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Sunday, June 16, 2013

Implementing CHP - Combined Heat and Power - Projects



Lower Energy Costs, Reduced Emissions, Secure and Resilient Energy Supply

CHP reduces the environmental impact of power generation by promoting the use of efficient, clean, and reliable approach to generating power and thermal energy from a single fuel source.

CHP can increase operational efficiency and decrease energy costs, while reducing the emissions of greenhouse gases, which contribute to global climate change.

Our Combined Objective is to save you time and money, reduce business risk and environmental impacts, and improve the power reliability of your facility in five steps:

o   Qualification Determine whether CHP is worth considering at your facility
o   Level 1 Feasibility Analysis Identify project goals and potential barriers. Quantify technical and economic opportunities while minimizing time and effort
o   Level 2 Feasibility Analysis Optimize CHP system design, including capacity, thermal application, and operation. Determine final CHP system pricing and return on investment
o   Procurement Build a CHP system according to specifications, on schedule and within budget
o   Operation & Maintenance Maintain a CHP system that provides expected energy savings and reduces emissions by running reliably and efficiently
Projects are designed to meet specific operational needs and to integrate seamlessly into existing mechanical and electrical systems.

Economic suitability for CHP 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.

The Technical Potential for CHP is based on the coincident demand of power and thermal energy. 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.

Is Your Facility a Good Candidate for CHP?

-          Do you pay more than $.07/kWh on average for electricity (including generation, trans-mission 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 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?



If you answered yes to 3 or more questions your facility is a good candidate for CHP

Level 1 Feasibility Study 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 - 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?

Level 2 Feasibility Study 16 - 80 hours, depending upon complexity and procurement approach. Optimize CHP system design, including capacity, thermal application, and operation. Determine final CHP system pricing and return on investment.

The primary purpose of a Level 2 Feasibility Analysis is to replace all of the assumptions used in a Level 1 Feasibility Analysis with verified data and to use this information to optimize the CHP system design, taking into consideration each of the following factors:

·         Site load profiles      • System vibration
·         System operational schedule      • Emissions and permitting
·         Capital cost      • Utility interconnection
·         Heat recovery      • System availability during utility outage
·         Mechanical system components      • Availability of incentives
·         System efficiency      • Maintenance costs
·         Sound levels      • Fuel costs
·         Space considerations      • Economic analysis including life-cycle analysis

Procurement is designed to help navigate the project development and implementation steps of contract negotiation, project engineering and construction, and final commissioning.

Developing and installing a CHP system requires a multidisciplinary team of professionals, including: mechanical, electrical, and structural engineers and contractors; equipment suppliers; a project manager; environmental consultants; and finance experts.


To Evaluate Develop and Implement Your CHP Program
Connect with Tema Management Applications
tema@arezza.net   skype: arezza1

The Project Developer
carries out project scoping early-stage tasks such as selecting the location for equipment, determining structural and equipment needs, and estimating costs and potential energy savings

conducts feasibility analysis detailed technical and economic calculations to determine the technical feasibility of the project and estimate project revenues and expenses

selects CHP configuration based on the results of the feasibility analysis, select primary equipment and configuration, contacts vendors to assess price, performance, schedules, and guarantees

creates a financial pro forma models project cash flows to estimate financial performance

obtains environmental and site permits acquires environmental permits, interconnection, and site permits/licenses

secures financing for the project

contracts with engineering, construction, and equipment supply firms selects firms, negotiates terms and conditions, and executes contracts

provides overall project management services through design, engineering, construction, and commissioning of the project. 

Energy Savings Performance Contracting ESPC A final third-party financing structure is the BOO option, in which the CHP facility is built, owned, and operated by an entity other than the host and the host purchases heat and power at established or indexed rates from the third party.2 There are also build-own-transfer projects, which are similar to BOO projects except that the facility involved is transferred to the host after a predeter-mined timeframe. Such projects may be implemented by an energy services company (ESCO) or sometimes by equipment suppliers and project developers acting as ESCOs.

In a BOO project, the ESCO finances the entire project, owns the system, and incurs all costs associated with its design, installation, and maintenance. The ESCO sells heat and power to the host at a specified rate that offers some savings over current energy expenditures, or can enter into an energy savings performance contract (ESPC) with the host. In an ESPC, the ESCO and the host agree to share the cost savings generated by the project; in return, the ESCO guarantees the performance of the CHP system. An ESPC mitigates the risks associated with new technologies for facility owners, and allows operation and maintenance of the new system by ESCO specialists.
ESPCs are frequently used for public-sector projects. There are no upfront costs other than technical and contracting support. Traditional ESPCs have three components:
A project development agreement
An energy services agreement
A financing agreement

As such, an ESPC is not a financing agreement by itself, but it may contain the financing component. Most lending institutions prefer to see the financing section as a stand-alone agreement that can be sold into the secondary market. This helps create demand for this financial instrument, usually resulting in better pricing.
The host must usually commit to take a specified quantity of energy or to pay a minimum service charge. This “take or pay” structure is necessary to secure the ESPC. The project host gives up some of the project’s economic benefits with a BOO or ESPC in exchange for the ESCO becoming responsible for raising funds, project implementation, system operation, system ownership or a combination of these activities. Some of the disadvantages of this approach to financing include accounting and liability complexities, as well as the possible loss of tax benefits by the facility owner.

CHP Project Risks and Mitigation Measures
Construction Execute fixed-price contracts, include penalties for missing equipment delivery and construction schedules, establish project acceptance standards and warranties
Equipment performance Select proven, compatible technologies; get performance guarantees/warranties from vendor; include equipment vendor as project partner; ensure trained and qualified operators; secure full-service O&M contracts
Environmental permitting Initiate permit process (air, water) prior to financing
Site permitting—Obtain zoning approvals prior to financing
Utility agreements—Confirm interconnection requirements, schedule, and fees; have signed contract with utility
Financial performance— Create detailed financial pro forma, calculate cash flows, debt coverage, maintain working capital/reserve accounts, budget for major equipment overhauls, secure long-term fuel contracts when possible.

Operations and Maintenance $0.005/kilowatt-hour (kWh) - $0.015/kWh for maintenance, depending on type of equipment and operations and maintenance (O&M) procurement approach; possible cost for energy consultant to negotiate fuel purchase, depending on system size and in-house capabilities.

Benefits of CHP CHPs achieve efficiencies of 60 to 80 percent, compared to average fossil-fueled power plant efficiencies of 33 percent in the United States. This improvement in efficiency translates to:

• Reduced total fossil fuel use.
• Lower operating costs.
• Reduced emissions of regulated air pollutants.
• Reduced emissions of greenhouse gases.
• Increased reliability and power quality.
• Reduced grid congestion and avoided distribution losses.

CHP and biomass/biogas funding opportunities
Ø  Financial incentives, such as grants, tax incentives, low-interest loans, favorable partial load rates (e.g., standby rates), and tradable allowances.
Ø  Regulatory treatment that removes unintended barriers to CHP and biomass project development, such as standard interconnection requirements, net metering, and output-based regulations. 

Ø  State and federal incentives applicable to CHP systems, such as direct financial incentives or favorable regulatory treatment


To Evaluate Develop and Implement Your CHP Program
Connect with TEMA
tema@arezza.net   skype: arezza1