Finding financing for industrial energy efficiency & chp
1. Finding Financing for Industrial
Energy Efficiency and CHP
Gearoid Foley
Senior Advisor
Mid-Atlantic Clean Energy Application Center
gearoid@psu.edu
NGA Policy Academy, Philadelphia, PA
March 6 2013
2. DOE’s Clean Energy Application Centers
• DOE's Regional Clean Energy Application Centers (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.
Slide 2
3. Overview
• C&I Applications & Owner Benefits
• Evaluating CHP’s Impact
•Energy, Capacity & Emissions
• Areas for Consideration
•CHP Policy touches many issues
Slide 3
4. CHP Applications
• Industrial Process Integration, PA
• Food Processing, CT
Slide 4
• Adding second 50 MW CHP Systems for total
installed capacity of 100 MW internal use only
• Total CHP plant will provide most of the plant’s
electric and thermal energy needs driven by
local Shale Gas.
• Food processing plant gets 100% of its power and
80% of its thermal energy from a 4.6 MW CHP plant
with duct burner and HRSG.
5. CHP Applications
• Office Building, CA
• Hospital, WI
Slide 5
• 1 MW Reciprocating Engine Plant with 320 Ton Chiller
• Reduces grid peak loads with chiller output as well as
generator output. Operates concurrent with grid load
• Provides power, space heating and space cooling.
• 2 x 1.5 MW Recips with 430 Ton Chiller
• Dual Fuel – Gas & Oil
• Continuous Duty & Backup Power
6. CHP Applications
• Identify projects that:
– have a high concurrence of electric and thermal loads.
– offset cost of providing new power capacity
– can integrate CHP with central plant renovation
– benefit from continuous duty backup power
– value reduced emissions footprint
• Gas Fired CHP is an important consideration as a compliance
strategy for Boiler MACT
http://www1.eere.energy.gov/manufacturing/distributedenergy/boilermact.html
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7. Energy & Capacity Benefits
• Reductions in purchased energy ($/kWh)
• Reductions in capacity purchases ($/kW-year)
• Lower cost of meeting RPS obligations (reductions in REC cost)
• Avoided T&D costs defer/avoid T&D upgrades
----------------(in restructured markets)------------
• Lower energy cost and capacity costs due to lower cost
generators being on the margin Demand Reduction Induced
Price Effect-DRIPE
Slide 7
Demand-Reduction-Induced Price Effect (DRIPE): Reductions in the quantity of
energy and capacity that customers will need in the future due to efficiency
and/or demand response programs result in lower prices for electric energy and
capacity in wholesale markets
………. Costs and Benefits of Electric Utility Energy Efficiency in MA
Northeast Energy Efficiency Council, Synapse, Aug 2008
8. Line Losses
Slide 8
This utility’s average resistive losses on their distribution system
are only about 7% over the course of the year.
At their system extreme peak, the estimated total losses reached
about 11%, one and one-half times the average losses for the
year.
At that extreme peak, however, the marginal resistive losses –
those that would be avoided if load had been a little bit lower if
an efficiency measure were installed – were 20%.
………… Valuing the Contribution of Energy Efficiency to Avoided Marginal Line Losses and Reserve Requirements
RAP 2011
9. Capacity Offset
• Based on peak load line losses on peak demand days when
the ISO capacity obligation is set, every MW of CHP would
offset 1.25 MW of capacity with local generation. With
cooling from the CHP thermal output an additional 20%
demand reduction is possible in peak load times, further
reducing the regional generation and transmission capacity
obligations.
• CHP offsets grid generation and transmission capacity
obligations with reliable and cost effective power. CHP
operation allows for aggregation of multiple units to provide
reliability equal to the grid.
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10. Avoided Costs
Exhibit A - 5: Avoided Electric Supply Allocations by Major Cost Component
Avoided Energy Supply Costs in New England
AESC - Synapse, Aug 2009
Slide 10
Major Cost Component % of Total Avoided Electric Supply
T&D1 (Transmission and Distribution) 15.4%
DRIPE (Capacity and Energy) 7.7%
Generation (Capacity and Energy) 76.9%
Note 1: Does not include local distribution
11. Emissions Benefits
• PJM dispatches
Marginal Plants
according to Price
Signal
• PJM Marginal units
are High Emissions
• CHP offsets fossil
fuelled Marginal
plants – not nuclear
or renewables
CO2 Emissions Rates of Marginal Units
Versus Average CO2 Emissions Rates
Source: PJM 2010
CHP CO2 Emissions
13. Areas for Consideration
• What is the discount rate used for calculating future years
benefits and costs?
• Are hourly marginal costs used for ascertaining benefits or
annual averages?
• How are regional cost differences captured in the analysis of
benefits and costs?
• In restructured markets are the wholesale energy and
capacity market effects of changes in the marginal units
serving loads captured? DRIPE
Slide 13
14. Areas for Consideration
• Are federal incentives such as accelerated depreciation or
Investment Tax Credits (ITC) subtracted from the installed
cost basis?
• Are cost reductions due to changes in REC purchases
included in the avoided cost calculation?
• Are marginal or average losses used in crediting avoided
supply costs?
• What if any non-energy benefits are included in the analysis
(other resource savings, improved power reliability/quality,
reduced reliance on imports, etc)
Slide 14
