Cogeneration Considerations

Cogeneration Considerations

DESPITE ITS STATUS as one of the hottest power generation trends, the concept of cogeneration was introduced to America by Thomas Edison. He designed and built the very first power plant in New York City. The plant was a clear example of cogeneration, as it distributed both electricity and thermal mass to residents on the southern tip of Manhattan.

Now, more than 100 years later, cogeneration is being examined with renewed interest. Major urban centers on both coasts of America have faced the potential of blackouts and millions of dollars in lost revenues. When combined with a faltering economy and the desire to decrease reliance upon oil-rich nations in the Middle East, an increasing number of industries and institutions are considering the benefits offered by cogeneration systems.

Cogen, or CHP, allows on-site power generation, putting to rest many of the traditional concerns of buying power from the local utility grid. On-site systems improve power reliability and quality. What’s more, certain cogen systems can achieve efficiencies of up to 80 percent. And with some simple payback schedules as short as two years, cogeneration systems can represent vast long-term power savings.

But some of the biggest benefits might come at the spur of National Energy Policy Development (NEPD) Group. The Bush administration has included cogen in the broad reach of its National Energy Policy as one way to increase efficiency. When President Bush toured a cogeneration power plant that supplies electricity and hot-water heat to several dozen office buildings in St. Paul, Minn., this past May, he summed up his intent to encourage CHP systems, saying, “I invite you to think with me about [this nation’s] energy future, and an early look at the future, right here in St. Paul. This plant harnesses the best of new technology to produce energy that’s cleaner and more efficient and more affordable.”

Under direction from the Bush administration, the NEPD Group encouraged the Secretary of the Treasury and Congress to enact legislation providing investment tax credits to businesses that purchase cogeneration systems, or to increase the longevity of cogen projects. The NEPD Group also recommended that the Environmental Protection Agency (EPA) promote CHP.

As a result of the attention paid to Bush’s National Energy Policy — and particularly the promotion of cogeneration as a ‘clean energy’ solution — Congress introduced or passed a handful of CHP-related bills earlier this summer. While many of the bills contained sections for fuel cell research, conservation practices and other initiatives for civil power consumption, Congress also focused on intelligent power use by business, industry and schools.

In August, the House of Representatives passed a comprehensive energy bill (HR 4 — Securing America’s Future Energy Act) that includes tax credit incentives for businesses and institutions that purchase and use cogeneration systems. John Jimison, executive director for the U.S. Combined Heat and Power Association, says that the tax credit language was originally part of the 1998 Energy Efficient Technology Tax Act (HR 4538).

“The provisions in the new bill apply to CHP systems with an electrical capacity of more than 50kw [and] which produce at least 20% of their total useful energy in the form of thermal power, and at least 20% in the form of electrical or mechanical power,” Jimison said.

Jimison explained that those systems eligible for tax credits under current legislation must be placed in service between Dec. 31, 2001, and Jan. 1, 2007, and that the system’s total energy efficiency percentage must exceed 60% (or 70% in the case of systems greater than 50mw). This bill also has provisions for extending the depreciation life of some cogen plants.

“This is a good starting point,” Jimison says, “but we can achieve greater benefits and improve upon this language.”

Lobbyists desire to expand existing tax credit provisions by removing the 50kw minimum-size restriction and applying the tax credit to thermal distribution system for new district energy systems that use CHP.

The EPA also gave the nod to cogeneration systems, announcing its incentives for CHP projects in mid-October. Although details about the agency’s initiatives were unavailable when this article went to press, many speculate that the agency will relax environmental site permits and/or announce partnerships for facilities that install cogen systems. Jimison, who has worked with the EPA, says that he expected the EPA incentives and potential partnerships to be attractive.

“We’re delighted with some of the EPA’s proactive measures,” Jimison said. “They realize that the growth of industrial energy use can coexist with environmental preservation — uniquely afforded by clean, efficient CHP sites.”

In addition to DOE and EPA incentives, there are select private sector opportunities that allow facility executives to investigate cogenerated power without many of the customary startup costs. For example, Encorp instituted a lease program mid-year 2001 in select energy markets. Encorp works with facility executives to assess their energy needs, then recommends a full complement of cogen hardware – everything from third party reciprocating engines and absorption chillers to the company’s line of paralleling switchgear. Encorp helps design, build and operate the plant; plant ownership, for the lease length, usually belongs to a local energy contractor.

Jeff Beiter, project sales director for Encorp, says, “These facilities get is on-site power without the hassles of having to learn how a cogen plant works.”

In one of two available contract options, facility executives can effectively ‘lease’ the cogen plant, energy costs and technical expertise, then pay $1 for all plant hardware at the end of the five to seven year contract.

“The companies we work with in this program pay a fixed energy cost during the contract term -– which gives them a better energy price than what they’re currently paying.” Beiter said. “We also maintain a 24-hour, 7-day-a-week operation that monitors the facility’s power plant. If something goes wrong, we can respond immediately.”

In short, programs such as Encorp’s allow executives to investigate cogen plant savings while educating their technicians for plant maintenance after the lease contract expiration date.

Despite the incentives, efficiency projections and potential paybacks, cogeneration is not a system compatible with every facility. To fully utilize CHP, facilities must be able to use the quantities of energy and thermal mass produced. Traditionally, the best facilities for CHP plants are institutional campuses like colleges and hospitals, manufacturing industries that require vast amounts of steam for process applications, or facilities that can use their own waste products for fuel, such as lumber operations and corporate dairy farms.

To help determine the feasibility of cogen system installation, the DOE’s CHP Initiative program provides a detailed three-step process on its Web site.

Step 1: Analysis

The facility must be able to use its current quantities of energy efficiently before upgrading. If a facility consumes 10 percent less power by installing a CHP plant, but has infrastructure inefficiencies that net a 20 percent loss, the facility should address current inefficiencies, then investigate a CHP project.

Also consider site requirements, including space or zoning limitations; the economics of CHP system installation, including capital costs, current average energy costs, return on investment and payback projections; and potential environmental limitations.

Step 2: Feasibility

This is a more detailed screening analysis and examines myriad considerations, including fuel access and price, operation and maintenance costs, interconnection requirements, project structure and development costs.

After these two steps, facility executives can use the payback estimator link on the CHP Initiative Web site to compute a basic payback schedule.

Step 3: Preliminary Design

Because thorough information about a facility’s power use has been compiled in the first two stages, this third step determines what kind of CHP system will work best within the facility’s infrastructure and energy requirements.

Many consulting firms and energy service companies have staff trained to make the above assessments. There are also a number of commercially available software packages for facility executives who wish to conduct initial feasibility studies on their own.

While the reasons for selecting cogenerated power are varied, facility executives should work in concert with their local utility company — especially because the utility can act as a consultant. They may also be a potential customer for excess generation of power or provide back-up power.

Cogeneration provides a host of options for facilities interested in bringing power production and heating and cooling options under their own roof. After carefully weighing energy needs and building infrastructure, facility executives who elect to use CHP systems will be producing power "full steam ahead."

Types Of CHP Systems:

Cogeneration systems can be separated into three distinct categories, each characterized by the “prime mover” -– the main power generation device -– of the system. Picking the correct system is vital to maximizing efficiency for facility requirements.
  • Engine-Driven Generator.
    Usually reserved for smaller systems, (10kw to 15mw) these employ an internal combustion engine to power a generator. Waste heat is captured from the gas-fueled engine and by sending exhaust to a steam generator.

    While this system has the highest power-production-to-steam ratio, internal-combustion powered cogen systems only produce low-pressure steam and are unsuitable for facilities requiring more than 15mw or steam pressure greater than 30 psig.

    Benefits of a combustion engine system include low capital costs and simple operation. But these cogen systems are also more prone to downtime for maintenance or repair than other types of systems, so it’s advisable to have continuous available power from a local utility.
  • Steam Turbine.
    Because these systems employ a conventional boiler to power a steam turbine, they are ideal for facilities and institutions that require large quantities of steam for heating or process applications, and a relatively low power load. High-pressure steam is vented across a high-pressure turbine to produce power with exceptional levels of thermal efficiency. Waste steam is then used for heating or to power processes.

    Because the boilers can be fired by a variety of fuels, including gas, coal, oil, natural gas, agricultural waste or biomass, steam turbine systems are ideal for industries that create their own burnable waste, such as sawmills, corporate farms and municipal waste treatment plants.

    Steam turbine systems are reliable and have good longevity; emissions depend upon the fuel used to fire the boiler.
  • Gas Turbine.
    Usually fired by natural gas, these systems generate electricity with a conventional gas turbine. Turbine exhaust is then reclaimed for steam production – which can be used for heating or to power a steam turbine. Gas turbines range in size from 1mw (or smaller), to 300mw systems; they produce both power and steam very efficiently.

    Because of their mechanical complexity, these turbines require technicians trained to maintain and overhaul their systems.
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By Loren M. Snyder, copyright 2001 Trade Press Publishing. This piece reprinted with permission from Energy Decisions, November/December 2001.