Distributed Generation:Onsite Power Options

World Environment Center

3rd Gold Medal Colloquium

“Energy and the Environment: Engineering Sustainable Growth”

May 17, 2001

Paul Bautista

What is Distributed Generation?

• Small scale generation resources

– less than 25 MW

• Located at or close to the load

– Customer

– Utility

– Third party

• Retail market play

The New Energy Market

Customer Choice in a competitive climate

Regulatory Change facilitates competition

Product Portfolio enables customer & provider choices

The basis of the new business is providing value with customer-focused solutions

Why the Interest in On-site Power?

• Restructuring is opening access to the electric grid system

• Customers have greater awareness of energy costs and options

• Technology improvements enhancing performance & economics

• ESCOs & ESPs opening path to market

• Federal and state government taking action

Opportunities for Wide Range of Stakeholders

• Customers– Productivity

– Energy cost

– Reliability

– Flexibility

• Electric Utilities– Deferral of T&D

investments

– Grid Management

– Customer retention

• Gas Companies– New load

– Load management

– New energy service

• Local Governments– Attract new manufacturing

and other businesses

– Maintain competitiveness

Policy Maker Interest

Increased energy efficiency

Reduced environmental impact

Climate change mitigation (CHP)

Improved reliability of the grid

Lower/Stable energy costs

Customer choice

Building an Economic Model

CapacityCost

EfficiencyReliabilityEmissions

O&M

DemandLoad Shape

Thermal DemandRisk Preference

Opp. Cost

Electric PriceOther TOS

Fuel Price and Avail.Power ReliabilityUDCo Attitude

Regulation$ Agents

DG Technology

• Reciprocating Engines (30 - 6,000 kW)

• Industrial Gas Turbines (500 - 20,000 kW)

• Microturbines (25 - 300 kW)

• Fuel Cells (3 - 3,000 kW)

• Renewables - photovoltaics, wind (1-1,000 kW)

Reciprocating Engines

• Established technology, most common prime mover in the world, distribution channels in place

• Gas-fired spark ignition engines appropriate for CHP, peak shaving, and direct drives less than 10 MW

• Diesel engines most common for standby, emergency, and remote applications

Combustion Turbines

• Small turbines (1-30 MW) established technology for many power and direct drive applications

• Fuel flexible but economics and emissions favor natural gas• Good for CHP applications requiring high quality steam in industrial

and large commercial applications

Microturbines

• Emerging technology for commercial rollout occurring now

• Simple designs with few moving parts

• Distribution, marketing, and service opportunities still exist

• Good for both small CHP, power only, peaking, and even standby

Fuel Cells

• Electrochemical power production with a space-age heritage -- inherently efficient and clean

• PAFC in early market applications -- many with economic subsidies

• Other technologies to emerge in the next 5 years -- market opportunities exist

Photovoltaics

• Technology is available for commercial application

• Costs are high, Federal and State subsidies are available

• High costs limit applications to niche markets -- remote areas and environmentally sensitive sites

Wind Power

Size range: 50-1,000 kW

Start-up time: n/a

Commercially available

Visual, noise and wildlife impacts

DG Applications

• Combined Heat and Power (CHP)

– Established market, with renewed interest

• Peakshaving and Peak Sharing

– Potential growth market

• Premium Power

– Ultra-high reliability and power quality

• Standby

– Predominantly a diesel market

CHP &Quality Power

Arbitr

a

ge

Anci

llary

Serv

ices

Backup &Peaking

Load

Cen

ter

Supp

ort

ISO Energy Service Provider/PX

Substation

Remote

Power

Combined Heat and Power

• CHP systems sequentially produce electricity, thermal or mechanical energy

• Sites have continuous thermal use

• Thermal energy is typically LP/HP steam, hot water

• CHP boasts energy utilization efficiencies up to 85%

• CHP is an important part of the DG application mix and very attractive from an energy policy perspective

• CHP Challenge to double US CHP capacity

CHP Efficiency AdvantageBoiler

Central Power Plant

DG/CHPFuel

Fuel

Fuel Heat

Power

Combined Heat and Power up to 85% efficient

50% efficient

CHP systems sequentially produce electricity, thermal or mechanical energy. Sites have coincident thermal demands. Thermal energy is typically LP/HP steam, hot water. CHP boasts energy utilization efficiencies up to 85%

Combined Heat & Power

• Criteria for Commercial/Institutional Sectors– Relatively coincident electric and thermal loads

– Thermal energy loads in the form of steam or hot water

– Electric demand to thermal demand (steam and hot water) ratios in the 0.5-2.5 range

– Moderate to high operating hours (>3000 hours)

Commercial and Institutional Market Segments

Application Electric Demand Thermal Demand

Hotels/Motels 100 kW – 1+ MW Domestic hot water, space heating, pools

Nursing Homes 100-500 kW Domestic hot water, space heating, laundry

Hospitals 300 kW – 5+ MW Domestic hot water, space heating, laundry

Schools 50 – 500 kW Domestic hot water, space heating, pools

Colleges/Universities 300 kW – 30 MW Centralized space heating, domestic hot water

Commercial Laundries 100 – 800 kW Hot water

Car Washes 100 – 500 kW Hot water

Health Clubs/Spas 50 – 500 kW Domestic hot water, space heating, pools

Country/Golf Clubs 100 kW – 1 MW Domestic hot water, space heating, pools

Museums 100 kW – 1+ MW Space heating, domestic hot water

Correctional Facilities 300 kW – 5 MW Domestic hot water, space heating

Water Treatment/Sanitary 100 kW – 1 MW Process heating

Large Office Buildings 100 kW – 1+ MW Domestic hot water, space heating

Extended Service Restaurants 50 - 300 kW Domestic hot water, absorption cooling, desiccants

Supermarkets 100 – 500 kW Desiccants, domestic hot water, space heating

Refrigerated Warehouses 300 kW – 5 MW Desiccants, domestic hot water

Medium Office Buildings 100 – 500 kW Absorption cooling, space heating, desiccants

Source: Hagler Bailly, OSEC

Natural Gas Is the Preferred Fuel for CHP

• Existing CHP Capacity: 52.8 GW

Natural Gas64%

Coal16%

Oil3%

Wood4%

Waste9%

Other4%

Other Industrial

20% Commercial and Institutional

9%

Industrials Represent 90% of Existing CHP

• Existing CHP Capacity (1999) 52,800 MW

Paper16%

Chemicals31%

Food9%

Refining13%

Metals5%

Source: Hagler Bailly, OSEC

Recip Engine2%

Boiler/ST34%

Gas Turbines Dominate Capacity

• Existing CHP Capacity: 52.8 GW

Gas Turbine15%

Combined Cycle49%

Source: Hagler Bailly, OSEC

Recip Engine48%

Boiler/ST26%

Recip Engines Dominate Sites

• Existing CHP Installations: 2167 sites

Gas Turbine16%

Combined Cycle10%

Source: Hagler Bailly, OSEC

Global Warming Implications of CHP(lb/MWh of Carbon Equivalent)

= 10% T&D Losses

658

COAL OIL --------------- NATURAL GAS ----------------

UtilityCombined

Heat &Power

- - - - - Boiler-Steam Turbine - - - - -

CombinedCycle

Gas Turbine

557

371

252

164

AVG

Utility MixYear 2000

597

NOX Implications of CHP(lb/MWh of NOX)

5.7

AVG

Utility MixYear 2000

5.1

Coal Oil

5 MWGas Turbine

(15 ppm)

0.27

- - - - - - Power Generation Only - - - -

2.9

4.6

(U.S. Average in Year 2000)

0.26

- - - - - - - Natural Gas - - - - - - - - - - - -

CombinedCycle

200 MW(9 ppm)

- - - Boiler-Steam Turbine - - - -

CHPFuel Cell

< 0.001

= 10% T&D Losses

NOx Emissions of DG Technologies

Efficiency NOx EmissionsSystem (LHV) (gm/bhp-hr) (gm/kW-hr) (lbs/MWhr) (ppm) (lbs/mmBtu input)

ATS Gas Turbine 0.38 0.20 0.26 0.6 15 0.06

ATS Gas Turbine 0.38 0.12 0.16 0.3 9 0.04

Diesel Engine 0.42 4.5 6.0 13.3 378 1.47

Lean Burn Nat Gas Engine 0.4 1.8 2.4 5.3 144 0.56

Lean Burn Nat Gas Engine 0.38 0.7 0.9 2.1 53 0.21

Stoic Nat Gas Engine w/TWC 0.32 0.15 0.20 0.4 10 0.04

Microturbine 0.27 0.3 0.4 0.8 15 0.06

Microturbine 0.27 0.17 0.22 0.5 9 0.04

Fuel Cell (PAFC) 0.4 0.01 0.02 0.04 1 0.004

Source:, OSEC

Other Industrial29%

Potential for Additional Industrial CHP

Paper30%

Chemicals11%

Food9%

Refining13%

Metals8%

Estimated CHP Potential: 88 GW

Source:, OSEC

Other11%

Potential for Additional Commercial CHP

Estimated CHP Potential: 75 GW

Health Care24%

Education27%

Food Sales/Serv

10%Lodging

7%

Office Buildings

21%

Peak Shaving

4000 4800 8760500

Peaking Equipment20% Cap/2.5% of energy

On Peak Intermediate30% Cap/17.5% of energy

Baseload Equipment50% Cap/80% of energy

$/kWh

Operating Hours per year

.02

.1

7.00

.04

Example of Utility on peak:261 workdays/yr X 16 hr/day = 4176 hr/yr

DG Offers Value for Growth Industries

• New Demand for Power from “Digital Economy”

• Current Power Grid may not Provide Power Needs of the new Internet-Based Economy– E-procurement, web-based enterprises and other IT

industries require 99.9999% power reliability

– “Growth in internet-quality power is expected to account for 40% of the increase in total US power demand by 2010” - BOA Securities

Standby Power

• Provide support for critical systems during a power outage

• Required by hospitals and some other critical life and safety applications

• Also used by customers with very high outage costs

• Two 450 kW diesel gen-sets shown here in the mechanical room of an Albuquerque hospital

DG Urban Profile – INGAA Foundation

• Need for New Capacity– Residential Growth

– “New Economy” Industrial and Commercial Markets

• Constrained Power Delivery System– DOE POST Report highlights Reliability Concerns

• Environmental/Air Quality Environment

DG Urban Profile – INGAA Foundation

• Electric Rate Structures Favorable to DG– Standby and Backup– Applicability of Competitive Transition Charges– Clear Price Signals to Customers

• Availability of Natural Gas• Regulatory Incentives

– PBR– Recognition of all DG Value Streams

DG Urban Profile – INGAA Foundation:Potential Emissions Reduction1

Chicago, Illinois Austin, Texas

Potential NOx Reduction(Thousand tons per year)

12.7-31.2 1.7-2.9

Potential SO2 Reduction(Thousand tons per year)

49.5-127.1 3.4-5.5

Potential CO2 Reduction(Thousand tons per year)

73.0-5,580.0 246.0-1,069.0

1Emissions reductions are relative to statewide existing utility power generation capacity. Assumed T&D losses are 5% for baseload and 10% and 7% during peak for Chicago and Austin respectively.

Emissions reductions are maximized through the utilization of combined heat and power (CHP)

Projected DG Capacity (MW) Additions

Source: GTI Baseline Projection

0

20,000

40,000

60,000

80,000

1998 2005 2010 2015

SmallCogenerators

OtherGenerators

Backup Power

Environmental Regulatory/Permitting Issues

• Requirements differ from region to region

• Time-consuming permit process

• Lack of technology information and universally accepted standards

• Emission standards can be a moving target

The overall environmental benefits of natural gas-fueled DG are generally recognized, but at the same time individual units

must be deployed under a permitting process that places economic burdens on DG and threatens to depress market

opportunities

Barriers and Challenges to DG

Deferral rates and practices by utilities

High standby/back-up power costs

Overly strict interconnect requirements

Stranded Cost recovery on kWh generated

Environmental benefits not recognized in permitting process

Siting and permitting delays/uncertainties

Non-core customer investment – this may change

Conclusions• Market Conditions and Trends Favor DG

• Technologies, Customer Choice, Energy Costs

• Environmental Fundamentals

• ESCOs & ESPs Providing Alternative Paths to Market

• Federal and State Initiatives Beginning to Recognize DG Benefits and Addressing Barriers

• Current Electric Utility Resistance and Regulatory Roadblocks Hinder Widespread Implementation

• Niche Markets & Applications Evolving Around Specific DG Features

• Once Enabling Market Drivers Adequately Evolve, DG Implementation will be Robust