IPST Members Meeting Combined Heat & Power: A Generator of Green Energy and Green Jobs April 11, 2012 Paul Baer, Marilyn Brown, and Gyungwon Kim
Presentation Overview Study background Methods CHP Policies Construction Bill of Goods Results Discussion
Study Background High salience of green jobs Politicized studies by different analysts Interest in developing robust methodology CHP selected as case study
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.
Regional Distribution of Industrial CHP Facilities in Pulp and Paper Plants (Data source: Combined Heat and Power Installation Database, 1900-2010) Capacity of CHP Facilities Legend Capacity of CHP in pulp and paper industry Capacity of CHP in other industries
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. http://www.ornl.gov /sci/eere/publications.shtml
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 0 250 200 150 100 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)
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
Input-output Model: Circular Flow Of The Economy $ consumption spending Goods & Services Labor Households $ wages & salaries Manufacturers and Businesses Businesses $ wages & salaries
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
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
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 2010 2020 2030 2010 2020 2030 1277 1149 989 1440 1129 785 1058 1005 929 1260 949 605 3. Gas Turbine 3,000KW 1451 1377 1265 1719 1646 1557 4. Gas Turbine 5,000KW 1096 1030 979 1152 1101 1049 5. Gas Turbine 10,000KW 1060 1010 959 982 929 869 6. Gas Turbine 25,000KW * 892 851 813 987 898 823 7. Gas Turbine 40,000KW 782 762 743 876 856 830 8. Combined Cycle** 831 806 787 723 1099 684 100,000KW * Applied system for this research, ** Two 40 MW Gas Turbine & 20 MW Steam
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 2010 2020 2030 2010 2020 2030 0.71 0.73 0.74 0.81 0.84 0.87 0.72 0.74 0.75 0.83 0.87 0.89 3. Gas Turbine 3,000KW 0.69 0.70 0.71 0.76 0.77 0.78 4. Gas Turbine 5,000KW 0.71 0.72 0.72 0.77 0.78 0.78 5. Gas Turbine 10,000KW 0.71 0.71 0.72 0.77 0.77 0.78 6. Gas Turbine 25,000KW * 0.71 0.71 0.73 0.71 0.71 0.72 7. Gas Turbine 40,000KW 0.72 0.73 0.73 0.72 0.73 0.74 8. Combined Cycle** 100,000KW 0.70 0.72 0.73 0.70 0.72 0.73 * Applied system for this research, ** Two 40 MW Gas Turbine & 20 MW Steam
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)
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%
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% 14.48 1. Primary generation 39.0% 12.58 222 Turbine and turbine generator set units manufacturing 11.34 188 Power boiler and heat exchanger manufacturing 13.42 2. Construction 20.0% 18.04 35 Construction of new nonresidential manufacturing structures 18.04 3. Electrical Equipment 7.0% 11.56 266 Power, distribution, and specialty transformer manufacturing 11.23 267 Motor and generator manufacturing 11.23 268 Switchgear and switchboard apparatus manufacturing 10.76 269 Relay and industrial control manufacturing 11.50 272 Communication and energy wire and cable manufacturing 10.02 275 All other miscellaneous electrical equipment and component manufacturing 14.62 4. Machinery and Fabricated Metal 9.0% 13.74 171 Steel product manufacturing from purchased steel 12.74 174 Aluminum product manufacturing from purchased aluminum 10.37 186 Plate work and fabricated structural product manufacturing 14.98 193 Hardware manufacturing 13.34 194 Spring and wire product manufacturing 14.19 195 Machine shops 18.94 196 Turned product and screw, nut, and bolt manufacturing 15.09 198 Valve and fittings other than plumbing 12.52 201 Fabricated pipe and pipe fitting manufacturing 13.71 202 Other fabricated metal manufacturing 14.79 207 Other industrial machinery manufacturing 15.82 226 Pump and pumping equipment manufacturing 12.71 5. Electronic Components 4.0% 11.09 234 Electronic computer manufacturing 8.57 235 Computer storage device manufacturing 11.26 236 Computer terminals and other computer peripheral equipment manufacturing 13.37 244 Electronic capacitor, resistor, coil, transformer, and other inductor manufacturing 16.39 CHP Plant Natural Gas 6. Environmental Equipment 6.0% 13.05 214 Air purification and ventilation equipment manufacturing 14.68 216 Air conditioning, refrigeration, and warm air heating equipment manufacturing 12.45 250 Automatic environmental control manufacturing 14.57 7. Other Materials 3.0% 11.27 127 Plastics material and resin manufacturing 9.59 136 Paint and coating manufacturing 11.44 144 Plastics pipe and pipe fitting manufacturing 11.40 151 Rubber and plastics hoses and belting manufacturing 13.36 160 Cement manufacturing 11.78 8. Scientific and Technical Services 8.0% 22.08 369 Architectural, engineering, and related services 22.17 374 Management, scientific, and technical consulting services 20.75 375 Environmental and other technical consulting services 23.15 9. Financial and Insurance Service 4.0% 14.80 357 Insurance carriers 11.33 358 Insurance agencies, brokerages, and related activities 20.31 359 Funds, trusts, and other financial vehicles 15.50
IMPLAN (Input-Output) Jobs Coefficients Installation 25.0 20.0 19.8 17.4 15.0 14.5 Operation 10.0 5.7 6.6 7.4 Energy Production 5.0 - 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.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Purchased Elec. Consumption (Bill kwh) Sales to the Grid (Bill kwh) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 CHP Capacity (GW) NG Consumption (Bill kwh) 80 70 60 50 40 30 20 Total Industrial CHP Capacity 2010 Reference 2011 High Efficiency/Lower Costs Capacity: 39.7->43.3 GW Elec. Price: 6.290 ->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% 1800 3% 8% 1700 1600 1500 1400 1300 1200 $3,198 million (in 2009$) costs Industrial Purchased Electricity Consumption 1050 160 Industrial Sales to the Grid 1000 2% 140 120 12% 950 900 850 100 5% 80 60 9% 40 $4,660 million (in 2009$) Savings 20 $840 million (in 2009$) gains 800 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Total CHP Capacity (GW) Total CHP Capacity (GW) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 CHP Capacity (GW) Total CHP Capacity (GW) CHP Capacity by Industry (NEMS) Total Industrial CHP Capacity Pulp and Paper CHP Capacity 80 13 70 60 2010 Reference 2011 High Efficiency/Lower Costs 15% 12 11 5% 50 10 40 9 30 20 8 7 6 16 Bulk Chemicals CHP Generation 4.5 Food Industry CHP Generation 15 14 13 12 11 10 18% 4 3.5 3 2.5 2 1.5 1 53% 9 0.5 8 0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2009$/mill Btu 2009$/mill Btu Second-Order Impacts Residential Electricity Prices Commercial Electricity Prices 36 32 35 34 2010 Reference 2011 Higher Efficiency/Lower Costs 1% 31 30 2% 33 29 32 28 31 - $1.6 billion Energy Bill Savings 27 - $2.4 billion Energy Bill Savings 30 26
Number of Jobs Estimated Employment Impacts 100000 62,200 80000 60000 37,000 40000 19,900 20000 8,800 1,400 0-20000 -40000 2015 2020 2025 2030 2035 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
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 2035. Therefore, about 100,000 jobyears per installed GW over 20 years or 5,000 equivalent full time jobs in a year. 160 140 120 100 80 60 40 20 0 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 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
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 2020 125 $22.45M @ $898/kW Value of electricity produced annually (.80 capacity factor) $11 million @ 6.3 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 million @ $5.1/MMBtu * Natural gas price from the EIA projection, which is more than double the current market price
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
Contact Information ***************************************** Dr. Paul Baer Assistant Professor, School of Public Policy Email: Paul.baer@pubpolicy.gatech.edu Dr. Marilyn A. Brown Professor, School of Public Policy Email: Marilyn.Brown@pubpolicy.gatech.edu Gyungwon Kim Ph.D. Student, School of Public Policy Email: joykim@gatech.edu www.cepl.gatech.edu *****************************************