Five Simple Steps to Immediately Determine Industrial CHP Viability

Transcription

1 Five Simple Steps to Immediately Determine Industrial CHP Viability David C. Oehl, P.E., President Maven Power, LLC, Houston, TX Overview: With issues related to the sustainable development of the energy sector pushing actions towards improving generation efficiency, the case for industrial scale combined heat and power (CHP) has become more compelling. CHP, the simultaneous generation of electric power and heat, usually in the form of steam or hot water, is increasingly becoming a viable option for both domestic and international industrial plants. Opportune industries include pulp and paper, breweries, bottling and canneries, manufacturing, agricultural mills, oil & gas, steel, chemical, cement, hospitals and university campuses. The market is large industrial sector consumption accounts for over 30% of all energy consumed in the United States. The recent increased viability is due to consistently low natural gas costs and electricity prices resistant to fall proportionally to generation fuel prices. Moreover, gas prices are expected to remain at historic lows for some time to come in the U.S. as the country currently sits on ample reserves for the next 120 years (1) and as a result of a growing aversion to imported foreign energy sources. In addition, interest rates and companies cost of capital remain extremely low, further pushing the cost of new projects or repowering efforts lower. Finally, recent national executive orders and state rulings have recently been made with the intent of incentivizing and facilitating the implementation of industrial scale CHP. With traditional renewable energy technologies such as photovoltaic and wind energy consistently unable to prove financially or physically accessible to large populations of the country at any reasonable scale, natural gas, as the cleanest of all fossil fuels and more than twice as clean as coal (2), will continue to be the obvious choice for industrial on-site generation with industrial CHP as an attractive long term option. Traditionally, evaluating the feasibility of industrial CHP plants has been a time intensive, complicated, and non-deterministic process. Variables that initially need to be identified include plant size, equipment efficiencies, fuel costs, power costs, construction costs, financing, engineering, water costs, and many others. With engineering feasibility studies for even small CHP plants costing well into 5 or 6 figures, Maven Power decided to undertake a study of the market, equipment, and services needed to execute industrial-scale CHP projects. This paper represents that effort and presents The Five Simple Steps to Determine Industrial CHP Viability a set of simple, easy to use criteria for plant managers, facilities managers and project developers to use for initially evaluating CHP feasibility, before investing a large amount of resources. 134 Vintage Park Blvd., Suite A-101 Houston, TX Tel: +1 (832) Fax: +1 (832) mavenpower.com

2 2 Spark Spread: Consider the recent history of retail industrial natural gas and electricity prices. U.S. nationwide electricity prices have remained relatively stable over the past 3-4 years within a band of /kwh, while natural gas prices have trended downward, decreasing by more than 50% since January More importantly, the spark spread, or the difference in price between the cost of power and the cost of fuel, has trended upwards in step with the decreasing price of natural gas (See Figure 1 below). This spark spread is the single most important factor in determining the viability of new industrial sized CHP power plants U.S. Industrial Spark Spread ( ) Source: U.S. Energy Information Administration Retail Electricity ( /kwh) Natural Gas (USD/MCF) Industrial Spark Spread Figure 1. Industrial Spark Spread, Government Considerations: Further improving the case for industrial CHP are a recent White House executive order and state level initiatives. A presidential executive order was issued on Aug 31, 2012, Accelerating Investment in Industrial Energy Efficiency. Several ways the order specifically encourages investment in industrial CHP include (3): Setting a national goal of deploying 40GW of new industrial CHP by Convening public workshops to review the investment models and current barriers to industrial CHP. Providing incentives for deploying CHP through emissions trading programs, grants, and loans Reviewing compliance options which will recognize the emissions benefits of CHP plants

3 3 The state of Texas Commission on Environmental Quality (TCEQ) issued a permit by rule (PBR) on July 31, 2012 effective immediately which will cut the red tape associated with getting an air permit in Texas for systems up to 15MWe (4). New plants qualify for the PBR if they meet the following requirements: Plant Size Range (1 Unit or Combination) Emission Type 20kw to 8MW NO X 1.0 CO 9.0 8MW to 15MW 1 NO X 0.7 CO 9.0 Table 1. TCEQ Permit by Rule Emissions Limits Emission Limit (lb/mwh) In interpreting the above emissions levels, the PBR above allows for a CHP credit of 1MW for each 3.4MMBtu of recovered heat. Note that this credit is not reflected in the above Table. For example, a 5MW CHP unit having 6 MMBtu/hr of heat recovery would need to meet a NO X emissions limit of 1.35 lb/mwh 2. It s interesting to note that many current production gas turbine generator sets with the original equipment manufacturer s dry low emissions combustion systems will meet the above emissions limits as given by Texas new permit by rule. This new permit by rule should allow for a more streamlined path to CHP project implementation and lower overall costs in Texas. Based on the White House s executive order and new state initiates like the one in Texas, it s clear that there is an increased awareness at both the state and national level of the significant advantages to industrial combined heat and power. CHP Modeling Case Study: Typical industrial or large commercial loads fitting the current target profile include plants or facilities having electrical loads in the 5-20MW range and steam loads of 15,000-80,000 lbs/hr. Consider a pre-engineering and modeling feasibility study for an industrial cogeneration power plant performed by Maven Power, LLC of Houston, TX. To illustrate the most challenging economic case, an application at the lower end of the power and steam load range was analyzed. The study was based on an industrial plant requiring approximately 5MW of electrical power and 100% utilization of the available steam for the plant processes. The objective of the study was to determine the techno-economic feasibility of on-site self generation of power and steam using a turbine-based cogeneration plant vs. purchasing utility electric power and steam generation using traditional on-site natural gas boilers. The cogeneration power plant was based on a single Solar Taurus 60 gas turbine generator and accompanying HRSG (Heat Recovery Steam Generator) located in the U.S.A. The gas turbine was modeled using the manufacturer s SoLoNOx DLE technology, however SCR (Selective Catalytic Reduction, NO x reduction only, no CO catalyst reduction included) equipment was 1 CHP Plants in this size range require an oxidation catalyst device to ensure compliance with NAAQS PM 25 requirements lb/mwh x [1 + ((6MMBtu/hr)/(3.4MMBtu/hr x 5MW))] = 1.35 lb/mwh

4 4 included in the modeling to ensure the plant would qualify as a minor source of emissions as defined by some regulating authorities. Plant Performance: The study yielded the following performance results 3 : 1) Power Output: 5306 kw 2) Steam Output: 24,000 lbs/hr 3) CHP Efficiency: 81.93% Site Considerations: Maven Power s modeling yielded the following results as related to the base line green-field site considerations: 1) Expected water usage 4 : 3,186 gal/hr at 75 F 2) Fuel consumption: 2,982 lb/hr natural gas (59 MMBtu/hr) 3) Required Site Area: 110 x 102 ft. 4) Emissions: a. NO x = 4.85 tons/yr (as NO 2 ) b. CO = 29.5 tons/yr c. CO 2 = 31,338 tons/yr 5) Ammonia consumption (SCR): a. Pure (NH 3 ) = 7.2 tons/yr b. Aqueous = 24.7 tons/yr Commercial Considerations: The economic feasibility of this 5.3MW application was modeled and the figure below shows a representative case for time to project payback vs. spark spread (natural gas based at $4 with the electricity price varied up to 10 /kwh). As can be seen, payback times are highly attractive in today s market for spark spreads greater than 4.0, even for a very small CHP plant (less than 5 years for plants with slightly lower installed costs). For spark spreads greater than 5.5, the project payback period is less than 4 years! Furthermore, a new figure can be generated for each application s plant size (MW) in which the payback time gets shorter with increasing plant size. Obviously the economics improve with increasing plant size. Our studies indicate that paybacks for plants significantly smaller than 4-5MWe (gas turbines) are not usually viable unless the spark spread is unnaturally large (occasionally seen in some international markets) or the natural gas is essentially free (some oil & gas cases). Also, for the U.S. markets, the overwhelming contributor to the economic feasibility is the steam generation, which is essentially a free energy source when considered over long project life cycles. In light of this, it is important to size the CHP plant such that all available waste heat is used to generate the maximum amount of steam. Over time, and given the correct spark spread, this sizing approach is more than sufficient to compensate for the poor economic benefit of electric onsite generation. 3 Performance based on continuous power output at 92.5% capacity factor (8100 hr/yr). 4 Makeup Water: all process steam consumed by customer s process with none returning as condensate.

5 5 5.3MW Cogeneration Plant Project Payback for Varying Installed Costs Payback (Years) $2200/kW $2000/kW $1800/kW $1600/kW Spark Spread ( /kwh - USD/MMBtu) The Five Simple Steps to Determine Industrial CHP Viability: Based on our analyses and the discussions given above, a set of simple criteria have been established to determine if industrial CHP may be viable for a given CHP project in today s market. These criteria apply equally to existing plants or new plants being considered. The five minimum criteria needed to indicate that industrial CHP may be viable include: 1. Power & Natural Gas Source: Your Plant is currently purchasing natural gas (or steam) and electricity from an external provider (utility, IPP, etc.) 2. Spark Spread: The Spark Spread for your plant (Electricity Cost Natural Gas Cost) must be greater than 3.5 ( /kwh USD/MMBtu) 3. Steam Source: Steam is generated at your plant using an on-site natural gas fired boiler, or steam is purchased directly from an external supplier at or above the selfgeneration cost. It is highly beneficial (but not required) if your steam load is relatively constant at or near the maximum steam demand. 4. Power Consumption: The average electrical power demand at your plant is 5MWe or more. 5. Steam Consumption: The CHP plant will be sized based on maximum continuous steam demand; hence the steam load at your plant should be large enough such that the continuous steam consumption is equal to the capacity available from the CHP (a general rule of thumb is about 23,000-25,000 pph steam per 5MW of electrical generation). If your existing plant or plant under consideration satisfies The Five Simple Steps above, this is a strong indication that CHP is a viable option, warrants further investigation and a formal feasibility study.

6 6 Conclusion: In the current market, given the reasonably large spark spread between electricity and fuel costs, the expectation for natural gas prices to remain suppressed for the foreseeable future, and recent governmental initiatives, industrial scale cogeneration is becoming more viable. Moreover, even with longer term fuel price volatility an uncertainty, with short break-even payback periods as demonstrated in the Maven Power study and The Five Simple Steps to Determine Industrial CHP Viability, risk may be significantly reduced to the owner or end user. Further arguing the case, is that the study presented in this paper focuses on a near worst case scenario in terms of scaling a single turbine/hrsg configuration generating relatively small amounts of power and steam. The economics and overall risk are significantly improved for users with greater electric power and steam loads. References 1. Smead, Richard G. North American Natural Gas Supply Assessment. Chicago : Navigant Consulting, Inc., U.S. Energy Information Administration Obama, Barack. Executive Order -- Accelerating Investment in Industrial Energy Efficiency. Washington, D.C. : U.S. White House, Texas Commission on Environmental Quality. Chapter 106 Permits by Rule, Rule Project No AI. Austin : TCEQ, AI.