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White Paper
The Impact of Distributed/Remote Generation on Electric Utilities
-Author-
Thomas Palma, Esq. New Hampshire Electric Cooperative
Plymouth, NH 03264
(603) 536-8650
-Technical Editor-
Thomas Rooney, C.E.M. GDS Associates, Inc.
Manchester, NH
(603) 656-0336
TABLE OF CONTENTS
Introduction ………………………………………………………………….……….. Distributed/Remote Generation Technologies – Residential …………..……
Wind Turbines (Small) ………………………………………….…….……….. Micro-Combined Heat and Power Systems ……………….....…………...... Solar Photovoltaics Residential ...........……………………..……..............
Distributed/Remote Generation Technologies – Commercial ………..……... Microturbines ………………………………………………….………………... Combined Heat and Power Systems (Cogeneration) …….………………... Wind Turbines (Large) ………………………………………………………….Solar Photovoltaics (PV) Commercial ………………………….……………. Fuel Cells ……………………………………………………….……………….
Conclusions………………………………………….………………………………… Sources…………………………………………………………………………………
1 4 4 6 9 11 11 13 15 16 17 18 19
INTRODUCTION Why Another Paper on Distributed Generation/Remote Generation (DG)? The answer to this question is simple. This is not another paper on Distributed Generation technologies. This is actually a paper on whether or not Distributed Generation will have an impact on electric utilities. Factors for each technology to be considered are economics, power quality issues, and a “feel good” analysis. Economics have to do with installation, maintenance, tax benefits, and operating cost versus receiving electricity from the power grid. Power quality issues have to do with specialized situations in which the utility cannot guarantee a steady enough voltage for the customer’s requirements. “Feel good” is the Lexus automobile analogy. It feels good to own and operate a Lexus even though the cost per mile is higher considering initial amortized cost, maintenance, and operating costs versus the economics for owning and operating a Chevy Impala. Also, falling into the “feel good” category would be a reduction in emissions compared to grid power even though this reduction is not mandated for the end-user. Almost all renewables would fit into the “feel good” category depending on the application. There will be little explanation of the various technical aspects of each technology since this has been covered in a myriad of other papers written on Distributed Generation. What is Distributed Generation in regards to this paper? Generally speaking, Distributed Generation is any form of generation supplying an end user that reduces the end user’s requirements for purchasing power from the incumbent utility. This could be for total requirements or a segment of total requirements. This could also be for individual customer demand side management. For the purposes of this paper, this would include: • Wind Turbines • Solar Photovoltaics • Fuel cells • Microturbines • Cogeneration • Micro-CHP but would exclude energy efficiency measures, backup generators used during an outage, solar water heating, and passive solar space heating. What Does the Term “Impact” Mean in Regards to this Paper? Imagine a situation in which an electric utility has 100% of the residential, commercial, and industrial potential or actual customers (“buildings”) in its territory receiving 100% of their electric energy from this electric utility. Any type of Distributed Generation that lowers: 1. the percentage of buildings that qualify under this first statement; 2. the percentage of electric requirements of one or more buildings; or 3. both 1. and 2. could constitute a loss of sales of kWh and/or kW (usually meaning a loss of revenue) and thus a competitive impact. This would exclude any program instituted by the electric utility that would help reduce or eliminate its potential capacity problems, peak period purchasing issues, or any other program instituted by the electric utility for its benefit. Obviously, any building that has the ability to net meter regardless of what state’s rules apply would be receiving less than 100% of its requirements from the electric utility. States in which
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the rate paid in both directions is equal would have the most adverse effect on the sales revenue of the electric utility. In summary, the definition of “Impact”’ for this paper is “a reduction in sales due to customers or off-grid potential customers (buildings in the utilities’ franchise territory) that are self-generating.” Incentives for Renewables By State Including U.S.. Territories According to the Database of State Incentives for Renewable Energy (DSIRE),1 there are several private, state, utility, and local incentive programs available depending on location. California is the highest with 26, Massachusetts has 12, New York has 8, and New Hampshire (my state of residence) has 1 program.
Type of Program # of Programs Personal Income Tax 19 Corporate Income Tax 22 Sales Tax 19 Property Tax 33 Rebates 70 Grants 54 Loans 46 Industrial Recruitment 12 Leasing 3 Production Incentives 28
Levelized Costs Levelized Costs are the buzz words or terms utilized in the industry when comparing grid electricity to DG electricity. For DG, this takes into account initial installed cost, interest, depreciation, operating costs, major overhaul, equipment life, and incentives. The United States Congressional Budget Office did an analysis comparing levelized costs for various DG technologies2 (See below). For renewables, the true winner is small wind over solar PV. Combined Heat and Power as an add-on to another technology appears to lower the levelized cost by approximately 30%.
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Federal Incentives and Tax Credits Most recent developments at the federal level include tax credits (2006 through 2007) for installation of DG technologies.3 These include:
Systems Federal Tax Benefit Solar PV 30% up to $2,000 for residential projects
no maximum amount for commercial installations. (projects must meet certain production levels to qualify)
WindTurbines $0.019 / kWh for the first ten years of energy production for commercial and utility grade installations
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Distributed/Remote Generation Technologies – Residential Small Wind Turbines Small wind turbines offer an interesting choice for residential home owners seeking a way to reduce their complete reliance on the local electric utility and to do their part to reduce fossil fuel emissions. Residential units in cities or in areas where there is less than ½ acre per house lot tend to be excluded from being feasible due to permitting issues. Conducting a wind study at a residential site is cost prohibitive. Wind maps could provide sufficient information for a homeowner to determine the availability of wind resources. Additionally, the land owner should become familiar with the land and the availability of wind on a day to day and seasonal basis. AWEA produced a Small Wind Roadmap in 2002 with equipment costs, number of homes connected to the grid, and other potential markets for residential wind.4
Costs and Electricity Productions for Typical 5 to 15 kW Residential Wind Turbines
2002 2020
Cost /kW $3,500 $1,200 - $1,800 Annual Electricity Production (kWh) 1,200 1,800
As the technology develops over an 18 year period, AWEA predicts that the price per machine will decrease by at least 50% and the production of kWh per machine will increase by 50%. This equates to systems that are 4 times more cost effective than today’s systems. In other words, their paybacks will be ¼ of today’s systems.
Millions of Homes Connected to the Utility Grid
2000 2010 * 2020
Homes with ½ to 1 acre of land Units not available 12.0 13.9
Homes with more than 1 acre of land 21.6 25.2 29.3 Gross potential number of homes for wind turbines 21.6 37.2 43.2
Net potential number of homes for wind turbines 7.6 13.0 15.1
* The number of homes has been growing at 1.54% per year (American Housing Survey, Census Bureau, Washington, D.C. 1998)
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As the below table indicates, the potential for residential wind is fairly large. If the average unit is 3kW, the net potential would be 45,000 MW by 2020 assuming full load. Adding 26,000 MW (see the table below) increases the total to 71,000 MW.
Other Potential Markets for Small Wind Turbines in 2020
Units Avg. Size in kW Total MW
Commercial 675,000 25 16,875 Public facilities 160,000 50 8,000 Off-grid homes 150,000 3 450
Off-grid Communities 200 250 50 Water pumping 350,000 1 350
Telecommunications 2,000 2 4 Total 1,337,200 25,729
Does this mean that every utility should scramble to get into the small wind business or should be concerned of losing sales? Not necessarily, the growth in electric demand will surpass this reduction in small wind (if it ever comes to fruition). More importantly for electric utilities is to consider uneven production due to good and bad wind days, safe interconnection to their grids, and net metering rules for their state. An example of a viable small wind company is Bergey Windpower. Bergey is a well known small wind turbine producer with 1 kW and 10 kW units. Based on a DG report and model prepared by GDS Associates for NHEC 5, the economics are calculated in the table below for a 1kW unit:
After Wind Turbine Installation
Annual Generation kWh *
Annual Savings
Maintenance @$0.03/kWh
Total Savings
2,628 $420 ($92) $328 * 30% Load Factor The average rate for 20 years would be $0.16 / kWh ($0.12/kWh in year 1 with a 3% escalation per year for 20 years).
Economics Savings = $328 Installed Cost = $3,500 Simple Payback = 10.7 years
This is without rebate incentives. The big question is whether a homeowner will want to wait 10 years for a return on the investment.
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New Developments Renewable Devices Swift Turbines Ltd. manufactures a small rooftop wind turbine. The units could be effective due to the ease of installation and no need for a typical wind tower.
Swift Rooftop Wind Turbines are manufactured in the United Kingdom. These units cost 1,500 British Pounds ($2,600 USD) and can produce an average of 4,000 kWh per year (at 30% utilization). The units are 1.5 kW and 2 meters in diameter.6
Micro-Combined Heat and Power Systems (Micro-CHP) Micro-Combined Heat and Power Systems are small electric generating systems that produce heat and power. These units will soon be commercially available in the U.S. for the home owner or small business owner. Aisin, Seiki Co., Ltd. began a Pre-Commercial Demonstration Program in 2005. Their claim is that they have “The micro-CHP System that ‘works’” - AISIN G-60 Micro-CHP. The unit can run as a water heater and produces 40,000 Btu/hr at a maximum water temperature of 140º-145º F and 6.0 kW of electric load. It has a full load electric efficiency of 28.8% and an overall heat and power efficiency of 85%. The ideal application for the G-60 is to supply a relatively steady hot water heat load. While the unit may be suitable for residential use to supply space and water heating, the loads would not be sufficient to result in long operating hours that would maximize the operating benefits of the unit. Possible applications might be in hospitals, nursing homes, hotels, or swimming pools where loads are more constant. The G-60 can be run on natural gas or propane and can be run continuously or used to shave peak demand.
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In Japan, a micro-cogen investment might pay back in two years, but domestically will take many times that amount. Moreover, during this tryout period for the G-60, a purchaser will pay a much higher “early adopter” price, of about $15,000. Aisin reportedly plans to drop this to just $6,000 or $7,000 if indications show that reasonable sales volumes will result. Making that assumption, a well-optimized G-60 in the US might indeed be paid off within a reasonable three- or four-year period.7
American Honda Motor Company in conjunction with Climate Energy, LLC of Massachusetts is also producing a Micro-CHP system. This system works differently than Aisin’s. The main objective is to produce heat and use the waste heat for electric generation. The Micro-CHP unit has an overall efficiency of 85% and the hot air furnace has an efficiency of 95%. These units are in test mode in the United States (U.S.). Introduction to the general market in specific regions is expected in 2006.
The Climate Energy Micro-CHP system is an integrated package of three parts, a power production module, a space heating system and a supervisory control system (see illustration on next page). The power production unit produces 1,000 Watts of electric power and a little over 10,000 Btu/hr of heat. The Micro-CHP Warm Air space heating space heating system integrates a custom state of the art high efficiency furnace produced by ECR International, Inc. with the Micro-CHP unit. The furnace is sized to meet the total heating load and provides the heat distribution to the home. The heat produced by the Micro-CHP engine is transferred to a coolant loop that supplies heat to the main heating appliance through a small heat exchanger.
During the winter when the heating demand is at a peak, the engine's heat output is augmented by operating the furnace or boiler. In this sense, the heating system has two stages, where stage one is the engine and stage two is the furnace or boiler. The goal is to operate the engine, with its modest heat output, close to 100% of the time throughout the heating season in order to maximize electricity production. When heat demand increases beyond what can be supplied by the engine, the larger capacity furnace or boiler kicks in to provide the balance. In essence, whenever there is a demand for heat, the engine runs as much as possible, and the furnace or boiler operates as little as possible and only when absolutely necessary.8
A similar version of Honda's cogeneration unit has been available for general use in Japan since March of 2003, and is now in more than 15,000 homes, lending the technology a track record of reliability.9 Climate Energy’s claim is:
“For the average user of Climate Energy's Micro-CHP System, up to 4,500 kilo-Watt hours (kWhr) of electricity can be generated annually, providing approximately a $600 reduction in annual electric costs. The system is also expected to yield a 30% reduction in harmful carbon dioxide emissions as compared with conventional heating appliances and grid supplied electricity.” 10
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1. Honda Micro-CHP Unit 2. Furnace 3. Cogen heat module 4. Controller
Climate Energy Warm Air Micro-CHP System Ratings 11
Natural Gas Fired Cogeneration Unit and Furnace
Stage Input Heating Capacity
Overall Efficiency
Net Power
Intake Flue
(MBH) (MBH) (%) (kW) Dia. Dia.
Cogenerating 17 11 85% 1 1 ½"
Auxiliary 50 to 150 47 to 143 95% 2" 3"
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Marathon Engine Systems located in East Troy, WI also produces a micro-CHP unit. Their claim is that the unit can produce 24,000 kWh of heat and hot water and 9,000 kWh of electricity at 90% efficiency amounting to energy input of 36,670 kWh. Units cost $15,500 installed.12
Gallons of
Propane Input kWh
Conversion
Output kWh
Annual Operating
Cost * Heat and
Hot Water 990 26,670 24,000 $2,300
Electricity 375 10,000 9,000 $850 Total 1,365 36,670 33,000 $3,150
* @ $2.25/gal Solar Photovoltaics (PV) – Residential Solar PV systems are springing up on rooftops in the U.S. under the Lexus analogy described in the introduction. Without state and federal incentives, typical systems cost $8.00 to $12.00 per Watt installed. Projects still face long paybacks with incentives. According to the Congressional Budget Office, Solar PV prices should continue to decline over the next 15 years.
Levelized Cost of Solar PV from 1980 to 2020 13
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Consider a 2.0 kW dc rated system and the analyzed for installation in NY and NH. The new Federal Energy Plan allows a residential tax credit of up to $2,000 for PV systems. Simple Payback Analysis for a Solar PV System
* for existing home or non-Energy Smart Home at $4.00 per Watt
Installed Cost
State Buydown
Federal Tax
Credit
kWh Produced 14
Local Rate *
Annual Savings
Annual Maint.
Total NetSavings
Payback Years
NY $16,000 $8,000 * $2,000 2,583 0.16 $413 ($50) $363 16.5 NH $16,000 $0.00 $2,000 2,594 0.16 $415 ($50) $365 38.4
** using 20 year average rate Again, paybacks are extremely long for homeowners even in NY. This probably qualifies as a Lexus for those with disposable income. New Developments
Solar Market of Maine designed and manufactures a new simple plug-in ready to go PV solar panel system, Blue Link.15 It plugs into any 120 Volt outlet. The unit can also be simply hardwired by an electrician. It comes with a grid tied inverter as well.
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Distributed/Remote Generation Technologies – Commercial Microturbines A microturbine is a turbine that has higher efficiency and low environmental impacts than standard electric generating turbines. Unit sizes start at 30kW. This technology has received significant attention and funding from the U.S. Department of Energy: “The Advanced Microturbine Program is a 6-year program for fiscal years 2000-2006 with a government investment of more than $60 million…Planned activities focus on the following performance targets for the next generation of "ultra-clean, high-efficiency" microturbine product designs:
• High efficiency — Fuel-to-electricity conversion efficiency of at least 40% • Environment — NOx <7 ppm (natural gas) • Durability — 11,000 hours of reliable operations between major overhauls and a service
life of at least 45,000 hours • Cost of power — System costs <$500/kW, costs of electricity that are competitive with
alternatives (including grid) for market applications • Fuel flexibility — Options for using multiple fuels including diesel, ethanol, landfill gas,
and biofuels.
The five manufacturers involved in the program are Capstone, GE, Ingersoll-Rand, Solar Turbines, UTC.” 16
Propane Fired System The following analysis is based on utilizing a propane fired system at an installation cost of $500/kW. Using propane at $1.65 per gallon at 40% efficiency and 91,600 Btu/gallon for a 100kW system, the financial model would look like:
kWh = 100 kW x 44,000 hrs. = 4,400,000 kWh Installation Cost = 100 kW x $500/kW = $50,000Fuel Cost = 4,400,000 kWh / (91,600 Btu/gal. x 40% / 3412 Btu/kWh) x $1.65/gal.
= $676,000Major Overhauls = $250/kW x 100 kW x 3 = $75,000 [11,000; 22,000; 33,000 hrs] Total Cost = $50,000 + $676,000 + $75,000 = $801,000Aggregate Rate = $801,000 / 4,400,000 kWh = $0.18/kWh
At today’s prices for microturbines notice the difference in aggregate rate.
Installation Cost = 100 kW x $1850/kW = $185,000Major Overhauls = $925/kW x 100 kW x 3 = $277,500 [11,000; 22,000; 33,000 hrs] Total Cost = $185,000 + $676,000 + $277,500 = $1,138,500Aggregate Rate = $1,138,500 / 4,400,000 kWh = $0.26/kWh
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Compare with a Natural Gas System at $1.25 per therm
kWh = 100 kW x 44,000 hrs. = 4,400,000 kWh Installation Cost = 100 kW x $500/kW = $50,000Fuel Cost = 4,400,000 kWh / (100,000 Btu/therm x 40% / 3412 Btu/kWh) x $1.25/therm = $469,000Major Overhauls = $250/kW x 100 kW x 3 = $75,000 [11,000; 22,000; 33,000 hrs] Total Cost = $50,000 + $469,000 + $75,000 = $594,000Aggregate Rate = $594,000 / 4,400,000 kWh = $0.135/kWh
Compare with an On-grid Customer for 44,000 Hours in a Typical Utility in the Northeast:
Months = 44,000 Hours / 730 Hours/Month = 60 MonthsRate = $240 per month. $6.00 per kW, and $0.098/kWh Monthly Charges = $14,400Energy Charges = 4,400,000 kWh x $0.098/kWh = $431,200Demand Charges = 100 kW x $6.00 / kW x 60 months = $36,000 [@ full load] Total Cost = $481,600Aggregate Rate = $0.11/kWh
It appears that even at $500/kW, microturbines are not cost effective unless combined heat and power is used. Microturbines can also be used to improve power quality and can be used in cogeneration and trigeneration systems (add absorption chilling to cogeneration). Harbec Plastics in Ontario, NY installed such an arrangement. Harbec needed continuous reliable power that could instantaneously load follow 30 percent swings several times per minute. Harbec installed twenty-five 30-kW Capstone microturbines. Hot water produced is used for heating in winter and absorption chilling in summer. Economics of the project were as follows:17
Natural Gas Contract – $6.85/MCF (M = 1,000) Value of Hot Water – $0.03/kWh Electric Power Cost – $0.07/kWh (factoring in value of hot water) Capital Cost per kW – $1,100 Utilization Rate – 5,000 hours per year Payback – less than 2.5 years
Harbec’s huge advantages were the buying power of natural gas at $0.685 per therm and the realization of hot water usage. Presently, microturbines may make many applications not cost effective used alone, but in combined heat and power applications, microturbines could be very cost effective reducing emissions as well.
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Combined Heat and Power (CHP) (aka Cogeneration) Cogeneration is the simultaneous process of creating heat while using the waste heat to generate electricity or generating electricity and using the waste heat for space heating or water heating.
The Massachusetts Institute of Technology (MIT) undertook the design and construction of a cogeneration plant for its campus in Cambridge, MA. Other universities as well have undertaken cogeneration as a way to reduce energy costs. See this website link http://www.energy.rochester.edu/us/list.htm for a list compiled by the University of Rochester. There are approximately 150 colleges and universities in the U.S.. and Canada utilizing cogeneration. This totals approximately 1,400 MW of load lost by electric utilities or capacity that does not need to be built.
“The MIT Cogeneration Project represents a ten year, forty million dollar initiative by the Massachusetts Institute of Technology to generate its own electrical and thermal power. The new plant is projected to save the Institute millions of dollars over the life of the plant through the technology of cogeneration. Through cogeneration, we generate our electrical and thermal power simultaneously by utilizing the waste heat from a gas turbine to generate steam. This technology is approximately 18% more efficient than the technology that it replaces.”18
The numbers speak for themselves. Below, see the actual reduction in load to NSTAR, their electric utility. Snapshot taken at 8:43 AM, July 12, 2005.19
Instantaneous Power Present (MW)
Today (MWH)
Present Cost * ($/s)
Current MIT Demand 25.527 204.517 1.17 Produced by MIT 20 MW Turbine 21.100 183.090 1.1
Produced by NSTAR 4.446 24.849 0.07 *MIT price based on fuel flow (natural gas and distillate oil), and price of natural gas ($4.60/MCF) and distillate ($1.59/gal) Energy Information Administration, 2002. NSTAR price is based on NSTAR load and NSTAR default service price for large commercial service ($58.77 MWH) NSTAR Default Service, 2003.
Additional incentives to universities include the reduction of environmental impact.
“The new technology used in our plant [MIT] will reduce emissions by 45% compared to our old technology. This reduction is the equivalent of eliminating 13,000 automobile round trips into Cambridge per day.” 20
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ACEEE reports that the market for CHP will stagnate because of barriers such as environmental permitting, utility backup rates, depreciation schedules underestimating the equipment life, and technology developments not being recognized by the market. If barriers are removed, their prediction is as follows:
Impact of Additional CHP Capacity
New
Additional CHP (GWe)
Displaced Util. Gen.
(TWhe)
Cumulative Additional Capital
($Mill)
Net Energy Savings (TBtu)
Net Savings ($mill.)
Carbon (MMTce)
Industrial (ACEEE) 2010 34 217 22,100 1,214 5,918 34 2020 62 396 40,300 1,995 8,825 57 DES (Spurr 1999) 2010 19 148 13,860 700 2,290 21 2020 50 390 19,540 1,600 5,210 51 Small CHP (Kaarsberg et al. 1998) 2010 20 NA NA 480 NA 17 2020 40 NA NA 960 NA 35 Total 2010 73 365 35,960 2,394 8,208 73 2020 152 786 59,840 4,555 14,035 143 If barriers are removed and new capacity is built, electric utilities face a fairly sizeable potential impact in the next 15 years in the amount of sales lost to cogeneration; 786,000,000 MWh and 152,000 MW.21
There are companies/developers that would finance or own cogeneration plants and sell the power directly to the end user with little or no cost to the end-user. One example is Cogeneration Technologies and Trigeneration Technologies, wholly-owned subsidiaries of EcoGeneration Solutions, LLC. Their claim is:
“We are specialists in project funding and financing of clean power and energy projects as well as consultants in Emission Reduction Credits, Certified Emission Reductions, Carbon Dioxide Credits and Renewable Energy Credits. For qualified commercial and industrial clients, we offer energy performance contracting services which means we will design/engineer, build, finance, own, operate and maintain our power and energy solutions with little to no investment requirements from the client.“22
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Wind Turbines – Commercial Commercial, industrial, and institutional wind turbines are typically 250 kW or larger on-site machines that only need to pass the economics test to compete with the utility total cost of delivered power not the energy price. In NH, this would be $0.12/kWh not $0.04/kWh. With current federal production tax credits (PTC) of $0.019/kWh, depreciation allowances, and varying state incentives, on-site commercial wind can be an attractive project to electric utilities’ larger customers. Also, the sale of Renewable Energy Credits to electric utilities in states with Renewable Portfolio Standards (RPS) could yield another $0.02/kWh to $0.045/kWh.23 This would raise the competitive cost to between $0.148/kWh and $0.193/kWh as long as the federal PTC and RPS were in place. This excludes any reduction in demand charges due to load reduction. This also excludes any standby charges from the utility and any other state incentives.
Based on a model created by GDS Associates for NHEC, a 250kW Fuhrlander FL250 wind turbine at a large industrial site would yield the following:
Base Case Annual kWh Peak Demand kW Annual Electric Cost Weighted Rate $/kWh
2,823,790 740 $314,175 $0.111
After Wind Turbine Installation Annual
Generation kWh
Annual Savings
PTC @$0.019/
kWh RECs
@$0.035/kWh Maintenance @$0.02/kWh
Total Savings
766,500 * $85,000 $14,600 $26,800 ($15,300) $111,100 * 35% load factor
Savings = $111,100 Installed Cost = $375,000 Simple Payback = 3.4 years
This analysis would beg the question: “why aren’t the electric utilities concerned?” Mainly, there are numerous issues such as amount of wind, permitting, standby charges, interest on money borrowed, and unit performance prediction versus reality that deter would be industrial wind enthusiasts. Utilities should take note of company presidents like Bob Bechtold of Harbec Plastics, Ontario, New York.
In 2002, Bechtold installed a 250 kilo-Watt Fuhrlaender at a cost of $400,000. This unit produces 20% of the plant's energy. He estimates that his energy projects will pay for themselves in eight years or less.24
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Solar Photovoltaics – Commercial Solar PV is making ground on commercial installations and not just for tree huggers/Lexus buyers. The City of New York recently installed a solar PV system at one of its subway stations. The 76,000-square foot state-of-the-art solar roof, manufactured by RWE SCHOTT Solar, is expected to contribute approximately 250,000 kilo-Watt hours a year to the station's non-traction power needs. This has become New York’s first solar-powered train terminal.25
Whether or not this project sets an example for the rest of U.S.. public transportation remains to be seen, however, it does point out that large scale solar PV projects are being built in non-typical sunny areas in the country. New York City has an insolation (kWh/m²/day) of 3.53 while Phoenix, AZ has an insolation of 5.38.26
Private companies such as Federal Express are also installing DG/Renewables systems.
FedEx began operating California's largest corporate solar power installation on August 9th. The 904 kilo-Watt system provides 80 percent of the energy required by the FedEx hub at Oakland International Airport. During periods when the energy generated by the system is greater than the facility's needs, the surplus energy will be transferred into the grid for general use. Berkeley-based PowerLight Corporation designed and built the system. To power the facility, FedEx flew more than 300,000 Sharp solar cells from Japan to a Sharp facility in Memphis, where they were installed into 5,769 photovoltaic modules that convert sunlight directly into electricity. The system encompasses the entire 81,000 square foot area of roof across the facility's two buildings. See the FedEx press release.27
Companies such as FedEx can amortize projects over a long period of time (the life of the system), can receive tax benefits such as tax credits and depreciation, can sell the RECs, and will receive ”good will” associated with going solar. The bottom line for this project may not prove prudent in today’s market. However, the operating cost will only slightly rise and the amortized cost will remain the same while electric utility rates will continue to rise since they are closely tied to fossil fuel prices. Some experts believe fossil fuels are in a state where demand has already exceeded production and supply (aka Peak Oil), thus, a worldwide continual rise over the next 25 to 50 years.
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Fuel Cells Fuel cells and the hydrogen economy go hand in hand because a fuel cell is most efficient when hydrogen is available as the fuel as opposed to using natural gas or propane and extracting the hydrogen. In the former case, hydrogen has to be extracted from water through electrolosis. The federal government, especially the DOE and President Bush, see the “hydrogen economy” as a potential direction for our energy and economic future needs.
“In his 2003 State of the Union Address, President Bush announced a $1.2 billion Hydrogen Fuel Initiative to reverse America's growing dependence on foreign oil by developing the technology needed for commercially viable hydrogen-powered fuel cells—a way to power cars, trucks, homes, and businesses that produces no pollution and no greenhouse gases.” 28
In May of 2005, the Department of Energy announced the investment of $64 Million in 70 hydrogen research projects. The projects will investigate five research areas: materials for hydrogen storage; membranes for fuel cells and for separating hydrogen from other gases and purifying it; nanoscale catalysts for hydrogen production, storage, and use; production of hydrogen from solar energy; and hydrogen production processes that mimic or make use of biological processes that generate hydrogen. The goal is to make hydrogen fuel cell vehicles and refueling stations available, practical, and affordable for the U.S. consumer by 2020.29
If the federal government is behind a specific technology, it is likely to have a higher chance of success than not having federal backing. How the “hydrogen economy” plays out remains to be seen. Today, fuel cells are still too costly to be competitive. According to the DGS Study, fuel cells range in price from $3,000 to $4,000 per kW and the cost to produce electricity runs between $0.10/kWh and $0.15/kWh. The following table illustrates economics annualized for a fuel cell installation at a 630 kW maximum demand large education campus in which a 200 kW fuel cell produces 1,752,000 kWh annually. From the cash flow standpoint, energy at $0.141 kWh is not very competitive but may be getting closer as national electric energy rates rise.
Capital Cost
Life/Term of Loan Loan @ 6% O&M Savings Cash
Flow Energy Cost
$/kWh $1,100,000 10 years $146,000 $149,000 $47,000 ($248,000) 0.141
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Conclusions For residential applications, it is difficult to see how any of the options discussed within this paper make economic sense over the life of the equipment. Each application must be analyzed on a case by case basis. It is pretty clear that the high cost per Watt of generation equipment and the full load hours preclude the average home owner from achieving reasonable paybacks. However, what is the payback on a new Lexus? For commercial applications, the economies of scale provide much better purchasing power per Watt versus residential applications. Additionally, businesses can take advantage of depreciation and other “losses”. Businesses must be in this for the long haul and consider installation of distributed generation in their capital planning for the life of the equipment (often 20 years or more). The table below includes a summary of the technologies reviewed and the level of impact that each one is estimated to have on a typical electric utility. Additionally, it points out the driving force behind installing the technology, the major barriers, and the utility opportunity. Based on the information gathered for this paper, it does not appear that DG will have a substantial impact on electric utilities in the next 1-10 years.
Technology 1-5 years
1-10 years Driving Force Major
Barriers Utility
Opportunity Residential Micro-Combined Heat and Power Systems
Level 1 Level 1 use as a backup generator or off-grid
solution
Price, fuel cost uncertainty,
reliability history
Own/lease equipment for off-grid applications to
retain customer Wind Turbines (Small) Level 1 Level 1 Interest in
technology, Lexus analogy
Required wind resource,
permits, price
Good PR by providing
assistance Solar Photovoltaics Level 1 Level 1 Interest in
technology, Lexus analogy
Price, solar insolation
Good PR by providing some
assistance Commercial Combined Heat and Power Systems (Cogeneration)
Level 1 Level 1 Energy cost savings (hot water
requirements)
Fuel cost uncertainty,
price
Own system and retain customer
Microturbines Level 1 Level 1 Energy cost savings (hot water
requirements), power quality
Fuel cost uncertainty,
price
Own system and retain customer
Wind Turbines (Large) Level 1 Level 1 Energy cost savings, environmental good
will (Lexus)
Required wind resource wind, permits, price
Own system and retain customer
Solar Photovoltaics Level 1 Level 1 Energy cost savings, environmental good
will (Lexus)
Price, solar insolation
Own system and retain customer
Fuel Cells Level 1 Level 1 Power quality Price, history of reliability
Own system and retain customer
Level 1 = 0 to 50 units for every 100,000 customers (includes all categories) Level 2 = 51 to 100 units per 100,000 customers (includes all categories) Level 3 = More than 100 units per 100,000 customers (includes all categories)
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Sources 1 http://www.dsireusa.org/summarytables/financial.cfm?&CurrentPageID=72 Prospects for Distributed Electricity Generation, Congressional Budget Office, September 2003, page. 12. 3 http://www.seia.org/getpdf.php?iid=21 , http://www.awea.org/news/energy_bill_extends_wind_power_072905.html 4 AWEA Small wind roadmap.pdf – 2002. 5 DG Report From GDS for NHEC. RENEWABLE ENERGY / DISTRIBUTED GENERATION TECHNOLOGIES IDENTIFICATION AND TARGET MARKET RESEARCH STUDY for the New Hampshire Electric Cooperative, March 17, 2004 6 www.renewabledevices.com. http://www.scotland.gov.uk/News/Releases/2004/05/55287 http://www.distributedenergy.com/de_0505_market.html8 http://www.climate-energy.com/news.asp9 http://hondanews.com/CatID5065?mid=2005042628647&mime=asc 10 http://www.climate-energy.com/news.asp eighth para.) 11 http://www.climate-energy.com/products.asp12 http://www.marathonengine.com/cogeneration.html13 Congressional Budget Office based on data from Department of Energy, Office of Energy Efficiency and Renewable Energy, and Electric Power Research Institute, Renewable Energy Technology Characterizations, EPRI-TR-109496 (December 1997). 14 http://www.clean-power.com/Kyocerasolar/default.asp15 http://www.solarmarket.com/products.html 16 http://www.eere.energy.gov/de/microturbines/#microturbine17 http://www.microturbine.com/onsites/pdf/Harbec%20Onsite%208.5x11.pdf18 http://cogen.mit.edu19 http://cogen.mit.edu/powermit/20 http://cogen.mit.edu21 http://www.aceee.org/pubs/ie983.htm22 http://www.trigeneration.net/23 David Kopans, Michael Tennis, and Fred Unger, Northeast Sun Summer 2004, Volume 22, Number 3. 24 http://www.fortune.com/fortune/smallbusiness/technology/articles/0,15114,1021317,00. html 25 http://www.solarbuzz.com/News/NewsNAPR515.htm26 http://www.apricus-solar.com/html/insolation_levels_usa.htm27 www.eere.energy.gov/news/ August 17, 2005 28 http://www.hydrogen.energy.gov/presidents_initiative.html 29 http://www.eere.energy.gov/news/news_detail.cfm/news_id=9074
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