Microgrids offer a promising opportunity for communities seeking to reduce energy costs, limit greenhouse gas emissions and increase resiliency. States seeking to capture these benefits—including Massachusetts, New York and Connecticut—are offering millions of dollars in financial support for microgrid development. For all their benefits and incentives, however, technical, financial and regulatory hurdles must be overcome to successfully execute a microgrid project.
So, what does it take to see a microgrid project through to completion? What are the pitfalls along the way?
The Boston Redevelopment Authority recently released its Boston Community Energy Study, exploring the potential for “Community Energy Solutions” such as microgrids throughout Massachusetts. SourceOne consulted on three of the four success stories featured in the report. We share six key insights from those projects that will help ensure your microgrid is a success.
1. Collect load data carefully.
Seasonal, monthly, and daily load patterns have significant implications for the size and type of generation technology, which in turn influence financial and energy modeling. The quality of decisions made based on the load data is compounded throughout project, making this a classic case of measure twice, cut once.
Specifically, we recommend collecting hourly data for an entire year for electricity, steam, hot water and chilled water. Monthly data is not granular enough to show important trends.
Quality load data can sometimes be found in unexpected places; it can pay to get creative in your search. The best source of load data may be paper-based plant logs or data from the building management system. Cataloguing and entering this data can be time-consuming, but it will pay dividends in the later stages of the project.
2. Plan for tomorrow, not today.
As with any major investment, implementing a microgrid is about planning for the future as much as the present. Microgrids should be built for the projected needs of its service area or with the flexibility to adapt to them.
Before investing in a microgrid, we recommend conducting a site-wide energy audit to identify potential energy efficiency measures. The impact of these efficiency measures should be factored into projections of the site’s load profile during the microgrid’s lifetime.
As with our first recommendation, this will help lay the foundation for strong decision-making throughout the project.
3. Pick a generating technology that suits your goals.
A microgrid can serve multiple purposes. The generating technology that is installed should reflect your priorities. Are you primarily interested in emission reduction, resiliency or cost minimization?
If resiliency is a priority, the generating technology needs to be dispatchable. The cost of intermittent resources like solar and wind should be levelized to include the energy storage required for dispatch.
Many of our most successful projects rely on highly efficient combined heat and power (CHP) plants. There are several CHP prime movers—steam turbines, reciprocating engines, gas turbines, fuel cells, microturbines—each appropriate in different application contexts. A critical criterion for choosing the right technology is matching the site’s power-to-heat consumption ratio with the CHP technology’s power-to-heat output ratio (yet another reason quality load data is critical).
Of course, hybrid systems are also a possibility, mixing and matching renewables and conventional generation as necessary. The important lesson is not to be overly prescriptive. Enter the evaluation process with an open mind and choose the technology or technologies that meet your needs.
4. Engage stakeholders early and often.
For such questions there is no right answer, but there is a wrong answer—ambiguity. We recommend approaching this challenge head on. Define roles clearly and early, learn from experience and revise as necessary.Building a microgrid can involve a lot of stakeholders—the generator owner, the city or town, electric company, gas company, existing utility customers, regulators, etc. Collectively, these stakeholders must find answers to a series of questions that satisfy all parties involved. That includes divvying up responsibilities such as: Who operates the microgrid? Who owns it? Who is responsible for electric reliability and power quality? how are maintenance and operating costs shared?
5. Plan proactively for your utility interconnection.
Microgrids are able to operate in island mode, independent of the larger electrical grid. Island mode is critical during major outages because it enables microgrids to offer self-sufficient power supply, adding resiliency. When the system is operating normally, however, the micro and macro grids can operate more flexibly when they remain connected.
To connect generation in parallel with the electrical grid, permission must be granted from the local distribution company. The permitting process can take over a year, so the application process should begin as soon as possible—usually when the generating technology is chosen.
6. Incorporate utility rate forecasts into your financial and energy models.
The savings from installing a microgrid depend on the cost of energy displaced by the microgrid. This in turn depends on the when the microgrid is generating. A flat utility rate is usually not detailed enough for the energy and financial models to be produce accurate outputs. Your consultant or engineer should be as skilled in utility rate forecasting as they are in energy systems analysis and project management.
Microgrids require careful planning if they are to deliver on their promise. Following these lessons learned from experience can guide you to success.
Want to learn more? Contact SourceOne at 800.510.4485 to speak to an energy expert.
In Part I of this blog series we explained how rising capacity prices increase revenue for demand response (and generation) and how you can cash in on demand response. But that’s only one side of the coin; the other side is that someone has to pay for that capacity. It probably comes as little surprise to hear: that someone is you, the electricity consumer.
In this post we will explain how capacity charges are determined, and what you can do to minimize your exposure.
What is a capacity charge?
Energy represents a large expense for most businesses. Capacity costs—determined by electricity consumption during just a limited number of peak demand hours in the year—are a key driver of annual utility costs.
Electricity consumers pay a fixed monthly payment called the capacity charge. This charge mirrors the price paid to electricity generators in the capacity markets for ensuring the grid can meet peak demand (see our primer on capacity markets HERE).
Depending on the operating rules of the local utility and regional transmission organization (RTO), capacity and other demand-based charges often range from 10-40 percent of a customer’s total electricity costs.
What comprises your capacity charge?
Your capacity charge is effectively comprised of two elements—the size of the capacity market and your usage during peak demand.
The size of the capacity market
For various reasons discussed in Part I of this blog series, capacity prices in the Northeast are undergoing an unprecedented increase. While capacity prices have been relatively low and stable for the past seven years, recent forward capacity auctions have closed at prices reaching five times higher than historic rates in some zones.
The increasing size of the capacity market (in both absolute terms and as a percentage of the wholesale electricity markets) will result in a commensurate increase in capacity charges for energy consumers unless they actively manage that risk.
Your usage during peak demand
Each year during peak demand on the electricity grid (usually during the afternoon on one of the year’s hottest days), the market operator tags each customer’s energy consumption, tracking their usage during the peak. This “capacity tag” determines your share of the capacity market for the following commitment period (see timeline grapic).
Hypothetically, a customer who reduces consumption to zero during the system peak could avoid paying for capacity all together.
How to minimize your exposure to capacity costs
While you cannot control the capacity market, you may have considerable control over your usage during the system peak when “capacity tags” are set. Therein lies the opportunity for savings. And as the capacity market grows, so does the incentive to minimize your exposure to capacity costs.
Here are some steps you can take to reduce your electricity usage during peak demand:
- Energy Efficiency Measures – The most reliable way to mitigate capacity costs is to install energy efficiency measures to lower your capacity tag prior to the summer when they are set. For example: replace inefficient lighting and motors, modernize HVAC equipment, etc. Consider conducting an energy audit to identify any deficiencies and maximize your savings.
- Engage in Demand Response – As discussed, demand response—a commitment to reduce electricity demand when called upon—can be a source of revenue, but it can also reduce your capacity charge by decreasing your electricity consumption during system peaks.
- Capacity Tag Management – Customers can take action to voluntarily reduce consumption during predicted peak hours. As with demand response, some preparatory work can help you make the most of this opportunity. A qualified energy consultant can help you:
- Sign up for alerts that notify you of the days when capacity tags are likely to be set
- Execute demand reduction strategies, such as lowering air conditioners, shifting production, scheduling maintenance or even shutting down a factory for a brief period
- Install a smart control system to facilitate demand reduction
- Evaluate whether back-up generation is an appropriate solution for your facility
Combined together, these strategies can help businesses save up to 30 percent on annual electricity costs, just by taking action during a few hours of the year.
Want to learn more? Contact SourceOne at 800.510.4485 to speak to an energy expert.
Demand response is here to stay
On January 25th, 2016 the Supreme Court of the United States ruled on a case that has been highly anticipated by the energy community—Federal Energy Regulatory Commission v. Electric Power Supply Association Et Al.
The case concerned a practice known as demand response in which wholesale market operators (e.g. ISO-NE, NYISO, PJM, etc.) pay consumers for commitments to reduce their electricity consumption during periods of peak energy demand or grid instability. A key provision at issue in the case was the Federal Energy Regulatory Commission’s (FERC) Order 745, which requires market operators to pay the same price for demand response as they pay for generation.
The case resolved two questions:
- Does FERC have the authority (under the Federal Power Act) to regulate the rules governing how wholesale market operators pay for demand response?
- Are FERC’s rules for governing demand response payments arbitrary and capricious?
The decision: FERC does have the authority to regulate how wholesale market operators pay for demand response, and FERC’s demand response payment rules are just and reasonable.
Translation: Demand response is here to stay. Or more precisely, the current iteration of how wholesale demand response is regulated (by FERC) and compensated (at the same level as generation) is here to stay.
Higher capacity prices are driving up demand response payments
But the story doesn’t end there. Demand response rates are established in forward capacity auctions at a level known as the clearing or capacity price. These auctions occur three years before each capacity commitment period in ISO-New England (ISO-NE) and PJM Interconnection (PJM), and seasonally or monthly in New York ISO (NYISO). The higher the capacity price, the more attractive demand response becomes. And capacity prices have been on the rise.
(For a primer on how forward capacity auctions work and how demand response fits in, click HERE.)
A squeeze on coal-fired and less efficient power generation is driving up capacity costs
This rising cost of capacity reflects a mismatch between forecasted electric demand and available generation in the future. The market is intended to provide industry with incentives to build more generation when and where it is needed. By mid-2019, recent and pending retirements of coal, oil and nuclear generation capacity in ISO-NE will total more than 4,200 megawatts (MW). Multiple drivers are contributing to these shutdowns.
To comply with increasingly stringent limits on greenhouse gas emissions, many coal power stations are being forced to shut down or retrofit their plants. Many of the nuclear plants in the Northeast were built in the 1970's and are now either approaching the end of their useful lives, struggling to compete with cheap natural gas, or both. Finally, new Pay-for-Performance in ISO-NE and PJM rules now prevent poor performing peaker plants that fail to contribute to the grid from collecting capacity payments. This simultaneously drives inefficient plants off the grid and incentivizes the construction of more efficient replacements. These trends are combining to squeeze electricity supply in the Northeast and, consequently, drive up capacity prices.
ISO-New England capacity prices more than double
Take ISO-NE as an example. The average clearing price over the first seven forward capacity auctions was $3.40/kilowatts (kW)-month with a high of $4.50/kW-month and a low of $2.95/kW-month. The three most recent forward capacity auctions have seen capacity prices rise substantially. The average capacity payment from 2017/18 through 2019/20 is $7.87/kW-month, more than double the average capacity price of the preceding commitment periods.
In sub-regions that are particularly constrained such as Northeast Massachusetts (i.e. greater Boston), the clearing price has reached $15.00/kW-month, a significant increase in just a few years. At that rate, 1 MW of either generation or demand response could receive fixed reservation payments of as much as $180,000 per year.
PJM sees rising trend
Similarly, we see a rising price trend for PJM Interconnection (PJM), though the pattern is not quite as severe. Over the three most recent commitment periods the capacity price has for the majority of PJM (aka RTO clearing price) has risen from $1.81/kW-month in 2016/17, to $3.66/kW-month in 2017/18, to $5.02/kW-month in 2018/19.
NYISO pricing threatened by pending retirements
NYISO runs seasonal capacity auctions every 6 months and then administers reconfiguration auctions on a monthly basis. As such, the capacity price beyond 2016 has not been established yet. Nonetheless, many of the market trends that are driving increased capacity costs up for ISO-NE and PJM are also present in NYISO. For example, two nuclear operating units at the Indian Point nuclear facility, with a combined operating capacity of 2,078 MW (representing 25 percent of downstate New York’s energy needs), risk shutdown if Entergy, the facility owner, is unable to relicense the reactors.
Depending on location and operational capability, demand response resources in New York may also qualify for ongoing reservation and performance payments from the local utility, making some of these programs the most lucrative in the country.
How to cash in on demand response
Taken together, the Supreme Court ruling and trends in capacity market prices point decisively towards one conclusion: now is the time to consider demand response. Follow the steps below to get started:
- Quantify and optimize your demand response load profile. Your demand response capacity (MW) is based on your non-critical base load as well as your load flexibility. Quantifying that requires a detailed load profile analysis and detailed inventory of equipment, operations, and processes. Large industrial facilities tend to be good candidates for pursuing demand response, but demand response can be economical for a wide variety of load profiles.
- Determine your internal break-even price. What is the opportunity cost of your electricity consumption? What is the lowest capacity price you would accept in exchange for your commitment to provide demand?
- Outline a successful demand response program. A qualified energy consultant, familiar with the competitive energy market, can help represent your interests and define your favorable conditions throughout contract negotiations.
- Engage with the demand response supplier that is right for your organization. Demand response suppliers aggregate demand response across energy users to participate in the forward capacity auction. A detailed review of available options, performance obligations, and contractual language is required before enrollment in a demand response program.
- Prepare your facility for demand response. As a demand response provider, you must be prepared to shave load at the market operator’s request. An energy consulting firm can help you:
Collect your demand response revenue!
Install a smart control system that can distinguish between critical and non-critical equipment and automate the shutdown of non-critical load;
Consider investing in a properly sized back-up generation system to ensure reliable operations in your facility;
Optimize financial returns by selecting the right strategy and seeking tax incentives, subsidies, and investment incentives where available;
Negotiate favorable contracts that strike the risk/reward profile and performance capability of your organization.
With demand response here to stay, now is the time to evaluate how to make it work in your favor. If you have further questions, don’t hesitate to contact SourceOne’s strategic commodity management team at email@example.com.
Stay tuned for our next post which will focus on how capacity charges are reflected in your utility bill and how you can use passive demand response and energy efficiency measures to minimize your exposure to this growing cost.
Transit yard and shops keep NYC subway trains 'chugging'
Resting on 75 acres of former swampland in Brooklyn, New York, the Coney Island Complex and train yard is managed by the Metropolitan Transportation Authority (MTA) and is one of the largest rail maintenance shops and rapid transit yards in North America. Built in 1926, the nearly century-old complex is used to perform regular maintenance for a fleet of 800 cars, as well as heavy maintenance and overhaul for every one of the approximately 6,000 cars in the New York City subway system – one of the oldest and most used public transit systems in the world.
"Coney Island Yard is vital to New York City Transit's subway operations. This facility supports a very large car maintenance, inspection and overhaul program, as well as being the largest car storage facility in the system." – SVP, Dept. of Subways Carmen Bianco
Maintenance operations support one of the biggest subway systems in the world
As one of the most populous cities in the United States, the subway system for New York City provides 24/7 transportation services and served over 1.75 billion rides in 2014 alone. A critical component of New York’s transit subway operations, the Coney Island Complex includes heavy maintenance facilities and track facilities for cars undergoing maintenance and overhaul, three related railroad storage yards and a central plant. The boiler plant provides heating to the entire complex, maintenance facilities and shops and process loads for maintenance and cleaning of subway trains - helping to sustain the largest subway system in the world.
Meeting the thermal needs of the largest rapid transit yard in North America
With two of the three original boilers shut down in recent years due to disrepair, a temporary boiler was installed to help support the complex’s thermal energy needs, along with one of the existing original boilers. Although the original boilers ran on fuel oil when they were constructed, the burners were replaced in recent years with dual-fuel burners capable of firing fuel oil and natural gas – a more environmentally-friendly fuel source. However, recognizing that the existing plant was well beyond its useful life, the MTA sought assistance from the New York Power Authority (NYPA). By leveraging NYPA's Energy Efficiency Program, the MTA launched its energy-saving boiler replacement project to reduce carbon emissions and service its existing steam loads with higher efficiency and greater reliability.
Energy efficiency projects like the one carried at the Coney Island Train Yard share in the goal of both saving energy and improving important infrastructure at key buildings in New York State,” said Gil C. Quiniones, president and chief executive officer, NYPA. “The Power Authority has plans to finance and carry out hundreds of millions of dollars in energy efficiency projects every year in support of Governor Cuomo’s Build Smart NY initiative, installing energy-saving technologies in public facilities throughout the state.”
MTA lowers GHG emissions and saves money
As an implementing contractor for NYPA's energy conservation programs, SourceOne managed a team of contractors led by AKS international to replace the existing steam plant. The multifaceted boiler project included demolition of the existing boiler plant, removal of the original steam boilers dating back to 1926 and installation of three new, dual-fuel high-efficiency boilers. The system also incorporates a condensate return system to conserve water and lower the need for city make-up water. The new boilers primarily run on natural gas and can also leverage #2 fuel oil in emergency situations or if there are constraints in the natural gas supply. Using multiple fuel sources provides flexibility, in addition to added resiliency.
The phased $5.4 million boiler replacement project was conducted in the midst of ongoing Hurricane Sandy recovery and posed no interruption to 24/7 subway services. The new high-efficiency boilers will reduce operating costs at the train yard by nearly $400,000 per year and will avoid approximately 1,500 tons of greenhouse gas (GHG) emissions annually – helping to support Governor Andrew M. Cuomo’s Build Smart NY initiative to increase energy efficiency in public buildings.
“This initiative is yet another way the MTA is playing a vital role in reducing carbon and evidence that investing in public transportation is one of the best strategies for reducing greenhouse gas emissions,” said MTA Chairman and CEO Thomas F. Prendergast.
Read NYPA’s press release to learn more about the project.
Technology and efficiency top the energy charts in 2015
The production, distribution and management of energy will continue to evolve over time; however, two trends in 2015 will continue to gain ground: smart building technology and energy efficiency. As stricter environmental policy gains traction in the U.S. and around the globe, businesses and institutions are required to adopt more sustainable energy management practices to reduce greenhouse gas (GHG) emissions and help combat climate change.
The birth of the smart building
By arming buildings with technology, like sub-metering, data management and utility management software solutions, building owners can track and identify any deficiencies to save energy and reduce GHG emissions. Using intelligent building software, building managers are better equipped to manage utility consumption, identify areas requiring improvement and advance energy efficiency retrofits that have a direct impact on reducing carbon pollution. Oftentimes, implementing distributed energy generation technologies, such as renewable energy and Combined Heat and Power (CHP), can also have a huge impact on efficiency, cost savings and carbon reductions.
Did you know that only 40 percent of commercial buildings actively measure and track their energy use? (Source: ENERGY STAR)
Why climate change is ‘driving the car’
With 45 percent of all U.S. GHG emissions attributed to commercial buildings and industrial facilities, these sectors are under greater pressure to comply with mounting environmental policy mandating carbon reductions. As recently as this December, several countries, including the U.S., pledged a commitment to address climate change and reduce global emissions in signing the Paris Agreement. In August 2015, the U.S. Environmental Protection Agency (EPA) unveiled the final Clean Power Plan for the same purpose. Considering the fact that 30 percent of energy is wasted within commercial buildings and industrial facilities, there’s clearly more that can be done, and should be done, to improve energy efficiency within these sectors.
Did you know that if commercial and industrial buildings improve their energy efficiency by 10 percent they can collectively save $40 billion and prevent GHG emissions equal to removing 49 million vehicles from the road? (Source: ENERGY STAR)
Leading the way towards smarter buildings
A key component in defining a building as ‘smart’ is the efficient delivery and consumption of energy; therefore, energy efficiency is part and parcel of a smart building. Some leading commercial and industrial building owners and government agencies are already at the forefront of the energy efficiency and smart building movement and they are reaping the results of these efforts in dollar savings and carbon reductions:
Grand Central Terminal
As one of the busiest train stations in the country and the largest in the world by number of platforms, the iconic Grand Central Terminal lies in the heart of midtown Manhattan and provides services to approximately 750,000 people per day. In 2014, the utility systems at the 49-acre transportation complex were upgraded, including new controls, lighting, metering and cooling system, extensive steam distribution system modifications and a new a state-of-the-art Building Management System (BMS). The upgrades will save an estimated $2.5 million annually and reduce harmful carbon emissions by more than 11,200 tons a year—the equivalent of removing 2,140 cars from the road. Learn more about the Grand Central energy efficiency project HERE.
Vornado Realty Trust
With over 100 million square feet of office, retail, and residential property, Vornado has implemented smart metering technology to track energy use from 3,000 meters across its entire building portfolio. Vornado has been leveraging EMsys, a web-based energy management system, to help support its energy management efforts. This web-based tool, integrating historical energy and water usage, temperature, humidity and environmental data, has helped Vornado recover millions of utility costs each year, in addition to helping reduce its carbon footprint. As a testament to Vornado’s energy conservation efforts, the company received the Partner of the Year, Sustained Excellence recognition from ENERGY STAR in 2015. Read more about Vornado and the efficiency efforts of leading commercial property owners HERE.
University of Massachusetts Medical School
UMass medical school in Worcester recently completed a central plant expansion to accommodate its increased energy requirements. By generating its own steam, chilled water and electricity via a new 7.5 megawatt, gas-fired combustion turbine and heat recovery system, the medical school doubled its campus research capacity and achieved $6.2 million in electricity savings annually. While the expansion increased electricity, steam and water-chilling capacity, it actually reduced overall GHG emissions due to the turbine’s efficiency. In March 2015, the Northeast Clean Heat and Power Initiative (NECHPI) honored the medical school with a Clean Heat and Power Champion award. Learn more about this CHP project HERE.
The evolving energy landscape
As 2015 comes to a close and a new year approaches, one thing is clear: the economic shifts in policy and regulation towards climate change will continue to shape the future ahead. As the growing need to reduce GHG emissions takes center stage globally, businesses, government and institutions will be required to do their part in helping to reduce carbon pollution. By employing innovative energy management tools and technology, commercial and industrial facilities are on the path to becoming smarter and more sustainable – a key requirement in the battle against climate change.
Due to current global energy market conditions, experts predict that the New England wholesale natural gas market may enjoy more stable conditions during periods of extended cold and high demand this winter. Increased imports of liquefied natural gas (LNG) to New England could prevent the price spikes that have historically occurred due to shortages in the local market.
In this Boston Globe article, Brant Davis, VP of commodity management at SourceOne, explains why Boston has become a lucrative destination for LNG importers and how this greater supply will impact energy costs.
Read the Boston Globe article HERE!
Feasibility study represents the first step towards energy independence for the City of Ithaca
Following the award of a New York State Energy Research and Development Authority (NYSERDA) New York Prize grant, the City of Ithaca and its stakeholders, including Unchained Properties, Ithaca Community Energy, Cornell Cooperative Extension and the Ithaca Area Wastewater Treatment Facility, have initiated a study to evaluate the feasibility of installing and operating a community microgrid to supply localized energy to the community. Community microgrids, or local energy networks, have the ability to separate from the larger electrical grid and, in some configurations, provide heating and cooling in the event of a grid outage or natural disaster.
With an established and successful track record working with cities and towns across the nation on complex energy conversion and reliability issues, SourceOne was selected to perform the feasibility study. “By exploring a range of supply and demand side solutions, the City of Ithaca is adopting a strategic approach to ensure energy reliability,” said Matt Cinadr, project manager at SourceOne. “We applaud the city in pursuing the most sustainable, reliable and cost effective energy solution for the community and its residents.”
By developing access to independent energy sources, Ithaca will be better positioned to support critical facilities during power outages, provide more sustainable, clean energy to the community and build reliability and resiliency into the electric grid.
Read the full press release HERE
Recognizing leadership and innovation in NYC energy management
Each year the New York Energy Consumers Council (NYECC) honors organizations and individuals who have demonstrated exceptional qualities of vision, innovation, and leadership in energy management by presenting them with an Energy New York Award (ENYA). As the largest energy customer advocacy organization in New York State, NYECC has successfully supported New York’s electric and steam consumers over the last half-century. By engaging in the public rate making process and supporting education and regulatory intervention, the NYECC has helped save utility customers millions of dollars.
This year on September 30th from 6-9 pm, NYECC will honor some of New York’s energy leaders and the critical infrastructure projects that are helping to redefine the energy landscape of New York. Hosted at the Tribeca Rooftop, the 2015 Energy New York Awards will celebrate energy leadership, vision, and impact - combined with great company, food and drinks! Join SourceOne and other energy leaders at this unique event, celebrating the organizations and individuals who have advanced energy reliability and the economic competitiveness of New York.
Celebrate energy leadership, vision, and impact
When: September 30th from 6-9 pm (rain or shine)
Where: Tribeca Rooftop, 2 Desbrosses Street, New York NY
~Premium Open Bar~
~Passed Hors D'Oeuvres~
~Sushi Bar & Dim Sum Station~
~Sliders, Pasta, and Salad Stations~
Groundbreaking national policy to reduce carbon pollution
On August 3rd 2015, President Obama and the U.S. Environmental Protection Agency (EPA) unveiled the final Clean Power Plan – a historic step in reducing carbon pollution linked to harming human health and advancing climate change. As the first national standard addressing carbon pollution, the Clean Power Plan seeks to take real action on climate change – cutting carbon pollution from the power sector 32 percent below 2005 levels by 2030, while advancing clean energy innovation, development and deployment. “By 2030, the net public health and climate-related benefits from the Clean Power Plan are estimated to be worth $45 billion every year. And, by design, the Clean Power Plan is projected to cut the average American’s monthly electricity bill by 7% in 2030” (Source: EPA Blog: 6 Things Every American Should Know About the Clean Power Plan).
A national standard, customized to each state
By providing national consistency, while setting individual carbon dioxide (CO2) emission reduction targets for each state, the Clean Power Plan allows each state to develop plans based on its unique energy mix of affected sources. Final plans for each state are required by September 6, 2016 and no later than September 6, 2018 for those states granted an extension. “The Clean Power Plan simply makes sure that fossil fuel-fired power plants will operate more cleanly and efficiently, while expanding the capacity for zero- and low-emitting power sources” (Source: EPA Fact Sheet: Overview of the Clean Power Plan). Fortunately, there are several tools available today that states can take advantage of to reduce emissions, including combined heat and power systems (CHP).
CHP can conservatively contribute approximately 46 million metric tons in CO2 emissions savings nationwide in the year 2030, according to American Council for an Energy-Efficient Economy.
CHP provides environmental advantages and economic benefits
CHP, also known as cogeneration, is a sustainable and efficient energy solution that recycles waste heat from its electricity generation process and converts it into useful thermal energy – achieving up to 80 percent efficiency. Traditional methods of separately producing electricity in power plants and heat and steam in boilers require the consumption of significantly higher volumes of fuel relative to CHP. Because CHP uses the same fuel source for both heat and power, it lowers resource demands and fuel costs, provides an on-site, reliable power source and results in reduced carbon emissions and air pollutants.
CHP is a well-established technology widely used at industrial facilities, hospitals and university campuses to provide energy reliability, reduce operating costs, meet high process loads and ensure 24/7 heating and cooling requirements. According to The Alliance for Industrial Efficiency, “The Clean Power Plan will make manufacturers more competitive, support new jobs, improve grid reliability, and cut electricity costs for all ratepayers. It is commonsense that companies that use less energy to produce iron, steel and paper will save money on their electric bills. Through this rule, states can help manufacturers save as much as 50 percent on energy costs, giving them new resources to increase productivity and innovation. Governors should seize this opportunity and include CHP and waste heat to power (WHP) in their plans”
Representing a critical strategy to cost-effectively reduce emissions, CHP is an underutilized resource with the potential for increased deployment in every state. In a recent report, the American Council for an Energy-Efficient Economy (ACEEE) estimated that CHP can conservatively contribute more than 68 million megawatt hours (MWh) of electricity savings nationwide in the year 2030, which equates to a reduction of approximately 46 million metric tons in CO2 emissions. Furthermore, the Department of Energy (DOE) estimates that if CHP provided 20 percent of U.S. electric capacity - up from the 12 percent it represents today - it could support one million new jobs.
According to the U.S. Department of Energy, if CHP provided 20 percent of U.S. electric capacity - up from the 12 percent it represents today - it could support one million new jobs.
How states can implement CHP to comply with Clean Power Plan requirements
By leveraging this energy-efficient technology, CHP can help states comply with their obligations under EPA’s Clean Power Plan. In fact, the ACEEE has released a step-by-step guide to help states effectively do that. This tool provides guidance on how to document and claim emissions reductions resulting from CHP measures in a state’s plan. ACEEE also offers a State and Utility Pollution Reduction (SUPR) Calculator as a tool to evaluate how much CHP could help your state toward achieving its Clean Power Plan emissions reduction target.
“States can strengthen the reliability of all of their electricity customers by including CHP in their compliance plans,” notes Elinor Haider, Vice President of Market Development at Veolia, one of the nation’s largest CHP developers and Alliance Steering Committee Member. “Because a CHP system can operate independent of the grid, they are more resilient, remaining online during extreme weather events that can lead to power outages. We witnessed the benefits firsthand during Superstorm Sandy in October 2013. While nearly eight-million residents across the Mid Atlantic lost power, the CHP system we helped implement kept the lights on at New York University and allowed the University to serve as a place of refuge during the storm.”
Learn more about CHP and its benefits:
- “10 Reasons States Should Include CHP in Clean Power Plans,” The Pew Charitable Trusts, March 24, 2015
- Cogeneration: The Independent Solution – An Example from NYU
- “Finally, Growth Re-Ignites in the Industrial, Commercial & Institutional CHP Market,” Climate Change Business Journal, Volume VI, No. 11, November 2013
- To CHP, or Not to CHP? The Process of Evaluating Combined Heat and Power
- Massachusetts Hospital and Medical Research Campus finds Resiliency with CHP
- Cogeneration plant for a global biotechnology company avoids 36,000 tons carbon emissions annually
- 64 MW Simple Cycle Power Plant creates new generation capacity to meet the electricity demand for Vineland, NJ
- SourceOne achieves $2.3 million in incentives for Lahey Clinic, paving the way for a new CHP plant, Medical Construction and Design, July/August 2013
- “Massachusetts portfolio programme backs CHP,” Cogeneration & On-Site Power Production, Volume 13, Issue 6, Nov 28, 2012
- “Combined Heat and Power Evaluation, Step by Step,” Energy Manager Today, November 5, 2013
As the popular saying goes, ‘Without data you're just another person with an opinion.’ This adage certainly holds true when managing commercial properties, manufacturing plants, central energy plants or refineries. According to Rocky Mountain Institute, “Most U.S. buildings’ expenses break down into a similar distribution —largely fixed costs, followed by utility bills, repairs and maintenance expenses (R/M). On average, building owners spend 22% of their operating costs on energy and water.” Since industrial facilities typically require extremely energy-intensive equipment and operations, utility expenses can be significantly more.
Without data you're just another person with an opinion
ENERGY STAR estimates that while $400 billion is spent on energy costs for U.S. commercial buildings and industrial facilities annually, thirty percent of this energy is wasted. With 45 percent of all U.S. greenhouse gas (GHG) emissions attributed to commercial buildings and industrial facilities, it’s strikingly clear that commercial and industrial facilities need to do a lot more to reduce utility consumption. However, in order to be able to reduce consumption, you first need to know exactly how much you’re using. With accurate data on utility usage, you’re not ‘just another person with an opinion.’ Being able to accurately calculate and track utility consumption on a granular level allows facility owners and managers to uncover efficiency opportunities and make informed decisions based on factual data.
You can't manage what you don't measure
Without accurate data, your plant may not be running optimally – potentially impacting profitability, performance and sustainability. Since the average plant has hundreds of gauges and other complicated instrumentation, the odds are high that a number of devices are not producing accurate readings or not working at all. This becomes further complicated when managing multiple sites comprised of differing infrastructure, equipment and varying fuel sources. Furthermore, plant conditions change over time due to a wide range of reasons, including ownership, management or staffing changes, regulatory issues, fuel variability, installation of new equipment or meter upgrades, etc. Even if an existing metering or monitoring system is in place, these changing conditions over time can significantly impair the accuracy of the efficiency and performance data collected.
Uncovering efficiency and cost saving opportunities
An instrumentation audit includes a focused and in-depth assessment of metering architecture, sensors, and gauges and identifies corrective actions to ensure optimum performance. Once data quality assurance is achieved, ongoing efficiency monitoring via advanced metering and a centralized web-based software system is imperative to efficiently managing a large-scale portfolio – whether these facilities are commercial buildings or industrial plants.
Building and plant operators are better able to react and adjust equipment, controls and/or meter performance based on high-quality, real-time data. Understanding plant performance not only allows management to make adjustments that increase efficiency and profitability, but also typically results in reduced consumption of raw fuel – yielding significant additional savings and GHG emissions reductions. Initiating a nation-wide instrumentation audit has proved to be extremely beneficial to Veolia North America – operator of the largest portfolio of district energy systems in North America.
Launching the Veolia Efficiency Optimization System
With a district energy fleet incorporating central plants of differing types and vintages with varying fuel sources and energy outputs, Veolia operates and maintains a diverse portfolio of district energy systems in 12 major cities across the United States. In 2014, Veolia required granular efficiency data across its portfolio and a centralized database to monitor and optimize its district energy plants nationwide. With in-house expertise in energy efficiency and energy plant operations and management (O&M), Veolia chose to leverage its own district energy and software experts to design and implement the Veolia Efficiency Optimization System (VEOS) – a data acquisition system which provides real-time equipment and plant efficiency data.
Due to its multi-faceted energy and software development expertise, Veolia is unique in the sense that they are able to design their own software application. However, for most corporations this would typically require either investment in an outsourced Software as a Service (SaaS) user interface or contracting a consultant to develop a custom data management solution. With the development VEOS underway, Veolia turned to its energy consulting business, SourceOne, to facilitate the comprehensive data collection and instrumentation audit comprising twenty-five district energy plants across the U.S.
National instrumentation audit yields efficiency opportunities
As part of the development of Veolia’s integrated plant efficiency monitoring system, VEOS, Sourceone is currently evaluating existing metering and instrumentation at each of Veolia’s district heating, chilled water, and cogeneration facilities. These detailed evaluations and reports determine the availability and accuracy of data necessary to calculate actual and target efficiencies on both the plant and equipment level and provide recommendations for optimizing current instrumentation and metering architecture.
Since plant equipment varies in size, age and condition across Veolia’s district energy portfolio, the VEOS investigations require comprehensive field audits to verify facility records, document current configurations, identify required metering enhancements and validate metered energy reporting techniques for wide variety of utilities, including electric, chilled water, hot water, natural gas, oil, super-heated steam and saturated steam. Energy flow streams are measured using a variety of both cutting-edge and tried-and-true instrument technologies. Interviews conducted with on-staff operations and maintenance personnel are also required to comprehensively document current procedures and institutional knowledge.
Each audit results in an in-depth report highlighting current plant configurations, instrumentation, conditions and opportunities for efficiency improvements. Although this nationwide audit is still currently underway, SourceOne has completed evaluations for half of the designated plants – uncovering several opportunities for improvements.
Understanding where you are is the first step to planning where you need to go
With accurate performance data, industrial and commercial building owners are better equipped to make educated decisions regarding budgeting, hiring, procurement, investments and efficiency improvements that will yield savings, reduce GHG emissions and improve profitability. By validating and streamlining utility data via an instrumentation audit, smart-metering technology and a centralized web-based data management system, Veolia is gaining a crystal clear understanding of plant performance nationwide. Based on this data, Veolia is making informed decisions to further reduce fuel and electricity usage, lower its carbon footprint and launch efficiency projects at its district energy facilities throughout the U.S.
As a testament to the importance of metering, data management systems and accurately assessing efficiency data, Veolia and SourceOne joined together in June 2015 to present on this topic at the International District Energy Association’s 106th Annual Conference and Trade Show. Download the presentation HERE.