Barriers and Solutions to CHP Technology Adoption A Policy Look

Transcription

1 Barriers and Solutions to CHP Technology Adoption A Policy Look State Energy Efficiency Policy Retreat Missouri August 19 th, 2014 Presented by: John Cuttica Energy Resources Center University of Illinois at Chicago

2 President Obama Executive Order August 30 th, 2012 o To accelerate investments in industrial energy efficiency, including CHP. o Establishes a national goal of 40 GW of new, cost effective CHP installations by o Achieving this goal would: Increase total CHP capacity in the U.S. by 50% in less than a decade Save energy users $10 billion a year compared to current energy use Result in $40 - $80 billion in new capital investment in manufacturing and other U.S. facilities over the nest decade

3 Technical Potential of 140,000 MW Existing CHP vs Technical Potential Potential CHP Existing CHP Source: ICF International

4 Generation Capacity (MW) Existing CHP Generation Capacity 1 versus Technical Potential 2 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 IL IA IN KS MI MN MO NE ND OH SD WI Existing Generation Capacity Technical Potential ICF International

5 What s Stopping Us from Getting There? Barriers & Solutions: Technology.. Minimal R&D focus should be on reducing first cost Financial Moderate (Regional Specific) Expensive, competes with other capital investments Spark Spreads payback and cash flow Financing good projects - becoming more available Policy.Substantial (State Specific) Focus of the rest of this presentation

6 State Policies to Support CHP Topic Outline Interconnect Standards Standby Rate Structure Clean Energy Portfolio Standards (RPS/EERS/AES) CHP for Reliability & Resiliency Utility Participation in CHP CHP as Environmental Compliance Information Sources: Guide to the Successful Implementation of State CHP Policies.. SEEAction Document ( hp_policies_guide.html) Utilities and the CHP Value Proposition ACEEE Report IE134 Material from presentations by: 1) Bruce Hedman IIP 2) Katrina Pielli U.S. DOE

7 Grid Interconnection The safety of the utility line personnel must be maintained at all time The safety of the equipment must not be compromised The reliability of the distribution system must not be compromised Utilities have responsibility for the grid Utilities normally have the last say on requirements to connect to the grid Problem? - Search for dispute resolution clause often resolved by regulatory body 7

8 Approaches to Reasonable Interconnection Standards Fees commensurate with system size & complexity Streamlined procedures with simple decision-tree screens (faster application processing for smaller systems and those unlikely to produce significant system impacts) Standardized, simplified interconnection agreements Practical and predictable technical requirements Dispute resolution procedures to resolve disagreements Allow larger CHP systems to qualify under the standards Allow interconnection to both radial and network grid (requires careful operational planning & system protection reviews) 8

9 Standby Rates (partial requirements service) Services for customers who operate onsite, nonemergency generation: Services normally include: Backup power during an unplanned generator outage Maintenance power during scheduled generator service for routine maintenance and repair Supplemental power for customers whose on-site generation under normal operation does not meet all of their energy needs Economic replacement power when it costs less than on-site generation Delivery associated with these energy services. 9

10 EPA CHP Partnership Avoided Rate o A metric: compares the projected average electricity cost compilation (no CHP & full service rates) to projected costs under partial requirements tariff (with CHP). o Quick indicator of the impact of standby rate structure o Ratio of avoided cost to the full retail average price. The higher the ratio the higher the savings and considered a less significant barrier

11 Avoided Rate (simple explanation) o Customer pays a electricity cost compilation (no CHP) of $0.08/kWh o Customer installs a CHP system that can generate at a cost of $0.05/kWh (takes into account the thermal energy, etc.) o If the customer could avoid the full retail rate (no standby or other special rates), then theoretically customer saves $0.03/kWh when operating CHP system o If avoided rate is 90% (avoid 90% of the retail rate or $0.072/kWh) then the savings are $0.022/kWh when operating o If avoided rate is 60% (avoid 60% of the retail rate or $0.048/kWh) then the customer loses money when operating the CHP system. Standby Rates Are Important!!

12 Standby Rates (Best Practices) o Allocation of Utility Costs Generation, transmission, and distribution charges should be unbundled Generation reservation demand charges should be based on the utility s cost and the forced outage rate of customers generators on the utility s system Higher-voltage delivery charges should recognize load diversity Source: The Regulatory Assistance Project and Brubaker & Associates, Inc.

13 Standby Rates (Best Practices) o Appropriate Incentives Pro-rated daily demand charges Daily maintenance demand charges -- discounted o Customer Options Interruptible standby service option Customers should be able to procure standby service from the open market Source: The Regulatory Assistance Project and Brubaker & Associates, Inc.

14 CHP in Clean Energy Portfolio Standards Renewable Portfolio Standard (RPS): Normally wind, solar, biomass projects Often market based qualifying projects may receive tradable credits (RECs) CHP utilizing biogas/biomass usually qualify Waste Heat-to-Power may qualify (if no additional fossil fuel used in the WHP system) Energy Efficiency Portfolio Standard (EEPS): Utilities to meet mandated annual targets (reduce energy use) Programs that provide financial incentives for investment in EE measures count resulting energy savings toward annual goals Massachusetts, Ohio, Illinois, Maryland are example states that include CHP Sometimes CHP restricted due to fuel switching issue 14

15 CHP in Clean Energy Portfolio Standards Alternative Energy Portfolio Standard (AEPS): Annual targets for percentage of supplier s capacity from alternative or advanced energy sources Example is Massachusetts (both APS and EEPS with CHP) 15

16 States with CHP in Clean Energy Standards February, states plus District of Columbia have some form of CEPS 24 of the states include a form of CHP and/or WHP as an eligible resource States vary on levels of implementation (specific tiers w/wo targets) 16

17 Considerations for Successful Approaches CHP eligibility definitions Minimum efficiency requirements and/or performance-based metrics Calculating energy savings (recognize both thermal and power outputs) Possible separate, distinct targets for CHP (binding targets are most effective) Most recent Midwest Examples: Ohio WHP included in RPS and WHP and CHP included in EEPS Illinois CHP and WHP included in EEPS (Pilot incentive program for public sector) 17

18 Specific Incentives to Promote CHP Technical assistance Capital incentives Feed-in tariffs Discounted natural gas rates Tax incentives Financing 18

19 Critical Infrastructure Resiliency o A key principle of disaster preparedness o Ability to maintain operation despite a devastating event o CHP (if properly configured): Offers the opportunity to improve CI resiliency Can continue to operate, provides uninterrupted supply of electricity and heating/cooling to the host facility o Critical Infrastructure emerging as a policy priority Hurricane Katrina and Sandy Emergence of Micro-grids (New Jersey, Connecticut, New York, and Federal Level-DOE)

20 Power Outage Cost Estimates Superstorm Sandy o Nearly $20 billion in losses from suspended business activity o Total losses estimated between $30 to $50 billion o Two-day shutdown of the NY Stock Exchange, costing an estimated $7 billion from halted trading o Rutgers estimates economic losses of $11.7 billion for New Jersey GDP SOURCE: silient_energy_infrastructure.pdf

21 CHP Kept Critical Facilities Running During Sandy o o o o o o o o o o o o South Oaks Hospital - NY, 1.25 MW recip. engine Greenwich Hospital - CT, 2.5 MW recip. engine Christian Health Care Center - NJ, 260 kw microturbine Princeton University - NJ, 15 MW gas turbine The College of New Jersey - NJ, 5.2 MW gas turbine Salem Comm. College - NJ, 300 kw microturbine Public Interest Data Center - NY, 65 kw microturbine Co-op City - NY, 40 MW combined cycle Nassau Energy Corp NY, 57 MW combined cycle Bergen Wastewater Plant NJ, 2.8 MW recip. engine New York University NY, 14.4 MW gas turbine Sikorsky Aircraft Corporation CT, 10.7 MW gas turbine istributedenergy/pdfs/chp_critical_facilities. pdf

22 Utility Participation in CHP o While utilities could play an important factor in wide spread implementation of CHP, they are often not economically incentivized to do so o CHP offers substantial direct and indirect benefits to utilities: Low cost, higher efficiency option to traditional centralized power plant resources & related transmission investments Ability to adapt to different fuels Speed of deployment relative to other generation options Ability to avoid significant line losses (Trans. & Distrib.) Reduced emissions compliance costs (higher efficiencies) Ability to function as a capacity resource Ability to balance system power fluctuations Reduced strain on distribution & transmission assets

23 Utility Participation in CHP Markets o Consider policies that permit but do not mandate utility participation in CHP markets. o If so, key features might include: Rules to ensure non-discriminatory access by third parties wishing to enter the CHP market in the utility service territory Financial controls to prevent cost shifting to non-chp customers Policy determinations on how to treat CHP-related earnings for rate making purposes Models for joint utility-customer ownership of CHP assets 23

24 Opportunities with Utilities: Midwest CHP Example Installations partnering with Utilities o We Energies (Domtar Paper Mill), Rothschild, WI, 50 MW boiler/steam turbine (2013) 1 o Lansing Board of Water & Light (REO Town Cogeneration Plant), Lansing, MI, 100 MW boiler / steam turbine (2013) 2 o City of Macon (Northeast Missouri Grain, LLC), Macon, MO, 10 MW combustion turbine (2003) 3 o City of Russell (U.S. Energy Partners, LLC), Russell, Kansas, 15 MW combustion turbine (2002) 4 o Detroit Thermal Energy (Cristal Global), Ashtabula, OH, 28 MW combustion turbine (2001) 5 o Muscatine Power & Water (Grain Processing Corp.), Muscatine, IA, 18 MW boiler / steam turbine (2000)

25 CHP in Emission Compliance o CHP Allowable: Boiler MACT Rules Proposed Clean Power Plan (d) Can consider CHP in adjustments Proposed compliance calculations provides 75% credit for thermal output Credit for reduced T&D losses Can consider emission rate or mass-based approach Should be included for EE credit (State decision) EPA seeking comments

26 Example Successful Implementation Approaches SEEAction Guide o Interconnect Standards: CO; ME; MD; MA; KY; OH; NH; DE o Standby Rate Structures: Pacific Power, OR; Con Ed, NY; Georgia Power, GA o Clean Energy Portfolio Standards: MA; CT; OH; WA; PA; MI; MD; IL; CA; o CHP for Reliability & Resiliency: TX; LA; NY; CT; NJ; o Utility Participation: AL; MO; TX; FL; GAS Rates (CA; CT; HI; NJ; NY) o CHP as Emission Compliance Option

27 Thank You for Your Attention Contact Information: John Cuttica 312/ For more information: CHP-for-State-Energy-Officials.pdf