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Deficiencies in metering of the electric and thermal output from a CHP system may make it difficult to verify the amount and value of CHP-generated energy. Comparing fuel bills to those of prior years will probably be inaccurate due to weather variations, process load changes, erratic CHP operations, etc. When BTU metering is added to verify the actual amount of useful heat, it may be found to be less than expected, and less than claimed during the sales pitch.
Some CHP electric meters fail to provide data in short intervals (e.g., 15 minute periods) making it impossible to determine if the power was being produced during the building’s monthly peak. Where peak demand charges are high, more than 15 percent of the total bill, for example, a failure to reduce peak demand may have a significant impact on the bottom line. This may lead to disagreement over the way the value of the power is calculated: The PPA formula may assume that peak demand was always being reduced by the CHP system, whether or not that actually occurs.
Hourly “smart” metering, monitored and recorded through a computer, would provide the information needed to both commission and optimize operation of such systems, while ensuring fair billing. Such metering would also allow a close match between the utility meter reading dates and the billing intervals for the CHP system. When those two intervals do not coincide, customer efforts to track monthly energy production and savings are problematic, at best.
Subtle details in PPAs may figure into other problems. To calculate the value of heat provided by CHP, it is necessary to develop a realistic cost per BTU for the building’s existing heating system. Its fuel use will be reduced when supplemented by using waste heat from cogeneration. Unfortunately, the dollar value of that heat is rarely known. Combustion efficiency is only part of the equation: It illustrates how well the fuel is burning, but does not tell how efficiently the heat is being distributed or the cycling losses that occur each time the boiler fires.
Accurately determining overall boiler efficiency requires measurement of heat supplied over time to the end uses, divided by the heating value of the fuel consumed during that same period. Depending on how well pipes are insulated and boilers are dispatched and controlled, that number could be 10 to 25 percent lower than simple combustion efficiency. In lieu of such an analysis, rules-of-thumb are often used that may underestimate efficiency of the existing heating system. When a low assumed efficiency is built into the contract, the value of heat supplied by the CHP system — and the vendor’s revenue under a PPA — may rise.
In other cases, issues may arise regarding how the prices of avoided power and fuel are developed. In the days when utility energy rates were stable or fixed by regulation, this may not have been an issue. But with today’s ongoing price volatility, and many facilities buying energy through third-party marketers, billing for CHP energy may become quite complicated.
One facility bought natural gas for its boilers under a fixed price contract, but the gas for the CHP system was purchased from the utility under a variable rate with a special discount for cogeneration systems. While the PPA stipulated a 10 percent savings relative to what energy would have cost without it, a vendor used the variable cogeneration gas rate instead of the fixed boiler gas rate to perform that calculation. The end result some months later was an overvaluing of the CHP heat by 9.3 percent, effectively canceling the guaranteed 10 percent savings. The same thing occasionally occurred with electricity: The facility was buying its power from a third-party marketer, but the vendor was charging the facility for CHP power based on the utility’s electric rate, which was higher.
Building a PC-based spreadsheet into the contract, with all formulae and factors visible to both parties, could go a long way to both avoiding such problems and correcting them when they occur.
How Cogeneration Systems Can Save Energy Costs
Avoiding Cogeneration Problems
Metering Strategies for Cogeneration Systems