Combined Heat & Power: A Generator of Green Energy and Green Jobs

Transcription

1 IPST Members Meeting Combined Heat & Power: A Generator of Green Energy and Green Jobs April 11, 2012 Paul Baer, Marilyn Brown, and Gyungwon Kim

2 Presentation Overview Study background Methods CHP Policies Construction Bill of Goods Results Discussion

3 Study Background High salience of green jobs Politicized studies by different analysts Interest in developing robust methodology CHP selected as case study

4 Numerous Market Failures and Barriers Inhibit the Growth of Industrial CHP Regulatory barriers Input-based emissions standards The Sarbanes-Oxley Act of 2002 Utility monopoly power & grid access difficulties Financial barriers Access to credit and project competition within firm Purchase power agreements Information and workforce barriers Workforce engineering know-how 45-49% Traditional System Power Plant Boiler Efficiency ELECTRICITY HEAT 75-80% CHP System CHP Efficiency Policy options are available to tackle these barriers.

5 Regional Distribution of Industrial CHP Facilities in Pulp and Paper Plants (Data source: Combined Heat and Power Installation Database, ) Capacity of CHP Facilities Legend Capacity of CHP in pulp and paper industry Capacity of CHP in other industries

6 We Have Shown that Two CHP Policy Options Could Have Numerous Benefits Output-Based Emissions Standards (OBES): This policy would provide financial incentives and technical assistance to states to spur adoption of OBES as authorized by the EPA to reduce energy consumption, emissions of criteria air pollutants and GHG, and regulatory burdens. A Federal Energy Portfolio Standard (EPS)with CHP and a 30% Investment Tax Credit: This policy would mandate electric distributors to meet an EPS with CHP as an eligible resource and to extend and expand the current investment tax credits for CHP. This policy would concurrently establish measurement and verification methods for qualifying CHP resources. /sci/eere/publications.shtml

7 Net Private Benefit (Billion $2009) The Two CHP Policies Appear to be Spurring the adoption of output-based emissions standards is particularly cost-effective, but so is the energy portfolio standard Highly Cost-Effective They are cost-effective under a range of 50 assumptions OBES = Output Based Emissions Standards EPS = Energy Portfolio Standards with an ITC for CHP OBES EPS How would more widespread use of CHP impact employment? Box and Whisker Plot from Monte Carlo Simulation of Net Private Benefit (7% discount rate)

8 Methodology for Addressing This Question: Hybrid NEMS-Input/Output Model Goal: Examine expected employment impacts from clean energy investments Clean energy policies and investments are first modeled in Georgia Tech s National Energy Modeling System (GT-NEMS) Using NEMS 2011, we compare two scenarios: 1) The reference case with CHP assumptions of 2010 NEMS 2) Case of higher efficiency and lower installation costs, per 2011 NEMS. NEMS outputs (capacity changes, supply changes, energy bill changes) then drive input-output multipliers to estimate employment impacts

9 Input-output Model: Circular Flow Of The Economy $ consumption spending Goods & Services Labor Households $ wages & salaries Manufacturers and Businesses Businesses $ wages & salaries

10 First Order Impacts Direct, indirect and induced jobs from Construction of new CHP facilities Operation of CHP facilities Purchase of fuel for CHP facilities Decrease in purchase of electricity Requires Cost and bill of goods for construction and operation Quantity and price for change in fuel and electricity purchase

11 Second Order Impacts Changes in energy supply and demand lead to additional savings or costs CHP operators have new (lower) cost structure Energy savings (and grid sales) are recycled through lowered prices, increased profits/dividends Other sectors are impacted by price changes Electricity prices fall Natural gas prices rise Demand changes with price changes Savings (or increased costs) are recycled

12 CHP Installation Cost Assumption The CHP installation costs can vary by information sources. EPA (2008) provided higher average of installation costs as: - Steam Turbine: 430-1,100 - Recip. Engine: 1,100-2,200 - Gas Turbine (5-40MW) : 970-1,300 Sentech (2010) - Steam Turbine: 475 (3MW), 429 (15MW) - Recip. Engine: 1,400 (2MW), 1,600 (1MW) - Gas Turbine (3.5-40MW): 972-1,910 - Combined Cycle: 723 NEMS Cost Assumptions in 2010 and 2011 System 1. Internal Combustion Engine 1,000KW 2. Internal Combustion Engine 3,000KW Total Installed Costs ($ 2005 / kw) 2010 EIA 2011: Lower Costs Reference Gas Turbine 3,000KW Gas Turbine 5,000KW Gas Turbine 10,000KW Gas Turbine 25,000KW * Gas Turbine 40,000KW Combined Cycle** ,000KW * Applied system for this research, ** Two 40 MW Gas Turbine & 20 MW Steam

13 CHP Efficiency Assumption NEMS Efficiency Assumptions in 2010 and 2011 EPA (2008) s overall efficiency (HHV): - Steam Turbine: 80% - Recip. Engine: 70-80% - Gas Turbine: 70-75% Sentech (2010) - Steam Turbine: 80% - Recip. Engine: 80% (1MW), 83% (2MW) - Gas Turbine (3.5-40MW): 64-77% - Combined Cycle: 70% System 1. Internal Combustion Engine 1,000KW 2. Internal Combustion Engine 3,000KW Overall Energy Efficiency 2010 EIA Reference 2011: Higher Efficiency Gas Turbine 3,000KW Gas Turbine 5,000KW Gas Turbine 10,000KW Gas Turbine 25,000KW * Gas Turbine 40,000KW Combined Cycle** 100,000KW * Applied system for this research, ** Two 40 MW Gas Turbine & 20 MW Steam

14 Categories of Accounts Installation Operation Energy Production Induced Impact 1. CHP Installation Productive investment from private sectors Program and administration costs Public financial incentives to stimulate overall productive investment 2. Operation and Management: Non-fuel 3. Operation and Management: Fuel Change in natural gas demand Change in coal and petroleum demand 4. Changes in Electricity demand and supply Change in industrial electricity demand purchased from utility Sales to the grid 5. Induced impacts from changed energy bills (passed to households) Change in energy bill in residential and commercial sectors Changes in industrial energy bills (increased gas purchases, reduced electricity bills and increased grid sales)

15 Methodology Construction Bill of Goods Based on the literature, we preliminarily estimated the division of construction costs between different sectors (matching IMPLAN s sectors) Sectoral detail was combined into ten categories Experts survey is used to confirm the bill of goods by asking the fraction of expenses for installing a CHP system (focusing on a medium sized (10MW) gas turbine fueled by biomass in pulp and paper industry) CATEGORY International Paper (NG-based) Respondents RED (NG-based) AMEC (biomass-based) GE Energy (biomass-based) Results from Experts Elicitation Our Estimates Primary Generation (Turbine and Power Boiler) 56% 39% 37% 36% 39% 25% Construction 11% 20% 22% 25% 20% 20% Electrical Equipment 11% 6% 4% 6% 7% 10% Machinery and Fabricated Metal 6% 5% 11% 7% 9% 15% Electronic Components (Controls) 3% 1% 3% 3% 4% 10% Environmental Equipment 3% 10% 5% 5% 6% 7% Other Materials 0% 2% 8% 3% 3% 3% Scientific and Technical Services 11% 9% 7% 7% 8% 5% Finance and Insurance 0% 8% 2% 8% 4% 5% Other 0% 0% 1% 0% 0% 0% Total 100% 100% 100% 100% 100% 100%

16 Bills of Goods for CHP When constructing a CHP system, how are financial resources spent? Answer = 14.5 jobs per $1 million investment. IMPLAN Code and Industrial Sector weights ( %) Jobs per Million dollars (2010 IMPLAN) Installation 100% Primary generation 39.0% Turbine and turbine generator set units manufacturing Power boiler and heat exchanger manufacturing Construction 20.0% Construction of new nonresidential manufacturing structures Electrical Equipment 7.0% Power, distribution, and specialty transformer manufacturing Motor and generator manufacturing Switchgear and switchboard apparatus manufacturing Relay and industrial control manufacturing Communication and energy wire and cable manufacturing All other miscellaneous electrical equipment and component manufacturing Machinery and Fabricated Metal 9.0% Steel product manufacturing from purchased steel Aluminum product manufacturing from purchased aluminum Plate work and fabricated structural product manufacturing Hardware manufacturing Spring and wire product manufacturing Machine shops Turned product and screw, nut, and bolt manufacturing Valve and fittings other than plumbing Fabricated pipe and pipe fitting manufacturing Other fabricated metal manufacturing Other industrial machinery manufacturing Pump and pumping equipment manufacturing Electronic Components 4.0% Electronic computer manufacturing Computer storage device manufacturing Computer terminals and other computer peripheral equipment manufacturing Electronic capacitor, resistor, coil, transformer, and other inductor manufacturing CHP Plant Natural Gas 6. Environmental Equipment 6.0% Air purification and ventilation equipment manufacturing Air conditioning, refrigeration, and warm air heating equipment manufacturing Automatic environmental control manufacturing Other Materials 3.0% Plastics material and resin manufacturing Paint and coating manufacturing Plastics pipe and pipe fitting manufacturing Rubber and plastics hoses and belting manufacturing Cement manufacturing Scientific and Technical Services 8.0% Architectural, engineering, and related services Management, scientific, and technical consulting services Environmental and other technical consulting services Financial and Insurance Service 4.0% Insurance carriers Insurance agencies, brokerages, and related activities Funds, trusts, and other financial vehicles 15.50

17 IMPLAN (Input-Output) Jobs Coefficients Installation Operation Energy Production Construction and Equipment Operation & Maintenance-Non Fuel Electricity Natural Gas Coal & Petroleum Other - Energy Bill Savings, res and com Induced Impact CHP operations and maintenance are also labor-intensive, as are the goods and services purchased by the energy bill savings. Compare these coefficients with those for energy production.

18 Purchased Elec. Consumption (Bill kwh) Sales to the Grid (Bill kwh) CHP Capacity (GW) NG Consumption (Bill kwh) Total Industrial CHP Capacity 2010 Reference 2011 High Efficiency/Lower Costs Capacity: 39.7->43.3 GW Elec. Price: >6.287cents/kWh First-Order Impacts 9% Capacity: 64.7->74.2 GW Elec. Price: 7.23->7.10 cents/kwh 1900 Industrial Natural Gas Consumption 15% % 8% $3,198 million (in 2009$) costs Industrial Purchased Electricity Consumption Industrial Sales to the Grid % % % % 40 $4,660 million (in 2009$) Savings 20 $840 million (in 2009$) gains 800 0

19 Total CHP Capacity (GW) Total CHP Capacity (GW) CHP Capacity (GW) Total CHP Capacity (GW) CHP Capacity by Industry (NEMS) Total Industrial CHP Capacity Pulp and Paper CHP Capacity Reference 2011 High Efficiency/Lower Costs 15% % Bulk Chemicals CHP Generation 4.5 Food Industry CHP Generation % %

20 $/mill Btu 2009$/mill Btu Second-Order Impacts Residential Electricity Prices Commercial Electricity Prices Reference 2011 Higher Efficiency/Lower Costs 1% % $1.6 billion Energy Bill Savings 27 - $2.4 billion Energy Bill Savings 30 26

21 Number of Jobs Estimated Employment Impacts , , , ,800 1, Construction and CHP Equipment Electricity purchases Coal & Petroleum Other- Energy Bill Savings, Res and Com Operation & Maintenance -Non Fuel Natural Gas Other- Program expenses Other - reduced Industry costs/increased profits

22 Jobs/GW (thou) Aggregating All Jobs: The Bottom Line Combining one time construction/installation jobs and the annual jobs from operation, utility-purchase changes and energy savings, yields total job-years/gw that rise from ~70,000 to ~130,000 between 2010 and Therefore, about 100,000 jobyears per installed GW over 20 years or 5,000 equivalent full time jobs in a year Total job-years over 20 years, by year of installation Total annual non-construction job-years over 20-year life One-time CHP construction jobs per GW

23 The case of a typical 25 MW CHP plant (based on a natural gas-fired turbine) Expected full-time-equivalent jobs, economy-wide CHP Installation capital cost For a plant installed in $898/kW Value of electricity produced annually (.80 capacity factor) $ cents/kwh Value of electricity used on site $8.7 million Annual electricity sales to the grid $2.2 million Annual additional natural gas costs* $4.3 $5.1/MMBtu * Natural gas price from the EIA projection, which is more than double the current market price

24 Conclusions Policies and technology improvements can expand the role of CHP in the U.S. energy economy. Employment is generated by plant construction, O&M, and the expenditures from energy savings. Second-order job impacts far exceed construction employment impacts. Lean manufacturing with CHP has triple dividends for jobs: maintaining domestic manufacturing = retained jobs direct, indirect, and induced jobs from CHP investments more competitive manufacturing of green products. 24

25 Contact Information ***************************************** Dr. Paul Baer Assistant Professor, School of Public Policy Dr. Marilyn A. Brown Professor, School of Public Policy Gyungwon Kim Ph.D. Student, School of Public Policy *****************************************