Emission Solutions November 2010 Newsletter

AN INTERNET PUBLICATION OF KLAUS EQUIPMENT COMPANY - PITTSBURGH PENNSYLVANIA

NOVEMBER 2010 NEWSLETTER

IN THIS ISSUE

Combined Heat and Power (CHP) PROJECT DEVELOPMENT PART 1

JAY SAYS

Combined Heat and Power (CHP) PROJECT DEVELOPMENT Part 1

Combined heat and power (CHP), also known as cogeneration, is an efficient, clean, and reliable approach to generating power and thermal energy from a single fuel source. By installing a CHP system designed to meet the thermal and electrical base loads of a facility, CHP can greatly increase the facility's operational efficiency and decrease energy costs. At the same time, CHP reduces the emission of greenhouse gases, which contribute to global climate change. The CHP Partnership is a voluntary program seeking to reduce the environmental impact of power generation by promoting the use of CHP. The Partnership works closely with energy users, the CHP industry, state and local governments, and other clean energy stakeholders to facilitate the development of new projects and to promote their environmental and economic benefits

Combined heat and power (CHP), also known as cogeneration, is the simultaneous production of electricity and heat from a single fuel source, such as: natural gas, biomass, biogas, coal, waste heat, or oil.

CHP is not a single technology, but an integrated energy system that can be modified depending upon the needs of the energy end user.

CHP provides:

Onsite generation of electrical and/or mechanical power.

Waste-heat recovery for heating, cooling, dehumidification, or process applications.

Seamless system integration for a variety of technologies, thermal applications, and fuel types into existing building infrastructure.

The two most common CHP system configurations are:

Gas turbine or engine with heat recovery unit

Steam boiler with steam turbine

Gas Turbine or Engine With Heat Recovery Unit

Gas turbine or reciprocating engine CHP systems generate electricity by burning fuel (natural gas or biogas) to generate electricity and then use a heat recovery unit to capture heat from the combustion system's exhaust stream. This heat is converted into useful thermal energy, usually in the form of steam or hot water. Gas turbines/engines are ideally suited for large industrial or commercial CHP applications requiring ample amounts of electricity and heat.

Steam Boiler With Steam Turbine

Steam turbines normally generate electricity as a byproduct of heat (steam) generation, unlike gas turbine and reciprocating engine CHP systems, where heat is a byproduct of power generation. Steam turbine-based CHP systems are typically used in industrial processes, where solid fuels (biomass or coal) or waste products are readily available to fuel the boiler unit.

Biomass CHP

CHP can be powered by biomass (plant material, vegetation, or agricultural waste) or biogas (methane produced by the aerobic or anaerobic digestion of biomass). In the current environment of high fossil fuel costs, using an opportunity fuel such as agricultural residuals or tree thinnings might provide the best economics for a project, as well as allow the project to qualify for additional incentives due to the renewable and clean attributes of the fuel.

CHP Applications

CHP technology exists in a wide variety of energy-intensive facility types and sizes nationwide, including:

Industrial manufacturers - chemical, refining, ethanol, pulp and paper, food processing, glass manufacturing

Institutions - colleges and universities, hospitals, prisons, military bases

Commercial buildings - hotels and casinos, airports, high-tech campuses, large office buildings, nursing homes

Municipal - district energy systems, wastewater treatment facilities, K-12 schools

Residential - multi-family housing, planned communities A number of site-specific factors will determine if CHP may be a good technical and economic fit for your facility. Answer a few simple questions to determine if your facility is a good candidate for CHP.

Benefits of CHP

CHP plays an important role in meeting the United States' energy needs as well as in reducing the environmental impact of power generation, including:

Efficiency Benefits
CHP requires less fuel to produce a given energy output, and avoids transmission and distribution losses that occur when electricity travels over power lines.

Reliability Benefits
CHP can be designed to provide high-quality electricity and thermal energy to a site regardless of what might occur on the power grid, decreasing the impact of outages and improving power quality for sensitive equipment.

Environmental Benefits
Because less fuel is burned to produce each unit of energy output, CHP reduces air pollution and greenhouse gas emissions.

Economic Benefits
CHP can save facilities considerable money on their energy bills due to its high efficiency and can provide a hedge against unstable energy costs.

Streamlining Project Development

Stage 1: Qualification

Stage 2: Level 1 Feasibility

Stage 3: Level 2 Feasibility

Stage 4: Procurement

Stage 5: Operations & Maintenance

The mission of the Combined Heat and Power (CHP) Partnership is to increase the use of cost-effective, environmentally beneficial CHP projects nationwide. To accomplish this mission, the Partnership has developed resources to assist energy users to design, install, and operate CHP systems at their facilities.

In order for the process to advance smoothly, a CHP Champion is necessary—someone who has the interest and the will to guide the project from conception to completion. The following pages will help you become an educated CHP Champion who can save your organization time and money, reduce business risk and environmental impacts, and improve the power reliability of your facility.

These pages provide information, tools, and hints on project development, CHP technologies, and the resources of the CHP Partnership. Resources are available throughout the process and are divided into five stages:

Goal: Determine whether CHP is worth considering at a candidate facility.

What You Need to Know

The purpose of Qualification is to eliminate sites where CHP does not make technical or economic sense. As a CHP Champion, you first need to analyze the suitability of CHP for your organization and potential site. There are many types of CHP technologies and applications available for a range of facilities and different sectors. In order to identify the costs and benefits associated with CHP at a specific site, experienced professional engineering analysis is required. Answering some preliminary questions regarding your candidate site before beginning an engineering analysis can save your organization time and money.

Diverse technical and economic factors contribute to the economic viability of a CHP project.

Technical potential for CHP is based on the coincident demand of power and thermal energy at a facility. Power can include both electricity and shaft power, which can be used for mechanical purposes. Thermal demand can include steam, hot water, chilled water, process heat, refrigeration, and dehumidification. A CHP system can be designed to convert waste heat into various forms of thermal energy to meet different facility needs, including heating hot water in the winter and chilling water in the summer.

Economic suitability for CHP at a specific site is based on: current and future fuel costs and utility rates; planned new construction or heating, ventilation, and air conditioning (HVAC) equipment replacement; and the need for power reliability at the site. CHP project economics are greatly affected by utility policies at the local, state, and federal level.

CHP can improve efficiency, save money, reduce environmental impacts, and improve power reliability for your business or organization, but only when the CHP system is an appropriate match, both technically and economically, to the specified facility or site.

Finally, the culture of the host organization needs to be thoroughly explored. What are its goals? How are decisions made? What are the expectations for return on investment? How are projects funded? Is the organization open to new procurement approaches? Having an understanding of these basic questions about the organization's culture will streamline the time needed to navigate the project development process.

Stage 1: Qualification ___________________________________________________________________________ Goal: Determine whether CHP is worth considering at a candidate site.

Timeframe: 30 minutes

Candidate site level of effort required: Minimal site information, average utility costs

Questions to answer: Which of my facilities are the best candidates for CHP? Is there technical and economic potential for CHP at a particular site? Is there interest and ability to procure if the investment is compelling? What am I trying to accomplish?

STEP 1

· Do you pay more than $.07/ kilowatt-hours on average for electricity (including generation, transmission, and distribution)?

· Are you concerned about the impact of current or future energy costs on your business?

· Is your facility located in a deregulated electricity market?

· Are you concerned about power reliability? Is there a substantial financial impact to your business if the power goes out for 1 hour? For 5 minutes?

· Does your facility operate for more than 5,000 hours/year?

· Do you have thermal loads throughout the year (including steam, hot water, chilled water, hot air, etc.)?

· Does your facility operate for more than 5,000 hours/year?

· Do you have thermal loads throughout the year (including steam, hot water, chilled water, hot air, etc.)?

· Does your facility have an existing central plant?

· Do you expect to replace, upgrade, or retrofit central plant equipment within the next 3-5 years?

· Do you anticipate a facility expansion or new construction project within the next 3-5 years?

· Have you already implemented energy efficiency measures and still have high energy costs?

· Are you interested in reducing your facility's impact on the environment?

STEP 2
If you have answered "yes" to 3 or more of these of these questions, your facility may be a good candidate for CHP.

The next step in assessing the potential of an investment in CHP is to have a Level 1 Feasibility Analysis performed to estimate the preliminary return on investment. EPA's CHP Partnership offers a comprehensive Level 1 analysis service for qualifying projects and can provide contact information to others who perform these types of analyses. Contact jklaus@klausequipment.com for additional information

Stage 2: Level 1 Feasibility Analysis

______________________________________________________________________

Goal: Identify project goals and potential barriers. Quantify technical and economic opportunities while minimizing time and effort.

Timeframe: 4-6 weeks

Typical Costs: $0 - $10,000

Candidate site level of effort required: 4-8 hours, including at least two meetings with engineering provider. Provide utility data for previous 1 - 2 years; provide anecdotal knowledge of building operation, including hours of operation, HVAC, and other thermal loads; provide information about future expansion or equipment replacement plans; communicate site goals, expectations, and concerns.

Questions to answer: Are there any regulatory or other external barriers that would prevent this project from going forward? Have your goals and concerns been identified and addressed? How compelling are the estimated economic and operational benefits? Do these benefits justify the expenditure of funds for an investment grade analysis?

The goal for Level 1 Feasibility Analysis is to determine if CHP is a proper technical fit for your facility and if CHP might offer economic benefits. In addition to energy savings, additional benefits of CHP might meet your organization's goals and provide added value to an investment in CHP. To determine the scope of the opportunity for CHP at your facility, an experienced engineer or CHP project developer should perform a Level 1 Feasibility Analysis. The purpose of a Level 1 Feasibility Analysis is to provide enough information on project economics to allow energy end users to make an informed decision about whether or not to continue exploring an investment in CHP for that particular location, while minimizing time and money spent to obtain that information.

Identifying Barriers

The first task at this stage is to identify if there are any uncontrollable factors that could prevent the implementation of CHP at the site. Common obstacles can include existing corporate power purchase contracts that prevent installation of onsite power generation or local utility and regulatory policies that prevent or hamper distributed generation. If one of these obstacles is present, further activity on the project should be suspended pending changes to the problem. If these factors only hamper implementation, a budgetary cost of overcoming them should be included in the Level 1 Feasibility Analysis.

Conceptual Engineering

The next task of a Level 1 Feasibility Analysis is to identify a preliminary system size, based on estimated loads and schedules for thermal and electrical demand at the site. Ideally, other types of energy conservation measures will have been considered or implemented prior to consideration of onsite generation. It is important that planned changes to site operations be discussed with the CHP engineering team. To minimize costs at this early stage of project development, it is best to have utility bills and anecdotal site information readily available to estimate the electrical and thermal loads at the site. The estimated load profiles and power-to-heat ratios will be used to investigate the applicability of various types of prime mover technologies for the site.

The most cost-effective CHP systems are designed to provide a portion of a site's electrical demand while providing the majority of the site's thermal needs. This type of design, known as thermal base loading, provides the greatest efficiency and cost savings by ensuring that all of the energy produced by a CHP system is used on site. Although site needs and final system optimization might call for another approach to CHP design, a base-loaded system is often the best starting point.

Preliminary Economic Analysis

An important component of a Level 1 Feasibility Analysis is the budgetary pricing and economic analysis, which will be developed for different system configurations. Many times, estimated equipment pricing is quite accurate at this initial stage, but other project development costs are often very preliminary, such as the cost of CHP system tie-in and site construction expenditures. In addition, it is important that reasonable placeholders for all other turnkey costs associated with CHP system implementation, operation, and maintenance are included in this preliminary budget.

The first level of economic analysis is usually a simple payback calculation that takes into account: (1) the amount of heat and power produced by the CHP system, and the estimated amount of each to be used on the site, (2) the avoided costs of utility-purchased heat and power, (3) the amount and cost of fuel associated with running the CHP system, and (4) the budgetary cost to install and maintain the system. In addition, a sensitivity analysis might show the benefits of available grants or incentives, the additional costs and benefits associated with using the system to provide backup power in a utility outage, and the impacts of future utility rate increases or decreases.

When heat and power can be produced on site for less than the cost of power from a utility and fuel for heat (separate heat and power), then there is a positive payback for the project. The length of payback is determined by the difference between purchased and onsite energy production. If all of the previously mentioned costs and benefits are included in the preliminary economic analysis, it should provide a fairly accurate representation of the scope of the CHP project opportunity. However, given all of the assumptions and estimates used in the Level 1 Feasibility Analysis, projected return on investment is only preliminary at this stage. If the analysis demonstrates that a CHP system could meet a site's operational goals and economic expectations, then exploring CHP project procurement approaches is suggested in order to proceed. Preliminary decisions regarding approaches to procurement can influence how to proceed to the next stage in the CHP project development process—the Level 2 Feasibility Analysis.. www.epa.gov/chp/index.html. TO BE CONTINUED....

Contact jklaus@klausequipment.com for additional information

EPA Pushes Ahead on GHG Standards

by Roy Bigham

Posted: December 23, 2010 The EPA issued its plan for establishing greenhouse gas (GHG) pollution standards under the Clean Air Act in 2011. The agency looked at a number of sectors and is moving forward on GHG standards for fossil fuel power plants and petroleum refineries – two of the largest industrial sources, representing nearly 40 percent of the GHG pollution in the United States. The schedule issued in the Dec. 23, 2010 agreements provides a clear path forward for these sectors and is part of EPA’s common-sense approach to addressing GHGs from the largest industrial pollution sources.

"We are following through on our commitment to proceed in a measured and careful way to reduce GHG pollution that threatens the health and welfare of Americans, and contributes to climate change," said Administrator Lisa Jackson. "These standards will help American companies attract private investment to the clean energy upgrades that make our companies more competitive and create good jobs here at home."

Several states, local governments and environmental organizations sued the EPA over the agency’s failure to update the pollution standards for fossil fuel power plants and petroleum refineries, two of the largest source categories of GHG pollution in the United States. Under today’s agreement, the EPA will propose standards for power plants in July 2011 and for refineries in December 2011 and will issue final standards in May 2012 and November 2012, respectively.

This schedule will allow the agency to host listening sessions with the business community, states and other stakeholders in early 2011, well before the rulemaking process begins, as well as to solicit additional feedback during the routine notice and comment period. Together this feedback will lead to smart, cost-effective and protective standards that reflect the latest and best information.

The Clean Air Act requires the EPA to set industry-specific standards for new sources that emit significant quantities of harmful pollutants. These standards, called New Source Performance Standards (NSPS), set the level of pollution new facilities may emit and address air pollution from existing facilities. The Act allows flexible and innovative approaches that take into account cost, health and environmental impacts, and energy requirements. The agency also must periodically update these standards to reflect improvements in control technologies.

Earlier this year, the EPA issued a common-sense approach to GHG permitting for the largest industrial sources. This approach, the GHG permitting guidelines issued in November, and these standards will give power plants and refineries a clear and sensible path for addressing GHG pollution.

The EPA will accept public comment on these two agreements for 30 days following publication of notice in the Federal Register. www.pollutionengineering.com

JAY SAYS

Dear reader,

Penn State University (PSU) tells us that many Pennsylvanians are aware of the recent surge in natural gas leasing activity. The vast majority of citizens, however, do not fully appreciate the scale of change such development will unleash.

The Marcellus shale is the largest unconventional natural gas reserve in the world. While reserve estimates should be considered somewhat uncertain at this early stage, as each new Marcellus well is completed, estimates of recoverable reserves of at least 489 trillion cubic feet seem increasingly reasonable. The market and strategic value of the Marcellus Shale will no doubt grow as conventional natural gas reserves are depleted and our economy adjusts to a path with lower greenhouse gas emissions. Natural gas has considerably lower carbon content than petroleum and coal. The market share of natural gas in electric power generation continues to expand and opportunities for switching from petroleum to natural gas beckon in the transportation sector.

PSU finds that the Marcellus gas industry in Pennsylvania generated $2.3 billion in total value added, more than 29,000 jobs, and $240 million in state and local taxes during 2008. With a substantially higher pace of development during 2009, economic output will top $3.8 billion, state and local tax revenues will be more than $400 million, and total job creation will exceed 48,000.

Pennsylvania could become the next state with energy surplus .

Best regards,
Jay Klaus
JKlaus@KlausEquipment.com
Klaus Equipment Company, Inc.
President