Emma Ye Chu, Darnell Group
Emma Ye Chu, Darnell Group
Despite the economic and environmental benefits as well as technology development of combined heat and power (CHP) systems, CHP market penetration has been stalled in the past few years. Order surveys among major manufacturers worldwide showed that from 1999 to 2001, CHP’s share in annual capacity (MW) declined by 41.3 percent and 33.5 percent for gas turbines and gensets, respectively. With other distributed generation (DG) technologies gaining stronger momentum, such as wind power, which is currently not applied to cogeneration, CHP’s share within the total annual DG market has shrunk to 23 percent, according to Darnell’s forecast.
Different barriers and opportunities for CHP exist in different nations, depending on their CHP policy, the structure of the energy industry and the nature of the demand of heat and power. The European Commission is concerned about whether it can reach its target set in 1997 to double the share of CHP electricity production in total EU electricity production from 9 percent in 1994 to 18 percent in 2010. According to their scenario analysis, the doubling could only be possible in the best scenario when all the supportive conditions are in place. The future U.S. CHP market is no more optimistic unless the current hurdles are removed soon.
Where the hurdles lie
The major barriers that are causing constrained widespread use of CHP include:
“- There is a lack of a uniform standard for the interconnection of CHP and other distributed generation technologies to the electric utility.
“- Many utilities charge discriminatory back-up rates or prohibitive “exit fees,” and require costly studies or installation of unnecessary equipment to discourage CHP.
“- Emission standards are not based on the overall output of power and heat, nullifying CHP’s efficiency superiority.
“- There are insufficient tax incentives. For new technologies with relatively low market share, tax credits provide an important inducement for manufacturers to begin mass production and for buyers to offset their first cost premium.
Many of these barriers involve regulatory and/or policy solutions. Fortunately, in order to enhance CHP’s role in energy conservation and reduction of greenhouse gas emissions, governments, environmental institutions and the CHP industry are putting together efforts to remove these hurdles. In September of 2001, the European Commission issued an official directive, which proposed priorities for technologies that contribute to the endeavor to comply with the Kyoto obligations. Grid-interconnection issues are addressed in particular. Member states are required to evaluate the existing legislative and regulatory framework and to ensure that the rules are objective, transparent and non-discriminatory.
Meanwhile, the U.S. Department of Energy (DOE) and the Environmental Protection Agency jointly released a National CHP “roadmap,” calling for an industry-government partnership to eliminate regulatory and institutional barriers. To overcome the existing inconsistencies across states regarding interconnection standards, DOE and the Institute of Electrical and Electronic Engineers have been working on the IEEE — P1547, a universal grid interconnection standard, which includes technical specifications and requirements for interconnection, and a section on test specifications and requirements. In August of 2002, the U.S. National Association of Regulatory Utility Commissioners (NARUC) adopted and recommended to all state public utility commissions the use of the model interconnection agreement and procedures. “Model” rates and tariff provisions for standby charges, exit fees and competitive transition charges, as well as effective dispute resolution processes, are under development. Alter-native technical approaches have been taken to implement the output-based emission standards based on the amount of electricity generated rather than on the amount of fuel required as an input to generate electricity. In addition, the U.S. Treasury Department is considering ways to standardize and define an accelerated depreciation schedule for CHP systems to better reflect the typical 7-10 year operating life.
CHP accounts for a large part of the total energy needs in the chemical, petroleum refining and paper industries. Technology development is one of the major forces driving these industries to replace the aging power generation systems with new CHP systems. For example, for the pulp and paper industry, a combination of biomass gasifiers and gas turbine cogeneration systems offer a higher electricity-to-heat ratio than conventional steam turbine cogeneration systems, resulting in higher overall energy efficiency and lower emissions by making use of biomass residues generated at the mill. In recent years, technologies like microturbines and fuel cell hybrid systems have facilitated small CHP systems to make inroads in the food, pharmaceutical and light manufacturing industries.
District heating/cooling CHP systems provide electricity to a number of commercial, institutional or even groups of residential buildings. The recovered heat can be used to produce steam for space heating, or powering steam-powered air conditioners for space cooling, or be tapped to provide hot water. Customers in this sector are hospitals, universities, office buildings, military bases, etc. The adoption of CHP systems for institutional use is driven by increasing energy prices and unreliability of the utility grid. Most of the UC (University of California) facilities have installed their hybrid CHP systems on campus. These cogeneration systems, combined with diesel generator capacity, can meet the campus energy needs during a rotating outage.
For household and small business applications, micro-CHP has been emerging in Europe. A Stirling-engine-based micro-CHP system can convert a total of around 70 percent of the energy value of natural gas fuel into useful heat for home space heating and hot water, with another 10-25 percent converted into electricity and the remainder.5-20 percent lost in the flue gases. This compares with a conventional gas central heating boiler where 70 percent of the gas is converted into heat and the remaining 30 percent is lost in the flue gases. Fuel cells and smaller size microturbines are also used for micro-CHP systems. With typical electrical outputs from 0.5 kW to 20 kW and thermal outputs from 5 kW to 100 kW, leading micro-CHP technologies have inherently low NOX emissions. Due to increased energy efficiency and desirable environmental impact, micro-CHP has great potential to penetrate into the big domestic energy supply market, especially in northern climates, where residential property heating profiles closely match electricity demand patterns.
Technologies and vendors
Currently, gas turbines, reciprocating engine gensets, microturbines, fuel cells and steam turbines are the leading CHP technologies. Companies and research institutions are making continuous efforts to improve system fuel efficiency and to test new technologies.
The U.S. Department of Energy has engaged in several research programs on fuel cell-microturbine programs. Used for CHP applications, fuel cell-microturbine hybrid systems are expected to increase electrical efficiencies and greatly bring down the cost of fuel cell systems, which is critical for fuel cell market growth. The world’s first fuel cell-microturbine hybrid power system has passed a key site acceptance test and the major endurance phase of its test program is under way. The system combines a Siemens Westinghouse solid oxide fuel cell with an Ingersoll Rand microturbine. Capstone Turbine Corp., a leading microtubine manufacturer, is developing its small (<1MW) MicroTurbine & Fuel Cell Hybrid Power Systems (HPS) for CHP and other DG applications. FuelCell Energy Inc. is continuing proof-of-concept testing of a direct fuel cell/turbine power plant with a 60 kW microturbine and two additional sub-megawatt power plant.
Major companies in these technology areas are supplying equipment for CHP applications. In August of 2002, Alstom Power’s GTX100 gas turbine and a steam turbine started operation in Blackburn, Scotland. This combined cycle gas turbine plant will supply process steam and up to 59 MW electrical power. The Siemens Power Generation Group, specialized in both gas turbines and fuel cells, is to build a standardized solid oxide fuel cell plant in Hanover, Germany. With an overall efficiency of 80 percent, this high-temperature fuel cell power plant will feed 220 kW of electrical energy into the grid. Simultaneously, some 160 kW of heat will be generated for Hanover’s district heating network. Ballard Power Systems, through a joint venture with EBARA Corp. of Japan, is developing a 1 kW cogeneration stationary fuel cell system with a total efficiency of 81 percent for the residential market in Japan. Other suppliers include: GE Distributed Power, Caterpillar, Mitsubishi Heavy Industries and Emerson Energy Systems AB.
In light of a more power-dependent digitalized economy and a deteriorating global warming situation, CHP offers a win-win solution in terms of lower energy use, lower emissions and better power quality and reliability. The CHP market is expected to grow faster than the overall DG market, at a compound annual rate of 19.6 percent, increasing its market share within the DG market to 30 percent by 2008.
CHP has great market potential. However, whether its penetration into the total power generation market will reach the ambitious targets depends on how we face the challenges now. Government initiatives, utility-CHP cooperation and education to raise CHP awareness are among the most critical supports for its success.
Emma Ye Chu is a research analyst with Darnell Group. Before joining Darnell, she worked as a research specialist for Roland Berger Strategy Consultants. She has extensive experience in business intelligence and market research for advanced technologies. She is currently completing a two-volume study on the global outlook for distributed and cogeneration technologies.
Darnell Group (www.darnell.com) is a leading source for worldwide strategic information covering the full spectrum of power electronics. Specialized in the economic/business analysis of emerging power electronics markets and technologies, Darnell Group provides primary research, news services and original, proprietary information.
A CHP success story: The College of New Jersey
The College of New Jersey (TCNJ) is located in Ewing, N.J., and is part of New Jersey’s state system of higher education. The campus occupies 340 acres and has a central steam, chilled water, and cogeneration plant to service 3.2 million square feet of building space, including housing facilities for students. In late 1999, the four-year-old 3.2 MW Solar Centaur T-4700 water-injected gas turbine was scheduled for an overhaul. However, recognizing the need for a larger turbine to accommodate increased campus energy demand, TCNJ decided to replace, rather than refurbish, the existing turbine. The new turbine increased the plant’s power output by 2 MW, improved efficiency to 77 percent, and improved the environmental performance of the plant. The new Solar Taurus 60 gas turbine was installed in December 1999 with minimal modifications to the existing heat recovery steam generator (HRSG)/duct burner and other plant equipment. The gas turbine and duct burner use natural gas as the primary fuel. Distillate fuel oil with a sulfur content of 0.1% (by weight) is used when natural gas is not available.
TCNJ Cogeneration plant operating data for 2000:
“- Project design capacity (MWe)– 5.2
“- Power to heat ratio – 0.5
“- Total net efficiency (HHV) – 77 percent
“- Percent fuel savings – 13 percent (900 metric tons of carbon)
“- Effective electric efficiency (HHV) – 71 percent
“- Percent NOx decrease – 72 percent (55 tons)
[Note: Data based on 8,342.75 annual hours of operation. Savings based on 50 percent efficient electric and 80 percent efficient thermal generation with natural gas as the primary fuel.Effective electric efficiency = (CHP power output)/(Total energy input to CHP system – total heat recovered/0.8). Assumes thermal output provided at 80 percent efficiency. NOx decrease compared to electric emissions of 3.6 lb NOx/MWh (1998 national average) and boiler emissions of 0.1 lb NOx/MMBtu.]
The air permit obtained by TCNJ for the larger turbine required the plant to meet more stringent emission limits of 25 part per million (ppmdv) for NOx and 50 ppmdv for carbon monoxide. However, at the time the project was being evaluated in July 1999, Solar Turbines did not manufacture a Centaur gas turbine capable of achieving the required emissions limit. Therefore, the College decided to install a 5.2 MW Solar Taurus 60 gas turbine with SoLoNOx technology that met the necessary emissions requirements.
By switching from a 3.2 MW output to a 5.2 MW output, the project increased the amount of on-site generation from 68 percent to 90 percent of total campus electricity needs. In addition, by installing a new gas turbine instead of overhauling the existing Centaur turbine, the amount of available waste heat increased by 30 percent. This, in turn, reduced the duct burner firing duty by 36 percent. Even though the power output of the plant rose by 56 percent, by replacing a 42-ppm turbine with a 25-ppm turbine there was a reduction in potential NOx emissions of 2.6 tons/yr. The replacement of the water injection system with a dry low NOx combustor yielded the extra benefit of decreasing water consumption. The annual NOx reduction from this facility is equivalent to the annual emissions from 2,800 vehicles.
In March 2001, the U.S. Environmental Protection Agency and Department of Energy presented an ENERGY STAR CHP Award to The College of New Jersey for “demonstrating leadership in its campus energy supply.”