Editor’s Note: This article originally appeared in the July/August 2013 issue and has been checked for accuracy.
Although every situation is unique, and it’s difficult to generalize, Barry Worthington, executive director of the US Energy Association (USEA) in Washington, DC, says progress in renewable energy over the last 10 years has been phenomenal as systems become more efficient. Nevertheless, use of renewable energy for onsite power generation faces many challenges and relies on tax credits and incentives for widespread use.
“Efficiency is improving, but we still need tax credits and incentives, because high cost, spatial requirements, and fluctuation all hinder development,” he says.
Fortunately, according to Michael Perna, vice president of marketing and business development for ConEdison Solutions, the Federal Business Energy Investment Tax Credit is legislated through 2016, allowing investors to recoup up to 30% of installation costs when they “go live.”
However, Steve Hamstra, chief technical officer at Greensleeves in Findlay, OH, manufacturer of large-scale geothermal heat pump systems, believes that many in the industry are not aware of available incentives. Others are taking advantage of them. He mentions one customer who installed a $10 million HVAC system and was able to recoup $4 million in the first five years due to federal tax credits, along with state and utility incentives.
“It ended up being the lowest first-cost system,” says Hamstra.
Getting those incentives may not always be so easy, indicates Bill Guiney, director of solar heating and cooling for Johnson Controls, who says that incentive programs are “gobbled up by big utilities,” leaving little for anyone else. In addition, every state has a different program, so a customer must be knowledgeable to take advantage of incentives. For example, he says, in Wisconsin, a permit for rebundling is required before even considering incentives.
As the cost of technology comes down, Guiney cautions, the incentives also go down. However, he’s noticed that the costs typically go down more than the incentives, which has contributed to making renewable energy a “growth business,” he says.
Johnson Controls often creates a three- to five-year contract for renewable credits for its customers, although a typical project lasts 15 years. “It takes modeling to get the best deal for the customer,” explains Guiney.
Six years ago Johnson Controls started its renewable business at the request of customers who wanted performance contracts, in which an engineer looks at a company’s assets-HVAC, operations, lights, sewer, etc.-in regards to ways to improve their performance and efficiency. They then develop a strategy to integrate renewable energy, such as landfill gas, wastewater treatment, wind, biomass, solar thermal, and photovoltaics (PV).
One obstacle to designing successful performance contracts is related to the energy efficiency measures previously performed by the customer. “Facilities are already on an economy kick,” says Guiney. They may have addressed issues such as energy-efficient lighting.
That makes it difficult to find savings to bundle. “Let us keep the low-hanging fruit so we can bundle,” he urges.
Although he believes incorporating renewable energy is often a good business decision, Guiney admits, “It’s very expensive, with a longer payback. It’s difficult to finance with performance contracts. Financing programs need to be developed.”
One method of effective financing is a separate power purchase agreement in which the customer pays for what is generated, not for the whole system. Sometimes referred to as site lease agreements, PPAs allow some customers who couldn’t otherwise afford renewable energy to integrate it into their energy strategy.
With PV generation costs down 75%, Guiney sees more opportunity to use it for distributed energy. “We have a large capacity to manufacture. Demand lowers cost, which makes it cost-effective; it’s cheaper than buying electricity . . . but the utility can’t go away.”
Cost remains the bottom line; customers rarely choose renewable energy just because it’s renewable, Guiney says-although some government clients are more inclined to explore renewables. Johnson Controls added solar air-conditioning through roof- and ground-mounted PV and a solar chiller at Ft. Bliss, TX, a zero-energy military base. They also did a solar water-heating project in Korea for the Army and have done work for the Bureau of Land Management.
Guiney indicates some customers want the latest technology, “rooftop solar, distributed energy consolidated into one meter, monitoring and control from one location with real-time information,” because of the convenience and possible money savings regardless of a particular technology’s applicability to their specific environmental requirements.
Ultimately, the decision to add renewable energy sources boils down to the cost of energy in a particular area: the cost of the system, energy productivity, incentives, and credits-and regulations. “Wind is more regulated,” reveals Guiney. “You can’t erect turbines within 25 miles of a radar station.”
In some areas, it’s not cost-effective, regardless of regulations. Nebraska, for example, has a lot of wind and low electricity rates, so using renewable sources for power generation isn’t practical. But the situation is different in Puerto Rico, where Johnson Controls installed a turbine for their schools.
Renewable energy systems must adapt to local conditions, Guiney continues. “The European thermal system is different; there’s no sun over there. We have other heating issues here.” We also have permitting issues: land use, soil condition, system design, and feasibility and impact studies. “It gets expensive.”
Lights for school crossings have relied on solar for 20 years, but have a small power requirement. Most applications must display sizable power requirements to justify the investment, Worthington says. “[A customer] would have to consume a large amount of power to make it economical.”
A new approach involves payments based on the electricity generated instead of asking the customers to pay the capital cost of solar installation. Over time, the customer should save money, depending on what the utility charges for kilowatt-hours.
“If unit rates are high and have time-of-day pricing, you can avoid peak demand charges [by using renewable energy for power generation],” he says.
“Rooftop solar,” solar PV, is growing in the number of applications and popularity, Worthington notes, thanks in part to local utility or government incentives, federal tax credits, and the potential of selling power back to the grid.
However, in addition to the sizable electricity requirement, there is also a sizeable spatial prerequisite that can prohibit the installation of solar systems. Rural locations offer a lot of space, but require small output for only a handful of people, as opposed to urban settings where an apartment building with a few hundred people would demand more.
Conversely, distributed energy can encounter complications in urban areas, despite the population density. “You need consistent power requirements during the day to optimize the size of the system for the most economical results,” elaborates Worthington. “A flat load is better than a fluctuating load like you’d find in a factory.”
Walmart was a good candidate for a PV system. As the tallest building around with a large roof, Walmart stores are not in urban locations with tall buildings, trees, antennas, chimneys, or cooling units blocking the light. The 24-hour retail stores also have a flat load.
One of the challenges of solar power is that the sun isn’t always out. But wind is also location-specific when it comes to distributed energy. An isolated property or remote location is best, Worthington indicates. In an ideal location, such as the mountains, wind should be available a significant amount of time. Even so, he says, “You want a combination of more than one wind unit plus a backup generator, unless you’re tied into the grid and can use it to offset.”
In his book, Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future, Robert Bryce claims that wind and solar energy require more land than other sources of energy production. However, he disregards the fact that only 25% of the land at a typical wind plant is actually used by wind turbines and diverse equipment, leaving the remaining area available for farming, ranching or other suitable uses. In fact, a 2008 US Department of Energy (DOE) report concluded that obtaining 20% of the nation’s electricity from wind energy would use less land than is currently occupied by the city of Anchorage, AK.
Critics of Bryce argue that other sources of production also require large areas, either for mining coal or uranium, or for natural gas pipelines. In addition, these traditional sources of energy typically impose harmful and often irreversible impact on the land. And, because fossil and nuclear fuels are consumed when they are used, new land will be continually required. Conversely, renewable energy sources are never depleted and have a comparatively benign impact on the environment. The DOE report noted that 1,000,000 acres of new land are disturbed every year by coal mining, which is several times greater than the amount of land that would be disturbed by obtaining 20% of America’s electricity from wind energy.
Geothermal is another renewable energy source that requires a large property in a specific location. Former President George Bush’s ranch uses geothermal power, but Worthington says “onsite geothermal is rare for power generation in a big way. It’s very unusual. It’s a big system that would need a lot of space. Maybe a factory in Nevada far from utility lines….”
Greensleeves’ Hamstra gives a little “Geothermal heat pump 101.” The in-ground, closed-loop underground heat pump system uses the earth to warm air or water. Horizontal or vertical HDPE pipes circulate the air 510 feet below ground, where soil temperature is a constant 55 degrees. Water flows 200500 feet deep, 20 on center, exchanging thermal energy with the earth.
The underground system can be a heat source or become a heat sink if heat accumulates. “It’s physics,” says Hamstra. “The key is the thermal battery: the earth stores heat, but you must have the right size reservoir.” If the system has an earth heat exchanger that’s not big enough, the ground gets too hot, rendering the system less efficient. The equipment no longer functions properly and can’t pump cooling energy into hot water. The same thing could happen if too much heat is pulled out in the winter: the ground freezes.
You must also use predictive control technology. Greensleeves measures real-time load on the ground against the design to predict or forecast efficiency. If the system includes a cooling tower, it will automatically fix a problem, correcting at lower cost.
One high school in the Florida panhandle with a geothermal system had so much load, the soil temperature increased to 110113°F in the summer. There was no way to get heat out of the ground. Hamstra says a good option is to run other devices, such as a cooling tower, to dump heat. Then it must be monitored.
“We put a control system on to measure the daily heat load,” he says. “We analyze and wait to dissipate energy at the optimum time when it’s less expensive.”
Most large applications are cooling-dominant, Hamstra says. One of his clients, a hospital in Mississippi, used a lot of energy to extract heat from the building to the ground. The ground is not the most efficient way of dissipating heat, however. Because their average temperature in January is 46°F, they began dumping more heat in January.
Shifting the cooling tower from summer to winter can increase efficiency. “Get the ground cool. If it’s 58 degrees [Fahrenheit] in March, there’s no need to turn on the cooling tower all summer. You can pull the heat out in the winter.”
Like a battery, reducing the amount of heat exchanger in the ground saves money. “An onsite renewable system is a more efficient way to move energy,” says Hamstra. “Geothermal takes less energy to operate because you’re moving energy, not using virgin energy.”
Used for heating and cooling and hot water, geothermal allows customers to reduce their peak electrical demand and consume fewer kilowatt-hours per year by taking advantage of a low-temperature heat source in the ground. Despite the need to constantly measure the health of the system and field, Hamstra states, “Even the worst geothermal system is better than an HVAC system.”
That may be true, but even with first costs at only 5070% of other systems and downsizing enabling geothermal to be applied in more places, Hamstra estimates only a 23% market penetration for the renewable technology. He blames cost, resistance in the design community due to liability concerns and lack of control sophistication.
Over time, sensors drift, he says. “A control system works optimally at first; it’s perfectly calibrated. The problem is that most don’t stay that way.” Greensleeves’ system “learns” and adjusts operation to suit the cooling load. “It’s self-healing-self-adapting as it mines data. It gets better over time.” The application-specific package control system runs the chiller, cooling tower, and pumps in a plug-and-play solution that is affordable and energy-efficient.
Solar power used to cost too much, Perne believes, but incentives and falling equipment prices have resulted in an explosion of solar energy. “Economic factors are driving it. It’s not suitable for backup power generation because the sun is not always shining. Better pricing is the goal.”
One of the challenges facing solar power is the perception that solar is expensive. “The market is still learning,” says Perne. “The recession has kept demand down, so growth in electricity has flattened due to deferred concern over the generation of power-but it will be an issue again.”
If you’re in a “high cost of electricity” state, he says, take a look at solar now. Although states like California and New Jersey offer big incentives, federal incentives like the ITC end in 2016. “There’s still a window of opportunity to reduce your electric cost or at least fix the price for the next 20 years.” Long-term contracts with a fixed price or known escalator can help companies reach their sustainability targets.
Another opportunity to save money and increase energy efficiency is to retrofit equipment such as lights, chillers, and building controls. ConEdison, which formed 15 years ago when the electricity and gas markets were deregulated, offers solar as a service; they install, own and sell through power purchase agreements.
Customers such as municipalities and cities, hockey arenas and water treatment facilities can opt for a rooftop or ground-mount system, or choose a large grid-connected behind-the-meter project. The benefits include a reduced cost/rate per kilowatt-hour.
As Perne points out, there can be operational challenges with concentrations of solar or wind. The challenge is location, believes Amanda Scaccianoce, marketing and communications administrator for Princeton Power Systems, a solutions-based inverter manufacturer. It’s difficult to find the appropriate place for the equipment, due not only to the space required, but the noise produced…and other objectionable aspects.
“A solar ray is not angled; it’s laid flat on a roof, so there’s no glare, but it’s considered an eyesore,” she says.
In some cases, the location poses a different kind of challenge. When a facility is too far from the grid, the impediment to using renewable energy as a source of power generation is more than aesthetic. Alcatraz Island, now a national park in the San Francisco Bay, used to be powered solely by a diesel generator, but the management wanted to eliminate it, Scaccianoce says. Too far away to connect to the grid, they opted for a microgrid system that has the ability to function independently.
Combining electrical energy storage, such as a lithium-ion battery system, with a solar array provides the ability to disconnect from the electrical grid without sacrificing reliability. At Alcatraz, a battery bank of four inverters “kick in” on cloudy days when the solar panels don’t produce, explains Scaccianoce. If the PV Ray batteries are depleted, then the generator kicks in.
“It’s up-and-coming technology that could be used for the Super Bowl or emergencies like Hurricane Sandy,” says Scaccianoce. “It’s buzzworthy.”
It’s also a way to reduce fuel usage and sizing of backup diesel generators, and in applications with a grid connection, to match power generation to the time of use for peak shaving. According to Princeton Power Systems, even small amounts of storage can have a major impact on reducing fuel costs, maintenance, and emissions.
Integrated energy storage systems combine batteries with inverters and a programmable communications system that allows it to interface with the electric grid, giving it the ability to run in a variety of grid support modes.
Lead-acid batteries cost the least, but lithium-ion batteries are the most cost-effective for many applications because they provide high-efficiency, a 10-year lifetime and deep-cycle capability. Hybrid lead-acid incorporates an ultra-capacitor with a lead-acid base, flow batteries, flywheels, and other types of storage.
Microgrid systems offer a solution for islanded areas-remote locations with no access to power or trouble accessing power. Where connected to the grid, they also provide grid support services such as peak shaving, frequency regulation, demand response and VAR support. As Princeton points out, grid support services are critical to enabling further penetration of intermittent renewable energy sources that can see wide swings in power output during short-term events like cloud coverage.
“It’s a misconception that it’s too complicated,” insists Scaccianoce. “It reduces costs and diesel consumption.”
The Scripps Ranch in San Diego runs a system similar to that at Alcatraz, but they remain connected to the grid. However, because the storage system next to the recreation center turns into a command center in case of wild fires, brownouts or other crises, they need a reliable off-grid system. They chose a containerized solution with two inverters with a battery pack and PV Ray.
Customers have different needs and goals. Eagle Pitcher, a laboratory in Joplin, MO, uses a microgrid system for battery testing purposes. They chose 45-foot ISO containers with two to three inverters for energy storage, allowing them to test battery technology, with the ability to provide backup energy if necessary.
“They wanted a turnkey grid energy management solution,” says Scaccianoce.
Yet another benefit is potential mitigation of issues facing the aging electrical transmission and distribution system by adding energy storage close to where power is needed.
California and the military have expressed a lot of interest in microgrid systems. “The military is a huge focus,” she reveals.
In a recent system demonstration, Princeton Power Systems submitted a 100-kW/82-kWh Energy Storage System at the Twenty-nine Palms, CA, military base to satisfy the military’s goal of reducing diesel fuel consumption and maintenance costs. “It was successfully tested in harsh conditions (rain, wind, intense heat), and we consider the testing a huge success,” says Scaccianoce. “This isn’t a microgrid system, but renewable energy systems are mainly used to satisfy diesel fuel reduction, cyber security, and maintenance costs for the military. Large companies and utilities may focus on these systems to satisfy other uses, such as emergency response, grid support service, and backup power.”
The key to generating power onsite with renewable energy sources, Hamstra says, is to reduce energy usage first. “Do an energy audit, and make the single biggest item more efficient. It’s easier to cover with onsite power generation if you reduce the load on the renewable system.”
Reducing costs and dependence on the grid are valued as benefits, but USEA’s Worthington sees consequences resulting from the impact of customers using distributed resources who rely on the power grid when a renewable source isn’t available. “There are consequences for the penetration of renewables, which suppliers and regulatory commissions are discussing now. There are things to sort out when we reach the tipping point.”
Right now, the tipping point is hypothetical, with only 1% of usage. Nevertheless, Worthington knows that when it comes, some tough decisions will have to be made. “It’s controversial and complicated. We must manage as we develop to get the optimal outcome for the most people.”
The problem is that as utilities promote efficiency, they lose revenue. If renewable energy power generation affects a utility’s revenue, how do they achieve efficiency?
“If the utility has decreasing sales because of renewable sources, but the equipment cost the same for the utility, revenue is now cut. That means other customers must absorb the cost,” explains Worthington. “Odds are 100% that users who can afford the system have more money and are getting a tax credit, shifting the cost of building and maintaining the system to lower-income customers.”
How can the utility be fair to the most entities when the person who can afford the system gets the tax credit? We haven’t sorted out the social impact, Worthington believes.
“When renewables play at the margins, it’s not important, but social equity becomes significant when renewables are more in use,” he says. “Issues like the right to sunlight will become the next barrier to distributed generation in urban areas, much like local zoning ordinances and HOA regulations are in suburban areas now.”