GOVERNMENT & POLICY
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LIGHTS OUT New York City residents were among some 50 million people who lost electricity last August when the power grid went down.
ALTERNATIVE
ENERGY
NO MORE BLACKOUTS? Efficiency advocates push combined heat and power as remedy for ailing electricity grid JEFF JOHNSON, C&EN WASHINGTON
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OT EVERY LIGHT WENT OUT ON
Aug. 14 when the electricity grid went down in the northeastern U.S. Eastman Kodak's 4-sq-mile manufacturing plant in Rochester, N.Y., kept right on running and so did International Paper's Ticonderoga, N.Y, papermaking facility And the lights stayed on at the University of Michigan, Ann Arbor; the Oakwood Health Care Center in Williamsville, N.Y.; the Wyoming County Community Hospital in Warsaw, N . Y; the Northrop Grumman plant on Long 20
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Island; half of Greater Rochester International Airport; and many more places. These facilities generate their own electricity at their own sites, and although company owners didn't necessarily build them to run isolated from the electricity grid, they found out they could and they did. This reliability and independence coupled with other benefits of what's called distributed energy is leading some electricity experts to predict that blackouts, grid congestion, and other transmission failures will push more facility owners to move off the grid. They believe, however,
that without government support, significant increases in distributed energy market share are unlikely, and the few provisions in the proposed energy bill are inadequate. The institutions listed above all use combined heat and power (CHP) systems to generate electricity, giving them a huge boost in efficiency and cost savings as well as grid independence. They take the heat created—and usually wasted—when generating electricity and use it to supply thermal energy to run key plant operations. C H P or cogeneration can raise electricity-generating efficiencies from 30%, which is typical for a central power plant, to 85% or even more. Coupling efficiency with the benefits of on-site generation can rewrite the economics of electricity production. For example, eliminating transmission lines and distribution systems can cut retail electricity costs by two-thirds in some areas. A RECENT STUDY by the Congressional Budget Office compared the price of gridgenerated electricity with the price of C H P electricity generated on-site using several different technologies. The study found, for instance, that the cost of electricity generated by fuel cells approaches that of grid-purchased electricity in areas where electricity costs are high. Electricity generated by combined-cycle gas turbines with 85% efficiency is about half the price of electricity off the grid. RealEnergy, a small, two-year-old California company is trying to take advantage of these economies by providing C H P systems for apartment buildings and offices, promising to sell electricity for 10% under the grid rate in return for a 15-year purchasing agreement. RealEnergy has some 50 contracts and has installed about 25 units. But most of the C H P generation is on a larger scale, and the majority is in the industrial sector, with chemical companies leading the way Combined-cycle gas turbines are used in nearly half of all C H P installations. They use natural gas to run a primary turbine to generate electricity and use the excess heat to make process steam, as well as to run more turbines. Dow Chemical, the nation's largest user of on-site, cogenerated electricity and steam, relies mostly on gas turbines and estimates that it saves about $750 million a year throughout the world by generating about 93% of its own power. Two-thirds of the savings comes from U.S. plants, says Bill Jewell, Dow business vice president for energy HTTP://WWW.CEN-ONLINE.ORG
The chemical industry is the largest in dustry sector using CHP—producing 33% of some 77,500 MWgenerated in the U.S. through CHP. That is about 9% of the na tion's total electricity capacity Dow generates about one-fifth of the chemical sector's total at eight large U.S. plants. Like other chemical companies, Dow owns some of the power plants and buys power at the others, using a third-par ty energy supplier inside its fence line. In all, Dow uses a bit more than 2,050 M W of electricity in the U.S. but generates about 5,000 MW, selling the rest back to the electric utilities that run the grid. Jewell stresses that the primary force behind Dows interest in C H P is efficien cy and economics—specifically the mon ey saved through prudent use of fuel. Re liability matters, too, he says, although the company has yet to experience large-scale blackouts. "But we have had experience with hur ricanes in Louisiana and Texas," he says. "There have been times when the only light on the west side of the Mississippi River at Baton Rouge was the Dow plant. "We intend that the plants can operate like an island and be isolated from the grid, but it kind of depends on whether you have time to prepare for a blackout and know ex actly what is happening at the time of the power disruption." He also notes the plants are designed to interact with the grid. For instance, the C H P power plant at the Dow facility in Pittsburg, Calif., produces 880 MW, and the plant uses only 15 MW; the Dow Mid land, Mich., plant consumes 65 M W b u t generates 1,300 M W "IT ISN'T REALISTIC to expect the pow er plant to operate if the grid is down and there is nowhere to put the power," he says. Jim McVaney, director of government relations for the American Chemistry Council, estimates that there are more than 200 C H P installations at US. chem ical companies. Along with reliability and efficiency, he says the industry has used C H P and on-site electricity to ensure a consistent flow of electricity to protect equipment from power surges or fluctua tions that come with electricity drawn from the grid.
APPLES-TO-APPLES Comparative costs of selected technologies show advantage of CHP Microturbine, electricity only Microturbine, CHP Gas ICE, electricity only Gas ICE, CHP Fuel cell, CHP Solar photovoltaic Small wind turbine Combustion turbine, electricity only Combustion turbine, CHP Combined-cycle system3 Price of f U.S. average electricity New England average Ο
5 10 15 20 25 Cents per kilowatt-hour, in 2000 cents
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a Benchmark for the cost of power from new targe-scale generators. CHP = combined heat and power. ICE = internal combustion engine. SOURCE: Congressional Budget Office
Most chemical companies use natural gas as a fuel and feedstock, and they have complained loudly about U.S. energy poli cies that encourage utilities to burn natu ral gas for a fuel, although they are doing the same. "^es, we burn natural gas," McVaney says in response, "but we do it more than twice as efficiently as utilities. Utilities just waste natural gas. Along with using waste heat, we run our units like the turtle. Utilities run their units like the hare, stopping and start ing them on peak demand. We run our units 24/7." These big industrial chemical producers have been CHP's core users primarily be cause of the industry's huge steam demand. Indeed, the need for steam has always been the force behind cogeneration, not elec tricity demands. Eastman Kodak's Rochester, Ν. Υ, plant is probably the first C H P facility in the U.S., going back to the 1890s. "We are a paper, film, and chemical company, and we need steam," says Joseph Sherman, head of utilities engineering at the plant. Unlike most C H P installations, East man Kodak burns coal, about 700,000 tons a year, at eight primary boilers for steam and electricity "Since day one, we've been capable of being independent from the grid," Sher man says. Originally he says, the company's founder, George Eastman, wanted on-site generation of steam for reliability and to
ELECTRIC POWER Chemical industry has 33% of U.S. cogeneration capacity
Metals 5%
Other 15%
Chemicals 33%
Food 8% Refining 11%
Paper 17%
Commercial & institutional 11% 2003 CHP capacity = 77,500 MW NOTE: CHP equals about 9% of total U.S. electricity capacity. CHP = combined heat and power. SOURCE: Energy & Environment Association
ensure the processes always kept running. Eastman engineers found that if they increased the steam pressure a bit, they could use it to turn turbines and generate their electricity as well as process steam. In fact, the company lacks sufficient inter connections to draw all its electricity needs—196 MW—off the grid. The company has always remained on the grid, Sherman notes, and it buys elec tricity when it is cheap and uses it for back up during maintenance. "But we still need steam no matter. Electricity won't help with that."
Combined heat and power or cogeneration can raise electricity-generating efficiencies from 30% to 85% or even more. HTTP://WWW.CEN-0NLINE.ORG
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GOVERNMENT & POLICY Another big plant that kept running in New York was the International Paper plant. It burns a mixture of wood waste and fuel oil, a spokesman says. Company engineers saw a power variance on the grid and shifted to self-operating mode and kept operating. The facility was built in the 1970s and, like Eastman, has a big demand for process OFF THE
steam. It has always been power self-sustaining, using waste as its primary fuel. While burning coal or oil and waste wood doesn't have the air pollution purity of burning natural gas, both have the high efficiency benefits due to CHP, giving them an advantage when it come to air emissions as measured against electrical output.
GRID
A Power Plant On Every Roof
K
evin Best has a deal for you: Promise that you will buy at least 60% of your energy from him for 15 years, and he will sell it to you for 10% less than you can buy it anywhere else. His company, RealEnergy, offers another benefit: Most of your power won't depend on the electric grid. No more lengthy electricity blackouts from hurricane-twisted transmission lines, blown-out transformers, or inept grid managers. In fact, the power system will be right on your roof or in your basement, rather than hundreds of miles away. Right now, however, this isn't a deal for everybody. RealEnergy's customers must buy about 1 MW of electricity, which is about 700 times more than is needed to run a house and a lot less than is needed to run a chemical company. But Best, who is a principal and founder of RealEnergy, bets this is a good deal for hotels, malls, office buildings, laboratories, and some industrial users. His average customer uses about 1.8 MW of peak electricity and buys about 1 MW from RealEnergy and the rest from a central utility. RealEnergy has about 25 power plants in California and another 25 under construction, some in the Northeast, Best says. One of their systems, Best points out with thinly veiled enthusiasm, powers the California Public Utilities Commission in San Francisco, which regulates the state's utilities, including electric generators, RealEnergy's chief competitors. The company came into being four years ago to market energy—electricity, heat, and cooling—for buildings. It appealed primarily to property manager and large real estate owners, who wanted steady, hassle-free, and relatively cheap energy, Best says. RealEnergy needs a market of 10 cents or more per kWh to make money and be competitive. The company can beat utilities' prices in two ways. First, Best says, RealEnergy does not have to pay for distribution or transmission of electricity, which makes up about two-thirds of the total cost of retail electricity. Second, he says, is efficiency. "We are prudent in our use of natural gas," he emphasizes. RealEnergy systems are combined heat and power (CHP) units, using the heat that central utilities waste when generating electricity to provide building heat and air conditioning. They get about 85% efficiency versus 30% for a central electric utility. The company primarily uses internal combustion engines to generate electricity, as well as some gas turbine installations and one big photovoltaic unit. Solar, however, is too expensive, he says, and the company does not give the 10% discount on solar units. Mostly they use large natural-gas-fired internal combustion engines coupled with a heat exchanger to draw off the engine's heat for thermal energy. In British thermal unit value, the usual-
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But the future of CHP may not be with these big manufacturing installations, says energy analyst Neal Elliott of the American Council for an Energy-Efficient Economy In the chemical arena, Elliott says specialty chemicals and high-value chemical products are likely to be the next CHP chemical industry market. Jewell agrees, saying that, for large chem-
ly wasted thermal energy exceeds the energy value of the generated electricity, Best says. Despite price benefits, Best says, his customers are generally driven by fear of lost production time or lost output when electricity isn't available. "The grid structure is in trouble, and blackouts can happen anywhere," he says. "But there was no interruption in natural gas service during the blackout in New York." He notes that most natural gas pipelines use small gas-driven pumps to move the fuel. While Best hopes to benefit from grid blackouts, he calls the grid a "wonderful national treasure." And he wants his installations to be wired to the grid in order to draw electricity during equipment maintenance shutdowns and when electricity price falls or natural gas prices spike. When a unit is installed, he Best says, RealEnergy clients have two wires coming into their buildings: one from RealEnergy's system and one from the utility. If one goes down, power comes from the other. RealEnergy is on-site with a fence around its equipment, Best says, with a "big red shutoff button" in case of emergencies. For the company to grow, a client better not have to push that big red button too many times. "In this business," he explains, "mistakes are very expensive to fix—whether it is reliability issues or noise and vibrations. We must build a clean, quiet unit because it might be right over your desk. "We contract to install and operate the plant for 15 years, but here is what will happen in reality: In year eight or nine, our little engines will wear out. We'll have had to rebuild them twice already, and they need to go. "So we go to the landlords, small lab operators, or whomever, and we tell them we are about to invest in another internal combustion engine, but it is now 2009 and fuel cells are here. By then, fuel cells are pretty cheap and light and small, and we'd prefer to repower with them, if we can extend your lease. "For us, internal combustion engines are a placeholder technology. We are in the fuel-cell business, but no one knows it because we haven't bought one yet. "Remember, fuel cells are 90% efficient—three times higher than the grid. Our profits should actually go up with fuel cells." The company is green at heart, Best says, but our customers aren't going to pay for that. But he says when RealEnergy slaps an "EPA CHP efficiency" sticker on a client's building, the building operator becomes an environmentalist. He predicts that in a decade, a half-dozen private utility companies like RealEnergy will be operating in the U.S.
HTTP://WWW.CEN-ONLINE.ORG
generation. "We have these poster-child ical companies, cogeneration opportuniexamples in our program—hospitals, nursties have largely been exploited. He points ing homes, and others—that kept operatto new Dow projects to modernize current ing during the blackout." C H P systems to improve reliability and efficiency rather than new installations. Officials with Calpine Corp., a C H P power company with several chemical However, the verdict is out on acceptcompany installations, and Solar Turbines, ance by smaller chemical companies, he a manufacturer of high-efficiency gas tursays, and much will depend on grid reliabines for C H P installations, say the blackbility and the price of natural gas, which is used as a fuel in nearly 70% of C H P systems. EXTRA CHARGE O t h e r potential markets, acElectricity from CHP could rise rapidly cording to Elliott, are food proCapacity, gigawatts cessing industries, colleges and uni250 versities, hospitals, nursing homes, and a mix of smaller installations. 200 The future of C H P will not be driv150 en so much by a need for process steam as by high efficiency, elec100 tricity reliability, and price certain50 ty, especially the flexibility to avoid grid price spikes. 0 1980 85 90 95 2000 05 10 15 Elliott also thinks C H P systems a Includes colleges, hospitals, etc. b Small units, for example, for will turn more to coal—with modindividual buildings. CHP = combined heat and power. SOURCE: American Council for an Energy-Efficient Economy ern pollution control technologies —in the face of high natural gas prices. He predicts the average installation out is awake-up call about grid reliability, but that it is too soon to tell whether it will will become smaller, with a "sweet spot" be a springboard to new business. of5to25MW "We are getting more calls from com"THERE IS A VAST potential out there but panies that are now worried and say they can't afford to go without energy," says not much penetration," says Bruce A. HedRichard Brent, manager ofgovernment afman, a C H P analyst and director of Enerfairs for Solar Turbines, a San Diego mangy & Environmental Analysis, a Virginia ufacturer. "We talked to them before, but consulting firm. He predicts that as C H P they are asking us to come back again and technologies improve and more competitalk to them about C H P tors enter the market, prices will drop. He also believes the market could grow due to "The push to C H P is not just coming grid reliability fears. from the facility and chemical engineers. It is But a study by New now a message from the York State of C H P opportunities found the chief financial officer who asks why the commarket for 2 0 - M W pany lost a batch of 'X units in the state was largely satisfied, says chemicals' when power flunctuated or the grid Dana Levy, project went down. manager with the New York State Energy Re"The answer, 'Gee search & Development boss, we could have preAuthority However, the vented it, but we would study found a potential have had to spend a lot C H P market of 26,000 of capital to do it,' is sites for installations of 5 M W and below. changing," Brent continues. "Life-cycle The state has a $15 million-per-year pro- costs are getting lower, and companies like ours are looking more competitive. We've gram to fund small-scale C H P demonbeen pretty busy" stration projects, Levy says. The state has about 80 projects in the works, including But proponents all have a horror story a few at small plastics companies. The U.S. to tell about some electric utilities' unDepartment of Energy also has a small prowillingness to hook up a C H P unit to the gram to encourage use of on-site cogenergrid—either dragging out the process for ation facilities for energy efficiency several years or charging so much that it Levy thinks the blackout in New Y)rk killed the project. And despite the talk of is helping focus attention on on-site C H P grid independence, it is too expensive to
"We are getting more calls from companies that are now worried and say they can't afford to go without energy."
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develop a system that can operate entirely off the grid, all the time. These supporters believe C H P electrical contribution will only grow significantly if Congress and state and federal government see C H P as an alternative to building more huge centralized power plants and spending some $100 billion to expand and modernize the nation's electricity grid. This was the subject of a House Science subcommittee hearing on Sept. 25. There, Thomas R. Casten, president and chief executive officer of Private Power LLC, told of his company's efforts at CHP, particularly its work at several Indiana steel mills using waste gas and heat to generate 460 M W of power. Casten urged Congress to help remove state and utility barriers that stall C H P facilities from interconnecting to the grid or result 20 in large fees, which discourage what he called "local power." Indeed, he said the U.S. has been looking at the wrong metric when pushing to build more central utilities or to modernize the grid. He added that several European nations are drawing some 4 0 % of their electricity from on-site generation. Casten estimates that the U.S. could produce 45,000 to 90,000 M W from waste energy if it were recycled. This is equivalent, he notes, to as many as 90 nuclear power plants. Casten criticized government programs that fund R&D projects for central utilities—coal, nuclear, and others—rather than support generation of on-site power, particularly if it uses waste energy The energy bill now in House-Senate conference committee holds some provisions to protect CHP users but contains little to encourage its development. Casten and others warn that government help will be necessary to overcome monopoly control of power lines by utilities in order to ensure access by a growing number of C H P companies, particularly small companies, that wish to sell retail energy and hook their units to the grid. Similarly, a recent report by the Congressional Budget Office echoed those concerns, warning that barriers established by utilities and state and local governments to grid access will block any advance in cogeneration possible through retail competition, which it said may be the next wave of energy market restructuring. Without government action, the report said, the benefits of on-site energy generation are unlikely to advance noticeably in the future. • C&EN
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