Matt Lensink, P. Eng. Chief Operating Officer CEM Engineering. Wednesday, October 26, 2016

Transcription

1 Matt Lensink, P. Eng. Chief Operating Officer CEM Engineering Wednesday, October 26, 2016

2 Overview 1. Situation Analysis 2. Is CHP/On-Site Power Generation an EMO? Technically Feasible? Financially Feasible? Implementable? 3. Proof (Via Case Studies) 2

3 Situation Analysis 1. Power prices Global Adjustment is biggest contributor Also pressure on transmission rates 2. Quality of power Perceived to be going down Parts of the grid are highly stressed 3. Natural gas supply/price Supply is better than ever Prices are outstanding 5. Financial Incentives Available until 2020 Generally 40% of CAPEX 6. Cap & Trade/CO 2 High efficiency BTM CCHP will get allowances 7. Third Party Ownership Is now permitted by the IESO 8. Resiliency Concerns Unpredictable risks (such as ice storms) 4. CHP Technology Constantly improving and expanding 3

4 What is Cogeneration? Simultaneous production of electricity and useful heat from a single fuel source. Utilizes proven technologies, such as: Combustion Gas Turbine Generators (GTG) Boilers or Heat Exchangers Internal Combustion Engine Generators (ICE) Electricity produced by a cogeneration system on-site displaces electricity purchased from the utility. 4

5 What is Cogeneration? Combined efficiency of cogeneration (75% to 85%) is higher than the separate production of electricity and thermal energy. Cogeneration (when properly designed and installed), can reduce annual operating costs significantly. Cogenerated heat displaces heat from existing burners or boilers or heaters. 5

6 Energy Efficiency Before CHP * * * Assumes nuclear 6

7 Energy Efficiency After CHP 19% CONCLUSION: 20% improvement in macro efficiency 7

8 Who Should Consider CHP? High, year-round demand for steam, hot water, hot oil, or hot air (or chilled water in summer months) Energy cost is significant % of operating cost (> 5%) About to install new boiler or new genset Energy Champion on staff (who is empowered to do the right thing) 8

9 Benefits of Cogeneration Make electricity for about 3 /kw.h If Fuel Chargeable to Power is 5,000 Btu/kW.h (HHV) If burner tip cost of natural gas is $6/mmBtu (HHV) = $5.69/GJ This excludes maintenance and capital repayment This makes plant more competitive. Results in significant reduction of unit energy cost $/lb. of product $/1,000 ft 2 of area heated and cooled 9

10 Benefits of Cogeneration By producing power on-site: Manage blackout/brownout risk (via islanding ) Reduce cost of electrical outages Control future electricity price increases In some cases: Avoid future capital expenditure on equipment Provide additional thermal capacity Existing thermal generation stays in place as back up. 10

11 CHP Systems Keep the Lights on During Hurricane Sandy New York University (NYU) 10 MW e Danbury Hospital 4.5 MW e Hunterdon Development Center 4.5 MW e Pepco Midtown Thermal Energy Plant 5.7 MW e Princeton University 15 Mw e 11 RESILIENCY IS NOW A FACTOR

12 Types of Thermal Energy High Pressure Steam > 400 psig Process Steam 100 psig 150 psig Low Pressure Steam 12 psig High Temperature Hot Water >100 o C Low Temperature Hot Water <100 o C Thermal Oil Hot Air 12

13 Types of Questions We Ask 1. Technical Answered via Questionnaires (short & long) 2. Non-Technical Much harder to get good answers Metrics Learn your language (Key Performance Indicator)

14 Technical Questions We Ask Latest month bills (gas & electric) Electrical Single Line Diagram (SLD) Licensed Stationary/Power Engineers & what class? % of all incoming natural gas used in boilers? Open to used/refurbished equipment? 14 How much power do you want to displace?

15 Type of Prime Mover How is thermal energy used? Type of thermal load Size of thermal AND electrical loads Influences type of prime mover recommendation Thermal AND electrical load factors Need for more thermal load? (Summer) Part load electrical efficiency (electric load following) 15 Heat-to-Power Ratio Calculate kwt to kwe (especially 4,000 on-peak hours)

16 Technically Feasible? Size prime mover by matching: Baseload thermal demand to Recoverable heat from prime mover For examples, see table below: Gas Turbine Generator > 12 mmbtu/hr (or 3,600 kw t ) Start at 1.8 MW e Internal Combustion Engine < 10 mmbtu/hr (or 3,000 kw t ) Stop at 3 MW e or 4 MW e 16

17 Non-Technical Questions We Ask What is your main issue/problem? Where are decisions made (here or elsewhere?) Is there a proponent/driver? (If so, who?) Is there also a sponsor/supporter at the top? What is the culture of the organization? What is your hurdle rate? 10, 15, or 20 year IRR (after-tax, before financing) 17

18 Metrics Questions We Ask How are you evaluated? (Key Performance Indicator) $/No. 2 Tin $/HL Beer $/tonne (or $/kg of product) How do you compare on unit cost basis to your competition or sister plants? How should I present financial benefit of CHP in units that you can relate to? 18

19 Estimated Annual Energy Cost Savings Year EBITDA ($ million CAD) Delivered cost of electricity in Year /kw.h Burner tip cost of natural gas in Year 1 $5.10/mmBtu (HHV) 19

20 EBITDA Derivation ($000 s/yr.) 800 kw e (assuming 6,500 hours/year of operation) 1) Purchased Power Saved 4,800,000 kw.h/yr. x $0.124/kW.h = 596 2) Purchased Natural Gas Saved 20,000 mmbtu/hr x $8.13/mmBtu = 164 3) Fuel for CHP System 1,290,000 m 3 x $0.23/m 3 = 297 4) Maintenance and Standby Power = 116 5) EBITDA =

21 Summary of Financial Analysis Approx. Capacity (kw e ) Approx. Gross Capital ($ million) Approx. Net Capital ($ million) Plant #1 First Year EBITDA ($000 s/yr.) 15-Year IRR (%) Plant # ,

22 Implementation Challenges Hard Challenges Electrical interconnection Air and Noise compliance Space available? Natural gas volume/pressure Buried services Soil conditions Soft Challenges No proponent at lower levels No support at higher levels Financial incentives take time (!) Cogen is too capital intensive (perception) Unwillingness to consider 3 rd Party Financing/Ownership Marginal credit rating/private ownership 22

23 Typical Hurdles/Solutions Capital Availability? Driver and Executive Sponsor Electrical Interconnect Predictable Payback? Capital Cost Accuracy On Schedule? Use Other Peoples Money (OPM) Identify both early on Apply to Guelph Hydro early on (first!) Predictable price of natural gas during payback period ( strip ) Complete 25% - 50% design first - then estimate Capital Cost Get all permits & approvals first IRR/NPV Alone Not Good Enough Is there another big problem that cogen solves? 23

24 THEN (MW e ) Brock University 6.4 CFB Pettawa 3.5 Emerald Energy From Waste 5.0 GreenField Specialty Alcohols 5.0 H.J. Heinz 7.8 Hamilton Health Sciences 21.0 Ingredion (London) 15.0 Ingredion (Port Colborne) 10.0 Labatt Breweries 4.9 London Health Sciences Centre 4.9 Maple Lodge Farms 5.0 NRCC Ottawa 4.0 Sanofi Pasteur 8.0 Sonoco (Brantford) 3.9 Sonoco (Trenton) 7.0 University of Windsor 3.9 University of Toronto 6.2 York University

25 NOW (MW e ) 3M Canada (Brockville) 2.0 3M Canada (London) 1.6 3M Canada (Perth) 1.2 Campbell Company of Canada 4.5 City of Windsor 0.4 City of Windsor 0.8 GreenField Specialty Alcohols 5.0 IGPC Ethanol 4.2 International Wax 3.5 K+S Windsor Salt 3.5 London Health Sciences Centre 3.5 Magna (Formet) 0.8 Magna (Polycon) 8.0 Oxy Vinyls 5.8 PepsiCo (Mississauga) 2.0 Toyota Motor Manufacturing

26 Campbell Company of Canada, Toronto, Ontario 4.5 MW e GTG based CHP system/90,000 lbs./hr HRSG $13 million CAPEX CEM completed detailed design & construction management 26

27 Toyota Motor Manufacturing Co, Cambridge, ON 9.2 MW e GTG based CHP system 4.6 MW e ) Two (2) 50,000 lb./hr fired HRSGs (Fresh-Air-Fired) Two (2) 2,000 TR Steam Turbine Driven Centrifugal Chillers $27 million CAPEX (before grant) CEM completed detailed design and contract admin 27

28 GreenField Specialty Alcohols, Chatham, Ontario 4.5 MW e GTG based CHP system/77,000 lbs./hr HRSG CEM accountable for: Owner s Engineer Electrical Engineering Electrical Commissioning (Coordinate with electric utility) Financial incentive Islands frequently Load shedding 28

29 London Health Sciences Centre, London, Ontario 3.5 MW e GTG based CHP system/25,000 lbs./hr HRSG 85,000 lb./hr package boiler Designed new Powerhouse CEM completed detailed design and contract administration Operational since 2013 No grant 29

30 Formet, St. Thomas, Ontario 800 kw e ICE based CHP system Acoustic weather-proof enclosure Complete with SCR and hot water heat recovery CEM completed detailed design and contract administration No remote trip relay 30

31 3M Canada, Brockville, Ontario 2 MW e ICE based CHP system Exhaust gas and heat recovery CEM completed detailed engineering and contract admin Operates in parallel with Hydro One (remote trip) Financial incentive 31

32 3M Canada, Perth, Ontario 1.2 MW e ICE based CHP system Exhaust gas and heat recovery CEM completed detailed engineering and contract admin Operates in parallel with Hydro One 32

33 IGPC Ethanol, Aylmer (Ontario) 3.3 MW e ICE based CHP system Exhaust gas heat recovery steam Jacket water heat recovery (hot water) CEM completed detailed engineering and contract admin Capable of islanding No grant 33

34 Why BTM CCHeP in Ontario? 1) Reduce electricity price by ~50% (12 to 6 ) Fuel cost (3.6 /kw.h) + maintenance (2 /kw.h) 2) Protect against future power price increases Both GA & Transmission (HONI) will increase 3) Protect manufacturing viability via emergency power capability Avoid financial impact of product loss due to power blips 4) 40% grant from Province of Ontario 5) Avoid capital on future cost of emergency gensets 34

35 Going Forward 1. More CHP will be built in Ontario (due to clarity) 2. Some CHP s will minimize parallel generation/operation 3. Uptake will depend on drivers 4. Get 5-10 year natural gas strip for predictable savings 5. Trend towards adding another technology to CHP (battery storage; flywheel UPS) 35

36 Converging Political, Market, and Economic Factors = The Perfect Storm Electricity Prices 10-15c/kWh +7% y/y OPG Pickering 2020 Phaseout (4-6x540MW) Highly Stressed Grid Concentrated Pockets Incentives Offsetting 40% of CAPEX (or $200/kWh saved) and CCA 50% Declining Balance INCREASING ATTRACTIVENESS OF CHP Privatization of Ontario Hydro +1.0c/kWh Mississauga/ Oakville Gas Plants 850MW Delayed, Move to Lennox (Kingston) and Sarnia Unpredictable Risk 2013 Ice Storm Cheap Natural Gas Delivered at $6/GJ 36