export of electricity

Low emissions – natural gas

Defining Combined Heat & Power (CHP) The on-site simultaneous generation of two forms of energy

(heat and electricity) from a single fuel/energy source

Waste Heat to Power CHP (also referred to as Bottoming Cycle CHP or Indirect Fired CHP)

Fuel first applied to produce useful

thermal energy for the process

Waste heat is utilized to produce

electricity and possibly additional

thermal energy for the process

Simultaneous generation of heat and

electricity

No additional fossil fuel combustion

(no incremental emissions)

Normally produces larger amounts

electric generation (often exports

electricity to the grid; base load

electric power)

Required high temperature (> 800°F)

(low hanging fruit in industrial plants)

Fuel

Electricity

Energy

Intensive

Industrial

Process

Heat produced for the

industrial process

Waste heat from the

industrial process

Heat

Heat recovery

steam boiler

Steam

Turbine

CHP: Already an Important U.S. Energy Resource

Source: ICF CHP Installation Database

• 82 GW of installed CHP at 4,100 industrial and commercial facilities

• 87% of capacity in industrial applications

• 71% of capacity is natural gas fired

• Avoids more than 1.8 quadrillion Btus of fuel consumption annually

• Avoids 241 million metric tons of CO2 compared to separate production

Existing CHP

• 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

CHP Annual Additions

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Cap

acit

y (M

W)

Sites >100 MW

Sites <100 MW

Annual Capacity Additions by Size

Source: ICF CHP Installation Database

CHP Annual Additions

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Cap

acit

y (M

W)

Sites >100 MW

Sites <100 MW

Annual Capacity Additions by Size

Source: ICF CHP Installation Database

CHP Additions 2006-2011 (3,442 MW)

CHP Additions by State CHP Additions by Application

Other Ind. 413 MW

Other Com. 503 MW

Food 323 MW

Paper 442 MW

Utilities 196 MW

Hospitals 143 MW

College/Univ 380 MW

Chemicals 591 MW

Refining 451 MW Other States

945 MW

Washington 123 MW Louisiana

129 MW Florida

147 MW

Ohio 160 MW

California 198 MW

Iowa 200 MW

Conn. 246 MW

New York 264 MW Penn. 115 MW

Texas 915 MW

Recent Market Conditions

o Most activity in states with favorable regulatory treatment and/or specific incentives

o Natural gas CHP in areas with supportable spark spread (Northeast, Texas, California)

o Biomass and opportunity fuels in Southeast, Midwest and Mountain

o “Hot” applications: universities, hospitals, waste water treatment, other institutional applications

o Growing interest in waste heat to power applications

o Project inquiries increasing

Emerging Drivers

Over 4,500 MW announced/under construction

Benefits recognized by policymakers – many states promoting CHP

Favorable outlook for natural gas supply in North America enhances economics

Opportunities created by environmental pressures on the power sector and industrial/institutional users

Growing interest in power reliability and critical infrastructure support

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Cap

acit

y (M

W)

Federal Support for CHP

• Executive Order: “Coordinate and strongly encourage efforts to achieve a national goal of deploying 40 gigawatts of new, cost effective industrial CHP in the United States by the end of 2020”

• DOE focuses technology deployment support for CHP - Regional Technical Assistance Partnerships and SEE Action – Regional meetings planned in support of Executive Order

⁻ SEEAction Guide of CHP Policy Best Practices

• EPA recognizes CHP as an efficiency measure under developing greenhouse gas emission standards and promoting output-based options that recognize CHP benefits (ICI Boiler MACT and Utility MACT (MATS))

• FERC Notice of Interest for recognizing ancillary services from small generators

CHP Value Proposition

Based on: 10 MW Gas Turbine CHP - 30% electric efficiency, 70% total efficiency, 15 PPM NOx

Electricity displaces National All Fossil Average Generation (eGRID 2010 ) -

9,720 Btu/kWh, 1,745 lbs CO2/MWh, 2.3078 lbs NOx/MWH, 6% T&D losses

Thermal displaces 80% efficient on-site natural gas boiler with 0.1 lb/MMBtu NOx emissions

Category 10 MW

CHP 10 MW

PV 10 MW

Wind

Combined

Cycle

(10 MW

Portion)

Annual Capacity Factor 85% 25% 34% 67%

Annual Electricity 74,446 MWh 21,900 MWh 29,784 MWh 58,692 MWh

Annual Useful Heat 103,417 MWht None None None

Footprint Required 6,000 ft2 1,740,000 ft2 76,000 ft2 N/A

Capital Cost $24 million $60.5 million $24.4 million $10 million

Annual Energy Savings 343,747 MMBtu 225,640 MMBtu 306,871 MMBtu 156,708 MMBtu

Annual CO2 Savings 44,114 Tons 20,254 Tons 27,546 Tons 27,023 Tons

Annual NOx Savings 86.9 Tons 26.8 Tons 36.4 Tons 59.2 Tons

CHP and Portfolio Standards

o Many states have developed portfolio standards to

increase the adoption of renewable, energy

generation, energy efficiency, and alternative energy

technologies.

o 40 states & DC have some form of RPS or AES with

21 specifically specifying CHP and/or WHP as

eligible technologies

o 16 states specifically specify CHP and/or WHP as

eligible technologies under their EERS.

o Not all have binding targets that apply to CHP/WHP

CHP and State Portfolio Standards

o State EEPS Program (administered by the investor

owned utilities) usually the single largest opportunity

within a state for increased large customer EE

o EEPS annual efficiency targets becoming much more

difficult to meet within budget caps

o Greater industrial, large commercial, institutional sector

participation is one of the keys to the future success of

state EEPS programs

o How can we increase large customer participation in

EEPS?

Can CHP be a Contributor

State EEPS Programs

o Projects must pass cost effectiveness test (TRC).

o Should incentives be on electric side, gas side, or

shared?

o How do you calculate allowable energy savings?

o Should incentives be tied to measured performance?

o Can CHP significantly assist in meeting targets?

o How do you control size of CHP incentives?

o What have other states done?

Some Thoughts for Including CHP in EEPS:

o Massachusetts – CHP a critical part of Advanced Energy Portfolio Standard and Utility Energy Efficiency Programs

o Maryland – CHP pilot program as part of EmPOWER Maryland energy efficiency program

o Ohio – includes CHP in EERS and WHP in both RPS & EERS. The whole EERS program under attack by First Energy and some legislators

o Illinois – CHP included in Public Sector 3 year filing. If approved an incentive program (modeled after Maryland) will be issued in Spring 2014. Incentive and savings shared on both electric and gas side.

A Few Examples

CHP and Critical Infrastructure

CHP and Critical Infrastructure

“Critical infrastructure” refers to those assets, systems, and networks that, if incapacitated, would have a substantial negative impact on national security, national economic security, or national public health and safety.”

Patriot Act of 2001 Section 1016 (e)

Applications: o Hospitals and healthcare

centers

o Water / wastewater treatment plants

o Police, fire, and public safety

o Centers of refuge (often schools or universities)

o Military/National Security

o Food distribution facilities

o Telecom and data centers

Infrastructure Resiliency

o A key principle of disaster preparedness

o Ability to maintain operation despite a

devastating event

o CHP (if properly configured):

– Offers the opportunity to improve CI resiliency

– Can continue to operate, providing

uninterrupted supply of electricity and

heating/cooling to the host facility

CHP versus Backup

Generation Backup Generator CHP

System

Performance

• Only used during emergencies

Fuel Supply • Limited by on-site storage

Transition from

Grid Power

• Lag time may impact critical

system performance

Energy Supply • Electricity

Emissions

• Commonly burn diesel fuel

CHP versus Backup

Generation Backup Generator CHP

System

Performance

• Only used during emergencies

• Designed and maintained to run

continuously

• Improved performance reliability

Fuel Supply

• Limited by on-site storage

• Natural gas infrastructure

typically not impacted by severe

weather

Transition from

Grid Power

• Lag time may impact critical

system performance

• May be configured for “flicker-

free” transfer from grid

connection to “island mode”

Energy Supply

• Electricity • Electricity

• Thermal (heating, cooling,

hot/chilled water)

Emissions

• Commonly burn diesel fuel • Typically natural gas fueled

• Achieve greater system

efficiencies (80%)

• Lower emissions

Uninterrupted Operation Requirements

o Black start capability

o allows the system to start up independently from the grid

o Generators capable of grid-independent operation

o the system must be able to operate without the grid power signal

o Ample carrying capacity

o system size must match critical loads

o Parallel utility interconnection and switchgear controls

o the system must be able to disconnect from the grid, support critical loads, and reconnect after an event

Superstorm Sandy

o Nearly $20 billion in losses from suspended business activity

o Total losses estimated between $30 to $50 billion

o Two-day shutdown of the NY Stock Exchange, costing an estimated $7 billion from halted trading

o Rutgers estimates economic losses of $11.7 billion for New Jersey GDP

SOURCE: http://www1.eere.energy.gov/manufacturing/distributedenergy/pdfs/chp_enabling_resilient_energy_infrastructure.pdf

One estimate states that over $150 billion per year is lost by U.S. industries due to electric network reliability problems

Source: https://www1.eere.energy.gov/manufacturing/distributedenergy/pdfs/chp_critical_facilities.pdf

Power Outage Cost Estimates

o South Oaks Hospital - Amityville, NY, 1.25 MW reciprocating engine

o Greenwich Hospital - Greenwich, CT, 2.5 MW reciprocating engine

o Christian Health Care Center - Wyckoff, NJ, 260 kW microturbine

o Princeton University - Princeton, NJ, 15 MW gas turbine

o The College of New Jersey - Ewing, NJ, 5.2 MW gas turbine

o Salem Community College - Carney’s Point, NJ, 300 kW microturbine

o Public Interest Data Center - New York, NY, 65 kW microturbine

o Co-op City - The Bronx, NY, 40 MW combined cycle

o Nassau Energy Corporation – Garden City, NY, 57 MW combined cycle

o Bergen County Utilities Wastewater Plant – Little Ferry, NJ, 2.8 MW

reciprocating engine

o New York University – New York, NY, 14.4 MW gas turbine

o Sikorsky Aircraft Corporation – Stratford, CT, 10.7 MW gas turbine

CHP Operates Through Super Storm Sandy

For more information:

https://www1.eere.energy.gov/manufacturing/distributedenergy/pdfs/chp_critical_facilities.pdf.

CHP and Critical Infrastructure

Smart Grid and Micro-Grids

Micro-grid generally considered to be self-contained

grid systems equipped with on-site power generation

(like CHP).

“A group of interconnected loads and distributed energy resources

(DER) with clearly defined electrical boundaries that acts as a single

controllable entity with respect to the grid [and can] connect and

disconnect from the grid to enable it to operate in both gridconnected or

island mode.” (DOE Microgrid Working Group Definition)

o CHP systems act as the backbone of microgrids by

providing base load reliably

o Microgrids must be capable of “island” mode in

anticipation of or in event of grid power failure

CHP and Micro-grids

Microgrid Example:

Gainesville Regional Utilities /

Shands Hospital

•4.3 MW GT CCHP

•chilled water: 4,200 tons

•steam: 14,500 pph

•100% island / blackstart

capability

•Category 4 Hurricane

Advantages

•utility–private partnership

•critical power •no-low capital •50 yr life

Savings

• 36.2% cost • $1.68 M/year • 68% less CO2 • 99% less SOX • 98% less NOX

Microgrid Example:

MCAGCC

Twentynine Palms

•7.2 MW GT CHP

•9.2 MW GT CHP

•4.8 MW Solar PV

•70+ miles of district

energy piping

•100% island capability

• (60) SCADA switches /

communications

• (2) Natural gas feeds

•200,000 gal. LP storage

Advantages

•7 day critical infrastructure reserves

•90% self generation

Campus Microgrid Daily Load Profile

Source: UC San Diego, John Dilliot, Manager, Energy & Utilities

Campus Microgrid Daily Load Profile

Source: UC San Diego, John Dilliot, Manager, Energy & Utilities

Recent State / Local Policy Measures

o DOE/State of New Jersey/ NJ Transit/New

Jersey Board of Public Utilities – announces

micro-grid to power the transit system among

Newark, Jersey City, and Hoboken.

o Connecticut – first state to launch an micro-grid

program: $18M awarded to 9 micro-grid projects

in July 2013 – Gov Malloy to commit additional

$30M over the next 2 years.

CHP and Microgrids

o New York City Mayor (Michael Bloomberg) calls

for public/private partnerships to scale up DG

systems and micro-grids in NYC with a goal of

800MW of installed capacity by 2030.

o Navigant Research (recent report) – North

America will lead the micro-grid market through

2020 with nearly 6 GW of capacity -- the

equivalent of six large nuclear plants.

CHP and Micro-grid (cont’d)

CHP and Emission Compliance

Strategies

• Industrial Boiler MACT

• Electric Utility GHG Emission Standard

EPA’s Boiler MACT Rule (CHP Role)

• ICI Boiler MACT - Standards for hazardous air pollutants from major sources: industrial, commercial and institutional boilers and process heaters

Final rule December 2012 – Compliance by January 31, 2016

• Compliance with MACT limits will be expensive for many coal and oil users (standard compliance measures)

• May consider converting to natural gas Conversion for some oil units, replacements for coal units?

• May consider moving to natural gas fueled CHP (trade off of benefits versus additional costs) – Represents a productive investment

– Potential for lower steam costs due to generating own power

– Higher overall efficiency and reduced emissions

– Higher capital costs, but partially offset by required compliance costs or new gas boiler costs

ICI Boiler MACT - Potential CHP Capacity

Fuel Type Number

of Facilities

Number of Affected

Units

Boiler Capacity

(MMBtu/hr)

CHP Potential

(MW)

CO2 Emissions

Savings (MMT)

Coal 332 751 180,525 18,055 114.2

Heavy Liquid 170 367 48,296 4,830 22.9

Light Liquid 109 241 22,133 2,214 10.5

Total 611* 1,359 250,954 25,099 147.6

*Some facilities are listed in multiple categories due to multiple fuel types; there are 567 ICI affected facilities

•CHP potential based on average efficiency of affected boilers of 75%; Average annual load factor of 65%, and simple cycle gas turbine CHP performance (power to heat ratio = 0.7) • GHG emissions savings based on 8000 operating hours for coal and 6000 hours for oil, with a CHP electric efficiency of 32%, and displacing average fossil fuel central station generation

The data on this chart is still being refined

GHG Pollution Sources…

President’s Plan to Cut Carbon Pollution (partial)

o Issued Proposed New Power Plant Standards on

September 20, 2013

o Utility Boilers fired with Coal and IGCC Units

– 1,100 lb CO2/MWh gross over a 12-operating month

period, or

– 1,000-1,050 lb CO2/MWh gross over an 84-operating

month (7-year) period

o Stationary Gas Combustion Units SC/CC

– 1,000 lb CO2/MWh gross for larger units (> 850

mmBtu/hr)

– 1,100 lb CO2/MWh gross for smaller units (≤ 850

mmBtu/hr)

Proposed Carbon Pollution Standard

for New Power Plants

o 1st half 2014 – expect Standard for Existing

Power Plants

o June 1, 2014 – EPA to release proposed rule

o June 15, 2015 – EPA to finalize rule

o June 30, 2016 – States to submit proposed

State Implementation Plans and supporting

regulations for review

o ~ October 2016 – State plans reviewed and

accepted

Timeline for Carbon Pollution

Standard for New Power Plants

0

500

1,000

1,500

2,000

2,500

AverageCoal

AverageOil

AverageNG

NG CHP Solar,Hydro,Nuclear

Biomass

Em

issio

ns (

lb C

O2/M

Wh)

0 ?

Relative Carbon Emissions from Power

Generation

Based on US EPA Egrid Averages for United States

Industrial Plant,

Institutional

Campus, etc.

Conventional Power Emissions vs CHP

10MW

CHP System

On-site

Boiler

83,220 MWh/yr

315,730 MWh/yr

51,152 tons CO2

TOTAL

23,029 tons CO2

97,060 tons CO2

TOTAL

23,029 tons CO2

savings

28,123 tons CO2

CHP Electric

676 lbs CO2/MWh

74,031 tons CO2

Grid Electric

1,779 lbs CO2/MWh

Results from EPA CHP Emissions Calculator

o States may consider flexible approaches to

meeting carbon pollution standards, including

support for CHP to mitigate other emissions.

o Emissions savings from CHP could be captured

in a number of ways:

– Through utility ownership

– Efficiency programs

– Credit trading

What does this mean for CHP?

Utility Participation in CHP

Markets

o Large Capital Investment which most companies

are reluctant to make

– Long payback periods by their standards

– Not directly related to their main area of business

o Discouraged by many electric utilities

– Utility regulatory framework often does not encourage

CHP

– Utilities encouraged to invest in central station power and

upgrading the present grid structure (larger rates of

return on their investments)

– Requires state policy changes

Two Prominent Barriers to CHP

o Competitive cost with traditional centralized power

o Speed of deployment

o Avoids significant line losses

o Defer significant grid upgrades (reduces conjestion)

o Reduce emission compliance costs

o Ability to function as a capacity resource

o Ability to balance system power fluctuations

o Ability to supplement and support greater

renewable energy deployment

Utility CHP Benefits

Example CHP Installations w/ Utilities o We Energies (Domtar Paper Mill), Rothschild, WI, 50 MW

boiler/steam turbine (2013)1

o Lansing Board of Water & Light (REO Town Cogeneration Plant), Lansing, MI, 100 MW boiler / steam turbine (2013)2

o City of Macon (Northeast Missouri Grain, LLC), Macon, MO, 10 MW combustion turbine (2003)3

o City of Russell (U.S. Energy Partners, LLC), Russell, Kansas, 15 MW combustion turbine (2002)4

o Detroit Thermal Energy (Cristal Global), Ashtabula, OH, 28 MW combustion turbine (2001)5

o Muscatine Power & Water (Grain Processing Corp.), Muscatine, IA, 18 MW boiler / steam turbine (2000)6

o Southern Co. approx 700MW CHP across its service area

1 - http://www.jsonline.com/business/power-plant-to-run-on-wisconsin-biomass-b9985790z1-221960911.html

2 - http://www.lansingstatejournal.com/article/20130630/BUSINESS/306300016/BWL-s-REO-Town-plant-fuels-next-generation-power?nclick_check=1

3 - http://www.midwestcleanenergy.org/profiles/ProjectProfiles/NortheastMissouriGrain.pdf

4 - http://www.midwestcleanenergy.org/profiles/ProjectProfiles/USEnergyPartners.pdf

5 - http://www.eea-inc.com/chpdata/States/OH.html

6 - http://www.eea-inc.com/chpdata/States/IA.html

State Energy Efficiency Action Network:

Guide to the Successful Implementation of

State Combined Heat and Power Policies

State and Local Energy Efficiency Action Network. 2013. Guide to the

Successful Implementation of State Combined Heat and Power Policies.

Prepared by B. Hedman, A. Hampson, J. Rackley, E. Wong, ICF

International; L. Schwartz and D. Lamont, Regulatory Assistance Project;

T. Woolf, Synapse Energy Economics; J. Selecky, Brubaker & Associates.

http://www1.eere.energy.gov/seeaction/pdfs/see_action_chp_policies_

guide.pdf

Discusses five policy categories and highlights successful state CHP implementation approaches within each category:

• Design of standby rates • Interconnection standards for CHP with no

electricity export • Excess power sales • Clean energy portfolio standards (CEPS) • Emerging market opportunities—CHP in

critical infrastructure and utility participation in CHP markets.

Standby Rates for CHP Utility tariffs for “standby rates” or “partial requirements service”—the set

of retail electric products for customers with on-site, non-emergency

generation can reduce the cost savings for CHP to a uneconomical point.

The tariffs are meant to recover the utility costs of providing backup

power, but cover other services:

o Backup power during an unplanned generator outage

o Maintenance power during scheduled generator service for routine

maintenance and repair

o Supplemental power for customers whose on-site generation under normal

operation does not meet all of their energy needs, typically provided under the

full requirements tariff for the customer’s rate class

o Economic replacement power when it costs less than on-site generation

o Delivery associated with these energy services.

Typically, standby rates are “ratcheted” to customer’s peak demand for an

entire year, and charges do not reflect actual costs, especially for CHP

customers with low forced outage rates. State and Local Energy Efficiency Action Network. 2013. Guide to the

Successful Implementation of State Combined Heat and Power Policies.

http://www1.eere.energy.gov/seeaction/pdfs/see_action_chp_policies_

guide.pdf

Standby Rate Barrier Example: Iowa

o The Midwest CEAC published a 2011 study, “Iowa On-site Generation Tariff Barrier Overview”

o Avoided rates for self-generation customers as a percentage of retail rates under tariffs for four utilities ranged from 71.9% to 80.5%.

o Modeling for CHP on Mid-American Eastern

– 1.6 MW CHP generating 81% of required kWh onsite

– avoids 74.7% of average retail service rate

– resulting in a savings of only 61% for CHP

– 41% of charges attributable to standby service

Standby Rate Barrier Example: Iowa

o Mid American

o Modeling for site with 1.6 MW of CHP

generating 81% of required kWh onsite,

avoids 74.7% of average retail service

rate, resulting in a savings of only 61%

with CHP.

Improved Standby Rate Design for CHP

Utility standby tariffs incorporating the following features

could encourage CHP self-generators to use electric service

most efficiently and more accurately charge them for actual

costs of standby service:

o Offer daily or monthly as-used demand charges for backup

power and shared transmission and distribution (T&D) facilities

o Reflect load diversity of CHP customers in charges for shared

delivery facilities

o Provide an opportunity to purchase economic replacement

power

o Allow customer-generators the option to buy all of their backup

power at market prices

o Allow the customer to provide the utility with a load reduction

plan

o Offer a self-supply option for reserves.

State and Local Energy Efficiency Action Network. 2013. Guide to the Successful

Implementation of State Combined Heat and Power Policies.

http://www1.eere.energy.gov/seeaction/pdfs/see_action_chp_policies_guide.pdf

Regional DOE CHP

Technical Assistance

Partnerships

o As of October 1st, the DOE Regional Clean Energy

Application Centers have been replaced with:

– Northwest CHP TAP

– Mid-Atlantic CHP TAP

– Southeast CHP TAP

– Mid-West CHP TAP

– Southwest CHP TAP

– Pacific CHP TAP

– Northwest CHP TAP

US DOE Technical Assistance

Partnerships (TAPS)