Taking Advantage of Combined Heat and Power (CHP)

1. Taking Advantage of Combined Heat and Power (CHP) Illinois Commerce Commission Joint Electric and Gas Policy Committee Meeting Combined Heat and Power (CHP) and its Role in Industrial Energy Efficiency Presented by: John Cuttica Energy Resources Center University of Illinois at Chicago www.midwestcleanenergy.org

2. John Cuttica • Director, Energy Resources Center (ERC) located at the University of Illinois at Chicago • ERC areas of expertise include: • Energy Efficiency in the Commercial, Institutional, and Industrial Market Sectors • CHP, Waste Heat to Power, and District Energy CHP Systems – Operate the U.S. DOE Midwest Clean Energy Application Center since 2001 • Bio-energy Analysis work includes energy efficiency and carbon reduction in ethanol plants in Illinois and Midwest and support DCEO in implementation of Biogas/Biomass program. • Energy Assurance Planning for Illinois • Utility Billing Management Support to CMS

3. Presentation Outline • Overview of Combined Heat and Power (CHP) • CHP in Utility EE plans? How to Calculate Energy Savings? • How is CHP being Utilized in Other States • CHP Role in Critical Infrastructure • Current CHP in Illinois, Opportunities for Expansion

4. What Is Combined Heat and Power? CHP is an integrated energy system that: • Is located at or near a factory or building • Generates electrical and/or mechanical power • Recovers waste heat for • heating, • cooling or • dehumidification • Can utilize a variety of technologies and fuels

5. What Are the Benefits of CHP? • CHP is more efficient than separate generation of electricity and heat • Higher efficiency translates to lower operating cost, (but requires capital investment) • Higher efficiency reduces emissions of all pollutants • CHP can also increase energy reliability and enhance power quality • On-site electric generation reduces grid congestion and avoids distribution costs

6. Fuel Utilization by U.S. Utility Sector Source: http://www1.eere.energy.gov/manufacturing/distributedenergy/pdfs/chp_report_12-08.pdf

7. CHP Recaptures Much of that Heat, Increasing Overall Efficiency of Energy Services…… 30 units Power Plant 32% efficiency (Including T&D) 94 units CHP 75% efficiency Fuel Electricity 100 units Fuel Onsite Boiler 80% efficiency 56 units Fuel Heat 45 units Total Efficiency ~ 75% Total Efficiency ~ 50%

8. …..and Reducing Greenhouse Gas Emissions 30 units Power Plant 32% efficiency (Including T&D) 94 units CHP 75% efficiency Fuel Electricity 100 units Fuel Onsite Boiler 80% efficiency 56 units Fuel Heat 45 units Total Efficiency ~ 75% Total Efficiency ~ 50% 30 to 55% less greenhouse gas emissions

9. Defining Combined Heat & Power (CHP)The on-site simultaneous generation of two forms of energy (heat and electricity) from a single fuel/energy source Conventional CHP (also referred to as Topping Cycle CHP or Direct Fired CHP) • Separate Energy Delivery: • Electric generation – 33% • Thermal generation - 80% • Combined efficiency – 45% to 55% CHP Energy Efficiency (combined heat and power) 70% to 85%

10. Defining Combined Heat & Power (CHP)The on-site simultaneous generation of two forms of energy (heat and electricity) from a single fuel/energy source Conventional CHP (also referred to as Topping Cycle CHP or Direct Fired CHP) • Simultaneous generation of heat and electricity • Fuel is combusted/burned for the purpose of generating heat and electricity • Normally sized for thermal load to max. efficiency – 70% to >85% • Minimum efficiency of 60% normally required • Normally non export of electricity • Low emissions – natural gas Reciprocating Engines Gas Turbines Micro-turbines Fuel Cell Boiler/Steam Turbine

11. Defining Combined Heat & Power (CHP)The on-site simultaneous generation of two forms of energy (heat and electricity) from a single fuel/energy source Waste Heat to Power CHP (also referred to as Bottoming Cycle CHP or Indirect Fired CHP) HRSG/Steam Turbine Organic Rankine Cycle Backpressure Turbine • Fuel first applied to produce useful thermal energy for the process • Waste heat is utilized to produce electricity and possibly additional thermal energy for the process • Simultaneous generation of heat and electricity • No additional fossil fuel combustion (no incremental emissions) • Normally produces larger amounts electric generation (often exports electricity to the grid; base load electric power) Electricity Steam Turbine Heat Heat recovery steam boiler Waste heat from the industrial process Energy Intensive Industrial Process Fuel Heat produced for the industrial process

12. Industrial Waste Heat Recovery Opportunities 800ºF + = High Temp

13. Attractive CHP Markets Industrial • Chemical manufacturing • Ethanol • Food processing • Natural gas pipelines • Petrochemicals • Pharmaceuticals • Pulp and paper • Refining • Rubber and plastics Commercial • Data centers • Hotels and casinos • Multi-family housing • Laundries • Apartments • Office buildings • Refrigerated warehouses • Restaurants • Supermarkets • Green buildings Institutional • Hospitals • Landfills • Universities & colleges • Wastewater treatment • Residential confinement Agricultural • Concentrated animal feeding operations • Dairies • Wood waste (biomass)

14. Could or Should CHP be Included in Utilities’ EE Plans? 30 units Power Plant 32% efficiency Change in the law: EE also includes measures that reduce the total Btus of electricity & natural gas needed to meet the end use or uses 94 units Fuel Electricity CHP 75% efficiency 100 units Fuel Onsite Boiler 80% efficiency 56 units Fuel Heat 75 units 45 units 150 units 100 units Total Efficiency ~ 50% Total Efficiency ~ 75%

15. Present Situation • Each year Utility EE targets are more difficult to attain • Industrials represent some of the greatest opportunities for EE investments (31% of the nation’s energy use is in Mfrg – much concentrated in energy intensive industries) • Industrials not satisfied with EE program offerings – often looked at as not responsive to their needs • CHP looked at by industrials – high first cost, looked at as confrontational with utilities, must compete with process capital investments • Utility CHP Offerings – sends right message, incentives can make a difference

16. CHP Utility EE Program Offerings • Must meet TRC, should require minimum operating efficiency (60% required for ITC) • Should provide some $/kW at commissioning to defray high first cost – should have a ȼ/kwh delivered based on performance (12 months) • Might consider a tiered incentive approach based on operating efficiency to encourage highest efficiency design (Ohio model) • Most states consider CHP an electric measure with incentives and savings part of electric program • Illinois should consider CHP a joint gas and electric program, with incentives and savings shared between electric and gas programs

17. Calculating Energy Savings S fuel CHP = F grid + F thermal CHP – F total CHP S fuel CHP: fuel savings associated with the use of the CHP system versus the use of electricity from the grid and thermal from an on-site boiler F grid: fuel that would have been used by the grid to generate the electricity output of the CHP system. F grid = E CHP X H grid F thermal: fuel that would have been used on-site by a boiler to provide the actual thermal output provided by the CHP system F total CHP: total fuel utilized by the CHP system to generate both the electric and thermal energy Savings will be in MMBtus

18. Calculating Energy Savings (cont’d) Next step is to covert the MMBtus saved by the CHP system into either kWh saved and/or therms saved One Simple Approach (combined gas and electric program): Utilities agree in program description what % of incentive will be funded with electric and gas funds (presumably larger % by electric since there is more electric funds available). Savings divided by same % as incentive funds provided. Converting MMBtus to kWh or therms: MMBtus÷ 0.1 MMBtu/therm = therms MMBtus÷ 3.412 MMBtu/MWh = MWhs--- most used method* * Some papers divide MMBtus saved by heat rate of the grid, others divide the MMbtus saved by the heat rate of the CHP system

19. Growing State Policy Support for CHP • 24 states recognize CHP/WHP in some manner in state Renewable or Energy Efficiency Portfolio Standards • Massachusetts – CHP a critical part of Advanced Energy Portfolio Standard and Utility Energy Efficiency Programs • Ohio – include CHP/WHP in Portfolio Standards; Boiler MACT pilot program • Maryland – CHP pilot program as part of EmPOWER Maryland energy efficiency program • California – Feed in tariff for excess generation systems under 20 MW – long term power purchase agreements • Louisiana, Texas, New York, New Jersey – CHP as part of critical infrastructure activities • Texas – Permit by Rule for CHP systems < 15MW

20. Federal Support for CHP DOE / EPA CHP Report (8/2012) President Obama signed an executive order to accelerate industrial energy efficiency and CHP in August, 2012 that sets a national goal of 40 GW of new CHP installations by 2020. DOE focuses technology deployment support for CHP - Regional Clean Energy Application Centers DOE - SEEAction “Guide to the Successful Implementation of State CHP Policies” – www.seeaction.energy.gov EPA recognizes CHP as an efficiency measure under developing greenhouse gas emission standards and promoting output-based options that recognize CHP benefits (ICI Boiler MACT and Utility MACT (MATS)) Executive Order: http://www.whitehouse.gov/the-press-office/2012/08/30/executive-order-accelerating-investment-industrial-energy-efficiency Report: http://www1.eere.energy.gov/manufacturing/distributedenergy/pdfs/chp_clean_energy_solution.pdf

21. CHP Value Proposition Based on: 10 MW Gas Turbine CHP - 30% electric efficiency, 70% total efficiency, 15 PPM NOx Electricity displaces National All Fossil Average Generation (eGRID2010 ) - 9,720 Btu/kWh, 1,745 lbs CO2/MWh, 2.3078 lbs NOx/MWH, 6% T&D losses Thermal displaces 80% efficient on-site natural gas boiler with 0.1 lb/MMBtuNOx emissions

22. Critical Infrastructure “Critical infrastructure” refers to those assets, systems, and networks that, if incapacitated, would have a substantial negative impact on national security, national economic security, or national public health and safety.” Patriot Act of 2001 Section 1016 (e) Applications: • Hospitals and healthcare centers • Water / wastewater treatment plants • Police, fire, and public safety (jails/prisons) • Centers of refuge (often schools or universities) • Military/National Security • Food distribution facilities • Telecom and data centers

23. CHP – Part of Critical Infrastructure • CHP is a proven and effective energy option for facilities/buildings that can enhance electric reliability and provide for energy services before, during, and after an emergency situation. • CHP provides users with financial benefits through energy savings every day rather than only during a grid outage, as with a standby generator. • CHP is more reliable than a standby generator because it is better maintained and continuously operated. Numerous examples – Northeast Blackout 2003, Hurricane Katrina 2005, Super-storm Sandy 2012, Various winter and summer blackouts/brownouts

24. CHP Kept Critical Facilities Running During Sandy • South Oaks Hospital - Amityville, NY, 1.25 MW recip. engine • Greenwich Hospital - Greenwich, CT, 2.5 MW recip. engine • Christian Health Care Center - Wyckoff, NJ, 260 kW microturbine • Princeton University - Princeton, NJ, 15 MW gas turbine • The College of New Jersey - Ewing, NJ, 5.2 MW gas turbine • Salem Comm. College - Carney’s Point, NJ, 300 kW microturbine • Public Interest Data Center - New York, NY, 65 kW microturbine • Co-op City - The Bronx, NY, 40 MW combined cycle • Nassau Energy Corp – Garden City, NY, 57 MW combined cycle • Bergen Wastewater Plant – Little Ferry, NJ, 2.8 MW recip. engine • New York University – New York, NY, 14.4 MW gas turbine • Sikorsky Aircraft Corporation – Stratford, CT, 10.7 MW gas turbine

25. New Report on CHP in Critical Infrastructure “Combined Heat and Power: Enabling Resilient Energy Infrastructure for Critical Facilities” • Provides context for CHP in critical infrastructure applications • 14 case studies of CHP operating through grid outages • Policies promoting CHP in critical infrastructure • Details how to design CHP for reliability http://www.eere.energy.gov/manufacturing/distributedenergy/pdfs/chp_critical_facilities.pdf

26. CHP Is Used at the Point of Demand 4,100 CHP Sites (2012) 81,800 MW – installed capacity Saves 1.8 quads of fuel each year Avoids 241 M metric tons of CO2 each year 87% of capacity – industrial 71% of capacity – natural gas fired Source: ICF International

27. CHP Annual Additions Source: ICF CHP Installation Database

29. CHP in Illinois • 1,330 MW installed at ≈ 137 sites • Represents ≈ 2.7% of generating capacity • Total Technical Potential ≈ 6,800 MW • Ranks 19th among states in CHP adoption • Ranks 5th among states in tech. potential

30. Midwest CHP Generating CapacityInstalled vs Technical Potential* * Technical Potential also includes existing CHP

31. CHP Generating CapacityInstalled vs Technical Potential 222,000 MW 43,000 MW * Technical Potential also includes existing CHP

32. ??Economic Potential?? What Defines Economic Potential • 2 year paybacks, 4 year paybacks, 8 year paybacks?? • Financial analysis can’t be done with average utility rates. • Average site data is unacceptable (operating hours, cost of system, level of heat recovery, etc) • How do you account for such benefits as reliability, power quality, resiliency, environment, etc • The economic potential lies somewhere between the two bars * Technical Potential also includes existing CHP

33. Questions www.midwestcleanenergy.org John Cuttica (312) 996-4382 cuttica@uic.edu 33