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Several states have financial incentive programs supporting CHP as a way to cut peak electric demand and improve general energy efficiency. The federal Energy Policy Act of 2005, recently renewed as part of the Wall Street bailout, offers a generous tax credit for CHP installation. Many non-industrial facilities are taking advantage of those opportunities to fund both studies and installation of CHP plants.
Contract options include outright purchase, leasing or a power purchase agreement (PPA) wherein a vendor covers the full cost of installation and sells the power and heat to the host facility at a guaranteed savings for all energy supplied by the system.
But making all this work to its full potential can get tricky. In the rush to address soaring power prices in California earlier this decade, hundreds of small CHP systems were installed, many of them partially funded with public money. A state-sponsored study of 48 of them, published in February 2007, found surprisingly disappointing results. Similar experiences have been seen elsewhere.
Most large fossil-fueled power plants convert heat to electricity with an efficiency between 30 and 40 percent. CHP systems generally boast thermal efficiencies (i.e., electricity and useful heat output divided by fuel energy input) of 60 percent or more. But that California study found an average CHP efficiency of only 37 percent. Depending on the generation mix at the local utility, even emissions may not have been cut at such low efficiencies.
While it has not yet performed a comparable study of CHP systems that it supported financially, the New York State Energy Research and Development Authority (NYSERDA) tracks the thermal efficiencies of those systems at a public Web site: chp.nyserda.org/reports/summary.cfm. Multiple spot checks found results similar to the California experience. On one cold New York day when thermal efficiencies should have been near their peak, the average efficiency of the 14 featured sites was 38 percent.
The California study cited various contributing factors that ranged from improper system sizing to erratic operation. Some systems operating under PPAs were, for example, shut down by vendors when spot market pricing for natural gas spiked, thus threatening their profit margins. The end result was not only inefficiency, but also a lack of dollar savings. In some utility areas that charge standby rates for on-site generation, a low CHP efficiency could also yield higher tariff charges affecting a facility’s entire electric bill, not just the kWh needed to make up for a CHP failure.
One of the most common problems occurs at the design stage. One example is CHP vendors using crude methods to size their systems, sometimes influenced by how sales are structured. If a facility executive is purchasing a unit, for example, it may be occasionally oversized, thus maximizing the vendor’s revenue. Instead of using actual hourly metered data, assumptions may be made based on monthly usages, anecdotal observations and overly optimistic rules-of-thumb. When load and thermal profiles are out of sync, savings may be less than expected, and much of the heat that would otherwise be useful gets dumped.
Getting rid of such waste heat has its own costs. One vendor used a facility’s cooling towers for that purpose, consuming extra power to run condenser water pumps and tower fans for more hours, and extra tower makeup water from evaporation. The facility’s power and water bills rose, eating into the overall savings.
The California study suggests that more sophisticated load data and analyses are essential in properly sizing a system for a given facility. It also cites a variety of technical failures at the design and operating levels.
During the design process, some vendors may declare that the computer models they use to calculate potential savings are proprietary, and provide only snapshots of the outputs. In one case, one such model showed the power output for two CHP units in a system but calculated the fuel cost for only one of them. The vendor persisted in claiming extraordinary potential savings for several months until finally being embarrassed into admitting the mistake.
Unless the customer has an experienced energy analyst on staff, use of an independent energy consultant may be the best way to avoid — and uncover — such blunders.
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