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CHP

CHP Presentation to<br>Legislators

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CHP

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  1. COMBINED HEAT AND POWER CHALLENGE CHP Presentation to Legislators Prepared by the Northeast-Midwest Institute on behalf of the U.S. Department of Energy 1

  2. Overview COMBINED HEAT AND POWER CHALLENGE I. II. III. IV. V. Why I should care about CHP Brief background on CHP Why CHP now? What’s the problem? What happens next? 2

  3. What is CHP? COMBINED HEAT AND POWER CHALLENGE Combined heat and power involves the sequential production of electricity and thermal/mechanical energy CHP is Cogeneration 3

  4. CHP is... COMBINED HEAT AND POWER CHALLENGE • A proven, highly efficient way to make low cost power • A way to stabilize costs for you and your constituents • A way to foster economic development 4

  5. COMBINED HEAT AND POWER CHALLENGE Schematic of a CHP System Schematic of a CHP System Combustion Turbine FUEL EXHAUST GAS AIR INLET PROCESS HEAT COMBUSTOR ELECTRIC POWER HEAT EXCHANGER Electric Generator COMPRESSOR TURBINE 5

  6. COMBINED HEAT AND POWER CHALLENGE I. Why I should care about CHP 6

  7. What CHP can do for You COMBINED HEAT AND POWER CHALLENGE Cut Energy Costs Address Reliability Open Doors to Retail Power Reduce Emissions 7

  8. Public Benefits COMBINED HEAT AND POWER CHALLENGE • Increases energy efficiency • Reduces emissions and pollution • Promotes sustainable growth • Helps address transmission and generation constraints • Increases grid reliability • Increases local tax base • Improves national security 8

  9. More Benefits COMBINED HEAT AND POWER CHALLENGE • Displacement of emissions from grid- supplied generation • Avoidance of T&D line losses • Allows development in non-attainment areas • Utilization of byproduct fuels • Reduces reliance on fluctuating foreign energy supplies 9

  10. The Need For CHP The Need For CHP COMBINED HEAT AND POWER CHALLENGE Stagnant Efficiency of U.S. Electric System 34% 30% Generation Efficiency 26% 22% 18% 1940 1950 1960 1970 1980 1990 2000 Fossil Electric Generation Efficiency (at plant, W/O T&D) Source: EIA, Annual Energy Review 1996 10

  11. CHP Uses Less Energy CHP Uses Less Energy COMBINED HEAT AND POWER CHALLENGE 86 Separate Heat and Power (Losses) Combined Heat and Power GRID Power station fuel (121) 35 Electricity Electricity CHP 100 180 CHP system fuel (100) Boiler fuel (59) 50 BOILER Heat Heat 15 (Losses) 9 (Losses) Source: Kaarsberg 1998 11

  12. Energy Movement Costs at Delivered Cost of Power COMBINED HEAT AND POWER CHALLENGE Cost of pipeline [$.30/MMBtu] @ 98% pipeline efficiency Energy Movement Cost: .17¢/kWh 300 mi. 24” Gas Pipeline 57% efficient Gas Generation 2 Compressors @ 7200 hp Power plant output @ 7% line loss Energy Movement Cost: .51¢/kWh 300 mi. 345 kV Line 57% efficient Gas Generation 12 Source: Alderfer, Competitive Utility Structures, LLC 1999.

  13. COMBINED HEAT AND POWER CHALLENGE II. Brief Background on CHP 13

  14. Historical regulatory approach has led to Electric Inefficiency COMBINED HEAT AND POWER CHALLENGE • 90 years of monopoly regulation – no rewards or incentives for efficiency – state law prevents competition • Central generation paradigm has led to: – Government enacted barriers to efficiency – Customer inertia – Vendor focus on electric only technology – Aging capital stock of generation Source: Alderfer, Competitive Utility Structures, LLC 1999. 14

  15. CHP is Most Common Onsite COMBINED HEAT AND POWER CHALLENGE • Power generation on site is far more efficient for the end user than having the power generated off site when transmission and distribution losses are included • It saves manufacturers $$ • It helps the environment 15

  16. Plant Plant Plant Plant Energy Efficiency Levels Energy Efficiency Levels Energy Efficiency Levels Energy Efficiency Levels Utility Power Plant 35% - 40% COMBINED HEAT AND POWER CHALLENGE Industrial Cogeneration 75% - 82% 16

  17. The Case for CHP COMBINED HEAT AND POWER CHALLENGE • Most power plants throw out 2/3 of the energy consumed through combustion • Power generation at sites where waste heat can be used can capture another 1/3 of the lost power • Capturing the wasted heat will reduce the demand for additional energy/fuel supplies 17

  18. III. Why CHP now? COMBINED HEAT AND POWER CHALLENGE • Power reliability • Power quality • Many advances in technology make it more cost effective • Big impact on CO2 emissions To take full advantage of distributed generation, we should capture the waste heat through CHP 18

  19. More Reasons for CHP COMBINED HEAT AND POWER CHALLENGE • Restructuring can offer opportunities to rethink current rules and regulations • Rationale for big power plants (i.e. economy of scale) no longer exists • Aging power plant portfolio is substandard – Clean Air Act of 1970 • Grandfathered power plants • Many plants are now 30 years old • Have limited reporting and NOx limits 19

  20. State Restructuring Status COMBINED HEAT AND POWER CHALLENGE 20 Source: Energy Information Administration, October 2000.

  21. Aging Energy Infrastructure 40% COMBINED HEAT AND POWER CHALLENGE % Electric % Boilers 35% 30% 25% 20% 15% 10% 5% 0% 1950 -1960 1970 -1980 1990+ 1950< 1960 -1970 1980 -1990 U.S. Electric Plant and Boiler Vintage 21 Sources: Energy Information Administration, Gas Research Institute

  22. Sea Change in Optimum Electric Plants’ Size COMBINED HEAT AND POWER CHALLENGE $/kW Average Installed Cost 5000 1930s Size Trend 4000 1950s 3000 1970s 2000 1980s 1990s 1000 0 0 200 400 600 800 1000 1200 Plant Power Capacity (MW) 22 Source: Bayless, 1994

  23. CHP in Use in the U.S. COMBINED HEAT AND POWER CHALLENGE Total Electric Generating Capacity in 1995: 750,859 MW Utility 89% Combined Heat & Power 7% Non-Utility Generation 4% Source: EEA, 1998 23

  24. Typical Emissions Rates for Electricity Generation using Various Fuels COMBINED HEAT AND POWER CHALLENGE Carbon/Energy (MtC/Q) Nox SO2 PM Fuel Type (lb/MWh) (lb/MWh) (lb/MWh) Coal 25 5.5 8.8 4.4 Natural Gas 15 3.3 .66 0.4 Nuclear .01 .07 .13 .18 Hydro 0 0 0 0 Petroleum 20 4.4 20 1.5 Biomass 0 0 0 2.2 Source: Northeast-Midwest Institute, Kaarsberg 1999. 24

  25. Electric Generation and Emissions Percentages by Fuel Type COMBINED HEAT AND POWER CHALLENGE Fuel Type % of % of CO2 % of NOx % of SO2 Generation Coal 52 74 80 92 Natural Gas 14 13 4 0 Nuclear 18 0 0 0 Hydro 10 0 0 0 Petroleum 4 6 3 6 Biomass 1 7 2 2 25 Source: Northeast-Midwest Institute, Kaarsberg 1999.

  26. 6 Pounds per MWh of NOx for Coal and Gas with and without Heat Recovery 5 Coal (U.S. Avg) Gas (U.S. Avg.) 4 3 COMBINED HEAT AND POWER CHALLENGE 2 1 0 Pounds/Mwhe Electric only Pounds/Mwh(e+t) CHP Electric Only With CHP 100% Power Technologies’ Efficiency with and without CHP 80% 60% 40% Source: Northeast-Midwest Institute, Kaarsberg 1999. 20% 0% 26 ST DE PAFCSE MTPEMFCPV gridCCGT CT GE

  27. COMBINED HEAT AND POWER CHALLENGE IV. What’s the Problem? 27

  28. Barriers to CHP COMBINED HEAT AND POWER CHALLENGE • Lack of awareness of CHP • Complex, time-consuming and costly siting and permitting • Inadequate regulatory credit for off- site emissions reductions • Unfair utility practices – costly stranded cost recovery fees – complex, costly interconnection – costly back up power rates 28

  29. The Policy Issues COMBINED HEAT AND POWER CHALLENGE 29 Source: Arthur D. Little 1999.

  30. Policy Issues continued COMBINED HEAT AND POWER CHALLENGE 30 Source: Arthur D. Little 1999.

  31. Current Implementation of the Clean Air Act does NotRecognize the Total Benefits of CHP COMBINED HEAT AND POWER CHALLENGE • Environmental permitting of systems is complex, costly, time-consuming and uncertain • Regulators do not give credit for displaced utility emissions • Regulators inappropriately compare small commercial DG to state-of-the art utility sized technologies, not the GRID 31

  32. COMBINED HEAT AND POWER CHALLENGE V. What happens next? 32

  33. Window of Opportunity COMBINED HEAT AND POWER CHALLENGE • Need to Replace Energy Infrastructure • Clean Air Act Implementation • Next Generation of Better, Lower Cost Technologies • Communication/Services Revolution • Electronics and Software Advances 33

  34. States Can Play a Critical Role COMBINED HEAT AND POWER CHALLENGE • Publicize CHP technologies • Streamline permitting • Ease Interconnection • Competitive electric and gas markets 34

  35. Conclusion COMBINED HEAT AND POWER CHALLENGE You can be proactive in how and when more CHP finds its way into the marketplace, or you can let other states take the lead and your companies. 35

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