COGENERATION: Technology and Economics

by Brian Grosjean, Project Developer for Northeast Generation Services

2006 by Brian Grosjean- used by permission

With energy prices rising due to increased fuel prices, every business manager is looking for ways to reduce operating costs. One proven way for a manufacturer to reduce energy costs is by generating electricity on site and reusing the waste heat in the process or for plant heating or cooling. This is called cogeneration. Cogeneration is the simultaneous production of two kinds of energy from the same source at the same time. Cogeneration is used in large and small locations where power and another form of energy is required. It has found application in the largest industrial locations such as integrated paper mills and petrochemical plants, and in locations as small as fast food restaurants and even homes. Usually, one of the forms of energy is electricity. The other energy form can be steam, hot water, or chilled water.

Electricity Out Fuel In

Cogeneration Plant
Heat or Cooling Out

The range of fuels used in cogeneration includes natural gas, diesel or heavy fuel oil, propane, coal, waste liquids or gasses from industrial processes, wastes from the paper process, and renewables in low power applications. The cogeneration plant can use any engine coupled with a generator that uses fuel to create electricity and waste heat. The most common are diesel engines and gas turbines. Reciprocating engines can also be used for very small scale cogen. The Engine-Generator The engine is coupled to an electric generator to produce electric power. This provides on-site power source ready to be connected to the plant load, in parallel with the utility. In this way, some cogeneration plants can operate even when the connection to the electrical grid is lost. This allows the cogen owner to disconnect from the grid in emergencies and continue operating during utility outages. This is a great advantage in remote locations, and in locations prone to utility outages.

There are two major types of engines used in cogeneration: Reciprocating diesel engines have been prime movers in industry for about 100 years. Their design has been refined to the point where reliability is better than or equal to any other plant component. Operations and maintenance costs, and repair costs are reasonable due to the availability of parts and experienced personnel. Engines are available from 50kw to over 20,000 kw per unit. The Gas Turbine is the prime mover for cogeneration. Electricity is generated from a generator attached to the output shaft. The waste heat (thrust) is ducted to a boiler to generate steam. This system is very efficient and reliable. Sizes from 1,500 kw to over 300,000 kw per unit. Cogeneration provides a means of recovering the waste heat from an engine which would ordinarily be discarded in cooling water or air exhaust, and using this heat to make steam or hot water. The heat from the electricity generation process is captured in a heat recovery system, usually based on a boiler using water. This generates steam or hot water for the process, or for heating, or even for generating more electricity in a steam turbine generator. The heat can also be used in an absorption chiller to generate chilled water from the waste heat of the power producer. Many cogeneration facilities on college campuses produce electricity for the college, and steam and chilled water for an underground district heating and cooling system distributed throughout the campus. With new developments in reliable technology, the concept of cogeneration has become a staple in any new plant design. The process is highly efficient, predictable and reliable, with failure rates lower than those of most pieces of process equipment. The total useable output of a cogeneration project can be double that of traditional power generator such as a fossil fuel steam generation plant. With such benefits, it is natural to ask why cogeneration is not used in every application where power is produced. There are several requirements for a cogeneration project which will pay for itself in a reasonable amount of time: There must be a need for large amounts of thermal (heat, process and/or cooling) energy nearby to the cogen plant. Cogeneration has high initial cost relative to traditional power generation technologies It requires a significant amount of valuable plant space with interconnections for electricity and thermal energy, It requires higher trained operators than a simple power plant.

The Heat Recovery Steam Generator captures the heat from the engine and generates steam or hot water. Standard designs for hot water and steam boilers are modified to optimize the waste heat recoverable from the prime mover. Many times, duct burners in the boiler entrance add additional heat to the steam

generator to generate more steam needed by the process. Pollution control equipment such as CO catalysts and Selective Catalytic Reactors (SCR) are installed in the flue gas stream in the boiler. Economic analysis Before any equipment is installed, a thorough analysis must be made of the cost benefit to the owner of the cogeneration project. The savings from reduced electricity and fuel purchases must offset the increased costs of labor, maintenance, taxes and capital financing. Each of these costs can be managed individually. From the Owners Point of View:

Savings Utility demand Utility energy Fuel for steam

Costs Fuel & Electricity taxes operations labor maintenance capital financing

The savings from the project must be greater than the increased costs. The savings will come from lowered utility demand, and the decrease in utility and fuel bills. The increased costs will be increased fuel costs, increased taxes on the capital costs, increase in operations labor for the cogen, increased maintenance costs and the increased long term capital investment. Each of these costs can be reduced and the risk managed by several methods. The cost of the cogen fuel can be managed by buying in bulk and storing on site, price hedging, especially for gas, and long term contracts. Electricity costs can be reduced by special cogeneration rates available from many utilities, and by managing the electricity demand during peak hours. Taxes can be reduced by moving the ownership of the equipment to lower taxed portions of the company, or by receiving capital equipment tax benefits from the State or Federal government. Operations labor can be managed by cross training operators and technicians, and by working to retain highly trained personnel.

Maintenance costs can be managed with service contracts with the various original equipment manufacturers, and with maintenance management programs. The capital cost of the project can be reduced by carefully considering the operating modes of the project and performing an analysis to decide which operating modes to optimize the design on. Some operating modes are so infrequent and expensive to design for that they may be served by other equipment or by the utility. From the point of view of a service subcontractor who is providing the O&M services and owns or leases the equipment, Annual Project Performa from a service contractors point of view: Fuel Cost O&M inc labor & materials Utility Demand and KWhr Capital Payback Total Expenses $5,000,000 $1,200,000 $800,000 $700,000 $7,700,000 Steam Revenue Electricity Revenue $4,700,000 $3,200,000

Total Revenues

$7,900,000

The annual return from the project to the service contractor is $200,000. This is used to pay investors and for profit. Environmental issues With Natural gas as the primary fuel, cogeneration systems meet and exceed Environmental Protection requirements in every state. SCRs and CO catalyst can reduce NOx and CO to levels required. Most states allow the use of No 2 fuel oil as well, using the same catalysts to reduce pollutants. Cogeneration systems create no hazardous wastes and can be built to discharge zero waste water into the local water treatment system. The increased efficiency of the cogeneration project is its greatest environmental benefit Overall fuel use for the same electricity and thermal energy is decreased, saving fuel for future generations.