Combined Heat and Power:

A Distributed Generation

Resource with High Potential

across the United States

August 11th, 2013

National Conference of State Legislatures

Task Force on Energy Supply

◦ DOE Clean Energy Application Centers

◦ Why are CHP investments being made?

◦ Why is more CHP not being developed?

◦ Standby rates for CHP and potential

improvements

◦ Real time pricing offers a win-win CHP

strategy for utilities and self-generators

Presentation Outline

DOE Clean Energy Application Centers (CEACs)

DOE's Regional CEACs promote and assist in transforming the market

for CHP, waste heat to power, and district energy technologies and

concepts throughout the United States.

Key services of the Regional Clean Energy Application Centers include:

◦ Market Assessments – Supporting analyses of CHP market potential in diverse

sectors such as health care, industrial sites, hotels, and new commercial and

institutional buildings.

◦ Education and Outreach – Providing information on the benefits and applications of

CHP to state and local policy makers, regulators, energy end-users, trade

associations, and others.

◦ Technical Assistance – Providing technical information to energy end-users and

others to help them consider if CHP, waste heat recovery or district energy makes

sense for them. This includes performing site assessments, producing project

feasibility studies, and providing technical and financial analyses.

The CEACs are offering technical assistance on CHP as a compliance

strategy for the more than 550 major source facilities impacted by the

Industrial, Commercial and Institutional Boiler MACT regulation.

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

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

Fuel Electricity

Steam

Prime Mover

&

Generator

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 80%

HRSG can be supplementary fired for

larger steam loads

Normally non export of electricity

Low emissions – natural gas

Heat recovery

steam boiler

Recip. Engine

Gas Turbine

Micro-turbine

Fuel Cell

Boiler/Steam Turbine

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

Steam Turbine

Heat recovery

steam boiler

Existing and Technical Potential for CHP in

Industrial and Commercial Applications

Internal estimates by ICF International and CHP Installation Database developed by ICF

International for Oak Ridge National Laboratory and the U.S. DOE; 2012.

Available at http://www.eea-inc.com/chpdata/index.html.

Estimated Technical Potential for CHP

in U.S. by State

Hedman, “CHP: Markets and Challenges,” for National Governors Association Roundtable

on Industrial Efficiency & CHP, June 2012;

http://www.nga.org/files/live/sites/NGA/files/pdf/1206oundtableHedman.pdf

Reduces energy costs for the end-user

Increases energy efficiency, helps manage costs, maintains jobs

Provides stability in the face of uncertain electricity prices

Reduces risk of electric grid disruptions & enhances energy reliability (Hurricanes Katrina & Sandy; 2004 Blackout)

Used as compliance strategy for emission regulations (Boiler MACT & Reduced Carbon Footprint)

Natural gas supply increases and price stability

Why are CHP investments being made? (> 4,100 installations & ~ 82 GW installed capacity)

Annual CHP Capacity Additions

PURPA

Hedman, “CHP: Market Status and Emerging Drivers,” for Midwest Cogeneration

Association Meeting, April 2013;

http://www.cogeneration.org/pdf/MCA2013April4_Hedman.pdf

Recent CHP Investment Factors

Hedman, “CHP: Market Status and Emerging Drivers,” for Midwest Cogeneration

Association Meeting, April 2013;

http://www.cogeneration.org/pdf/MCA2013April4_Hedman.pdf

Plans for

4,500

MW CHP

Annual CHP Capacity Additions

Historical NG Price at Henry Hub

Natural gas reserves have increased

confidence in price stability

More development in states with

favorable regulatory or policy status

Spark Spread improving in areas;

Northeast, Texas, California

Biomass and other opportunity fuels in

Southeast, Midwest and Northwest

Awareness of strategic applications:

universities, hospitals, wastewater

treatment, institutions

Growing interest in power reliability and

critical infrastructure

Opportunity to meet environmental

performance requirements in industrial

and institutional sectors

Economics not right (long payback periods) ◦ Spark Spread not favorable ◦ Capital Cost

Competing for tight capital budgets Limited technical awareness Too much of a hassle

◦ Working with utilities may be seen as impediment

◦ Potential cost savings reduced by fees and charges; interconnection, standby, departing load

Why is more CHP not being developed

at sites where it makes sense?

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:

Backup power during an unplanned generator outage

Maintenance power during scheduled generator service for routine maintenance

and repair

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

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

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

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

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

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

Mid American

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:

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

and shared transmission and distribution (T&D) facilities

Reflect load diversity of CHP customers in charges for shared

delivery facilities

Provide an opportunity to purchase economic replacement power

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

power at market prices

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

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

Princeton University has a 15 MW gas turbine CHP system, operated to maximize savings by reducing demand on grid during peak pricing times.

Real time pricing offers a win-win CHP strategy

Borer, “Ted Talk on CHP & Campus Sustainability” for International

District Energy Association. February 2013;

http://www.districtenergy.org/26th-annual-campus-energy-conference

Peak utility power

pricing

CHP operated at

peak to reduce

grid demand

CHP operated at

baseload to meet

thermal demands

DOE Headquarters / Advanced Manufacturing Office

Claudia Tighe

CHP Deployment Program Manager

Katrina Pielli Senior Policy Advisor

Office of the Deputy Assistant Secretary for Energy Efficiency

http://www1.eere.energy.gov/manufacturing

/distributedenergy/ceacs.html

DOE & Southeast CEAC Contacts Southeast CEAC

Director: Isaac Panzarella; (919) 515-0354; ipanzarella@southeastcleanenergy.org

Co-Director: Pedro Mago; mago@me.msstate.edu

States Covered: Arkansas, Alabama, Florida, Georgia, Kentucky, Mississippi, North

Carolina, South Carolina, Tennessee, and Louisiana, Texas & Oklahoma for Boiler MACT

Technical Assistance only

Thank You!