The push for distributed energy resources, particularly in California and New York, is stimulating market opportunities for cogeneration, also known as combined heat and power.
The markets for clients interested in buying cogeneration systems, however, have not changed, according to Jim Crouse, Capstone Turbine’s executive vice president for sales and marketing. Now, clients are becoming more aware of distributed energy resource choices because of the popularity of renewable resources, he says.
Customers see that there are more choices. But cogeneration isn’t at the top of the list, like solar, Crouse says. “It still is not well known or understood, but we are seeing improvement,” he says.
Changes over the past 10 years in the cogeneration industry have not been with the turbine and engine technology, but rather with control improvements and remote monitoring, Crouse says. It is now easier for an energy management team to interface with a customer’s facility personnel and provide data on the system’s performance, or get raw data from customers to correct problems.
In the regulatory realm, emission standards have become more stringent around interconnections and siting issues, but more so on a case-by-case basis, Crouse concludes. There are costs to interconnect cogeneration units with utility distribution lines, and many utility districts require customers to pay non-bypassable charges for “leaving” the utility and no longer buying the power for which the utility contracted. And utilities in the Southeast have significant highly variable standby charges, Crouse says.
Capstone is the manufacturer of inverter-based microturbines with air bearings. Crouse says half of Capstone’s business is outside the US, and as far away as Siberia.
The biggest challenge everywhere for customers is the inability to have long-term visibility. By that, Crouse means that elections in Mexico, tax benefits in the US, and political events can shorten a business’ long-term perspective and impact its return on investment.
This article focuses on the small cogeneration market, below 10 MW, and companies which supply the system packages to manufacturing companies, hospitals, schools, universities, municipalities, wastewater treatment plants, and the oil and gas markets and manage them. It is a tough but growing market supported by government incentives.
TECOGEN DIVERSIFIES ITS SYSTEMS
Tecogen, headquartered in Waltham, MA, manufactures induction and inverter cogeneration systems scalable from 60 kW to multiple megawatts. Its InVerde product is a patented inverter-based variable speed cogeneration system capable of providing black start operation in the event of an outage. It has provided the greatest success for the company in recent years, says Abinand Rangesh, director of project development at Tecogen.
Rangesh attributes this success to the aftermath of Hurricane Sandy, particularly in New York, and the need for backup power in the case of natural disasters. The InVerde system can maintain constant electrical efficiency from 125 kW down to 40 kW, and can operate down to 10 kW. Rangesh says this results in substantially higher savings than competing products, in particular when compared to a synchronous or induction generator.
Rangesh explains that induction engines are primarily used for energy savings and cannot operate if the grid goes down. They rotate at a constant speed of 1,800 rpm to match grid frequency. Synchronous engines are similar since they also rotate at 1,800 rpm but they can operate in the event of a utility blackout. They are highly inefficient if they have to operate at reduced power, however.
An inverter-based engine, on the other hand, allows for very high efficiency at all power settings and can be used with multiple machines working together. It will also provide backup power in the event of a blackout.
While the inverter-based cogeneration system is capable of seamlessly switching to backup power when utility power goes down, Rangesh explains that most utilities require that Tecogen shut the system down, isolate the building’s load from the utility, and restart the cogeneration system, which usually takes less than 10 seconds.
While the inverter-based cogeneration system may be more expensive, the system produces more power so the installed cost per kW after rebates can be similar to the induction system, Rangesh says. Furthermore, the increased efficiency of the inverter-based system results in greater savings.
Rangesh makes another point with the InVerde system. He explains that it was designed to be installed in tight spaces in boiler rooms and is prepackaged with Tecogen’s Ultera emissions system that brings the carbon monoxide and nitrogen oxide discharge levels down to a combined 1 to 2 parts per million which is comparable to those of a fuel cell. It is also very quiet and can operate as a microgrid if there are multiple systems installed on a site.
Tecogen has installed cogeneration systems predominantly in multifamily apartments and healthcare facilities such as nursing homes and hospitals in recent years, says Rangesh. Most cogeneration systems are sized between 200 kW and 400 kW. Tecogen has also supplied many of its systems for schools and other public facilities in conjunction with larger ESCO contracts where energy efficiency projects are an important component.
Tecogen is also seeing its TECOCHILL natural gas engine-driven chiller systems being installed in ice rinks and cannabis growing facilities where cooling without electricity is advantageous. These engine-driven chillers do not generate electricity but instead turn a compressor to produce cooling, says Rangesh. These chillers are mechanical cogeneration systems since most of the electrical load previously used to provide cooling can be eliminated, thereby reducing demand charges during on-peak periods. He says that these units have been around for about 20 years.
The Great Neck New York (Andrew Stergiopoulos) Ice Rink in Great Neck, NY, added a new natural gas engine-driven chiller that replaced an aging and costly electric chilling system in 2006. The new ice-making system saves energy and made it economically possible to extend the annual skating season into spring and fall months, according to Great Neck Park Superintendent Neil Marrin, quoted in a case study on Tecogen’s website. It also provides air conditioning so that the building is able to serve as a summer recreation center.
The TECOCHILL CH-200x engine-driven chiller provides 95 tons of cooling and maintains a glycol-water mixture at 15°F as it circulates beneath the ice sheet. Heat recovered from the engine-driven chiller’s jacket coolant, the engine exhaust gases, and the cogeneration module are used throughout the sports complex.
One of the uses of the recovered heat is to regenerate a Munters desiccant dehumidification system to reduce excess moisture in the rink and to raise the temperature of the air in the rink. The chiller’s heat recovery also provides hot water for the Zamboni machine which resurfaces the ice. By using the hot water in this way, the rink is cutting its overall energy use.
Sales of conventional cogeneration are being driven largely by customers wanting backup power in addition to energy savings, says Rangesh. Most packaged cogeneration projects installed in the 1990s were seen as risky investments when compared to the larger cogeneration systems, he explains. Now, they are seen as a box sitting next to a boiler, and multifamily housing owners are more comfortable with them. Rebates in some states are also increasing their popularity.
Rangesh says the regulatory environment has been quite favorable to packaged cogeneration systems where rebates have become available in many of the northeast states (as well as in California). He points to the investment tax credit and bonus depreciation making the payback more favorable.
2G SEES CHP PICKING UP
2G began business in 1995 in Germany and established its North American subsidiary, headquartered in St. Augustine, FL, in 2007. It manufactures reciprocating engines sized from 50 kW to 2,000 kW and can mix multiple engines to fit customers’ preferences.
Emily Robertson, 2G’s North American marketing and sales manager, says the company’s initial focus, both in Germany and here in the US, was on biogas systems for farms under its G-Box label, a small containerized 50-kW power plant with low noise output. It is still available.
The company’s research led to the natural gas-fueled engine. Today, the business is split about half and half—biogas systems and natural gas-fired cogeneration or combined heat and power systems (CHP).
Today, 2G installs biogas systems in wastewater treatment plants and food processing plants in addition to farm applications, Robertson says.
Meanwhile, hospitals, hotels, and other institutions that operate 24 hours a day, seven days a week are turning to cogeneration for resiliency and the ability to operate off the grid, Robertson says. They cannot afford to shut down for two weeks in the face of extreme weather events such as the aftermath of storms and flooding.
Robertson says cogeneration is a good application in other ways as well. It can be used for backup power and also produce power on a regular basis. “CHP is picking up steam because of economic costs for electricity as well as a way to increase resiliency and to reduce emissions. Extreme weather events are definitely influencing companies to consider installing CHP systems, especially if they can use CHP for multiple uses,” she says.
Institutions such as hospitals, hotels, and universities are environmentally conscious, says Robertson. “Once they realize how much their output is affecting the world, they have to be leaders.” Universities want to tell prospective students, “Here are things you care about and we care about too,” she says.
Robertson cited as an example Erlanger Baroness Hospital in Chattanooga, TN, where four 2,000-kW packaged reciprocating engines totaling 8 MW were supplied by 2G. A heat recovery steam generator is attached to each of two cogeneration units. One of the engines is always on standby and used when other engines are out for planned or unplanned maintenance.
Erlanger is an emergency care center and must be in operation 24 hours per day. White Harvest Energy LLC installed and will maintain the system. It will be commissioned by the end of 2018. Once operating, it will remove 42,000 tons of carbon dioxide from the air each year.
The regulatory environment for markets in the US is really complicated, Robertson concedes, because there are so many different rules in many states. In Europe, rules are pretty much streamlined under the European Union. If companies are seeking to meet emissions restrictions, it helps with the marketing, she says. “We are doing a lot of business in Maryland where they have created incentives to increase resiliency in companies and will be at the forefront of cleaning the air.”
California’s restrictions, on the other hand, are so tight that CHP systems can be too expensive, Robertson argues. Selective catalytic reduction units are required to reduce engine emissions, and in some cases they make the cost of a project prohibitive.
INTELLIGEN BUILDING MINI UTILITIES
Intelligen Power Systems has immersed itself in the power transformation movement now happening in New York City thanks to REV or Reforming the Energy Vision, introduced in 2014 by Governor Andrew M. Cuomo. In support of this effort, the New York State Energy Research and Development Authority (NYSERDA) is providing incentives to customers to install cogeneration systems, and Intelligen is taking advantage of this program.
Sal Cona, Chief Operating Officer at Intelligen, explains that the purpose of REV is to target high-density areas in New York City where distributed energy systems can be installed to relieve the city’s grid system and replace large generating stations. One might interpret this vision as coming full circle on Thomas Edison’s plan for his original Pearl Street plant.
Intelligen Power Systems is building a mini-utility for each of its clients in New York City, says Cona. “We act as a utility with utility-grade safety devices. It’s a difficult process to do this.” Intelligen purchases its three engine sizes—280 kW, 160 kW, and 80 kW—from MAN in Germany and builds the cogeneration systems. Cona says the company overhauls the engines at 60,000 hours, and “then we rebuild them and they go another 60,000 hours.”
The engines can be scaled up to about 3 MW, says Cona. Ten 280-kW units equal 2.8 MW. A lot of the buildings in New York City are in that size range. “This size range works really well for us,” he adds.
The cogeneration systems Intelligen installs operate at 80% efficiency, producing electricity and directing waste heat to heating and/or cooling. System emissions are a tenth of Environmental Protection Agency requirements of 1.0 grams/breaking HP of Nitrogen Oxides (NOx), says Cona. Our system measures at 0.1 grams.
The majority of Intelligen’s clients are multifamily buildings with at least 150 units. “Those with 300 to 400 units are perfect for us and we’re even working on a 700-unit building. We’ve also done some manufacturing applications and a hotel,” says Cona.
“Once we start a project, from breaking ground to commissioning, it takes between seven and ten months,” says Cona. On the other hand, a utility takes years to build a 50-MW plant.
One of the difficulties Intelligen confronted from the beginning was Consolidated Edison’s requirement that an inverter be installed on every installed cogeneration system within its service territory.
Cona explained that the inverter goes between the installed cogeneration system and the connection to the utility. “It allows zero power to go to the utility” when utility power has been disrupted and is not flowing to the building, he says. This allows the cogeneration system to continue operating to provide power to the building, usually to selected high priority services.
Cona says this inverter technology is still in the testing phase, but it will be a big factor in the future. “It is cost prohibitive and difficult to figure out,” he says. It’s different than the inverters used on solar systems which convert DC power to AC power to be used in the building. This technology for cogeneration systems (a 375 kVA inverter) takes AC power and converts it to DC power and converts it back to AC power, all inside one box the size of a refrigerator.
NYSERDA provides incentives for installing cogeneration; vendors like Intelligen may share these with their customers. “Our pitch to customers is, they can back the project when they see NYSERDA putting up $1 million of the funding. The client will then provide the rest of the funding, the project gets built, and they increase their resiliency,” says Cona.
Cona says a building with four 280-kW units will be saving $700,000 each year, increasing its value over a 25-year period.
About 10% to 12% of the city’s buildings have cogeneration systems, and another 20% are looking at it, says Cona. “We have a plan to reach out to the 70% of the buildings in the five boroughs and have them under our umbrella,” he says. In terms of doing business outside the city, Cona says “We want to master New York City first.”
Looking to the future, Cona says the company will be adding storage systems to its offerings. NYSERDA says it will be adding storage to their incentive program and are hinting that it will be required at some date in the future.
Cona has another plan for the future: “We are thinking about developing a way to have cogeneration systems on a block or local grid to communicate and share load.”
REGATTA SEES MARKET CHANGES
Regatta Solutions markets itself as an energy solutions company that helps clients manage their energy costs. Before the company recommends a technology such as a cogeneration system, it audits the client’s energy consumption to better understand how it is using its energy.
Steven Acevedo, president and chief executive officer of Regatta Solutions, says, “We focus on integrating technologies and that includes microgrids which will foster resiliency our clients want and they want a handle on their utilities.” One of the things Acevedo and his colleagues are seeing is that utilities are changing their rates because of renewables. “So, we’re looking at reducing the power demand charge.”
Acevedo says that the potential clients the company is seeking to do business with are looking for cogeneration systems in the 500-kW to 2-MW range. Regatta has formed a partnership with Flex Energy and buys the 333-kW gas turbine engines FlexEnergy manufactures in a typical 1.3-MW configuration for cooling, heating, and power. Flex Energy also offers 250-kW units. The units are fully equipped power plants contained in a box suitable for shipment to all environments.
FlexEnergy acquired the Ingersoll Rand energy systems business at the end of 2010. Ingersoll Rand had developed the cogeneration technology over many years. FlexEnegy sells its engines into multiple global markets—oil and gas, biogas, cogeneration, cogeneration heat and power (CCHP), and external exhaust heat systems—according to Mark Schnepel, Flex Energy’s chief executive officer. Furthermore, he says cogeneration customers can improve the overall system efficiency by using the turbine waste heat together with an absorption chiller for cooling or with a duct burner to create steam.
FlexEnergy’s US markets for its cogeneration systems are in the Northeast and on the West Coast, Schnepel says, in large part driven by high electrical prices and incentives which are lacking in the Midwest.
Acevedo says the durability of these gas turbine engines makes them fit well in the harsh environments of the oil and gas drilling industry where his company helps them with stranded gas flaring applications. “Cogeneration is a clean emission device to those companies,” he says. Regatta has also installed cogeneration units in universities, food processing facilities, and hospitals.
Acevedo formed Agave Systems, which offers power control systems for microgrid integration with controls capabilities that allow clients to integrate multiple technologies like cogeneration, energy storage, and solar to work cohesively as one system, he says. He buys battery storage units from Tesla.
Acevedo has been selling cogeneration systems for 10 years and has been developing microgrids for the past four years. His company merges multiple distributed generation technologies—cogeneration, solar, and battery storage—into the microgrid.
He has seen a market change. “We’re being brought in to retrofit engines. We’ve seen systems not sized correctly or not laid out properly.” Cogeneration systems have many moving parts including chilling, heating, steam, and controls. To have a successful system, you have to see how the whole system goes together, Acevedo says. “We’ve seen mid-market companies that spend $2 million to $3 million and they depend on a good payback of three to four years. That’s the dashboard most clients look at. It is the hurdle,” he says.
A common factor is that clients believe they will be in business for 20 years—the strategic vision on long-term viability of their business. Our ideal client will have that view and secondly tie in sustainability and a green initiative in their marketing strategy.
From a regulatory standpoint, Acevedo says, it is much easier today than nine years ago to interconnect with utilities. For this reason, Southern California Edison has been really good. Also, it used to take nine months to get an air permit. Now, it takes two to three months. The process is smoother now, he says.
FlexEnergy has California Air Resources Board certification for the low emissions of its engines allowing Regatta to install their cogeneration systems in certain districts without an air permit—for example, in the South Coast Air Quality Management District. However, they do have to obtain air permits for installations in the Bay Area Air Quality District.
FDS UTILIZES CAPSTONE WASTE HEAT
Regatta installed six 65-kW Capstone microturbines at FDS Manufacturing, headquartered in Pomona, CA, in 2009, and they have been running ever since, says Kevin Stevenson, vice president of engineering at the company. FDS Manufacturing is a family-owned paper and plastic packaging manufacturer, specializing in single-face paper rolls and clamshells mainly for industry and agriculture, Stevenson explains.
The Capstone turbines, totaling 365 kW, produce about 25% of the facility’s needs. Stevenson says the payback was based on the 100% utilization of the waste heat off the engines. “Inexpensive electricity is actually the by-product,” says Stevenson.
Four turbines are used to produce hot water for a 100-ton Thermax absorption chiller. The remaining two microturbines are used to make dry, hot air for drying in the company’s plastic process. The microturbines replaced a 70-ton electric chiller and two 385,000-BTU-per-hour Unidyn hot air burners. The original systems have been kept online in case of microturbine outages, Stevenson says.
The microturbines need to be rebuilt every 40,000 hours normally, says Stevenson. “We have had all the turbines rebuilt on this schedule and [the cost] is built into the maintenance budget. A rebuild only takes about four to six hours, due to the proprietary air bearings that Capstone has developed. If you are starting/stopping the turbines often, you may need to service them sooner. They want to be run all the time,” says Stevenson.
Because the microturbines allow the facility to use less energy, FDS has been able to use the electricity on more production equipment. “We have complete redundancy in our auxiliary systems and produce electricity cheaper than Southern California Edison,” says Stevenson.
FDS is currently looking to install a 750-kW to 1-MW solar system in its facility, according to Stevenson. “We are counting on Regatta’s Agave power control system to integrate the systems,” he says. Regatta operates that system for FDS.
Stevenson says FDS estimates it is saving approximately $35,000 monthly with the cogeneration system.
CALIFORNIA POWER PARTNERS LOVES PPAs
California Power Partners, established in 2001, has installed over 100 small cogeneration projects throughout California, Oregon, and Washington, and some on the East Coast. Joe Silva is president of the company and is now semi-retired. He feels free to provide a long view of the industry.
In the last 10 to 12 years, California Power Partners has concentrated on renewable energy projects and, most recently, on wastewater treatment systems for municipalities, Silva says.
California Power Partners was the distributor for Capstone Microturbines and the company installed over 100 of the units in wastewater treatment plants. Silva says the advantage of the microturbines is that they produce a lot of heat which benefits the treatment plants which need it for digesters. Gas bills are reduced since boilers are no longer needed most of the time except for backup. However, he says, most of those the company installed are now decommissioned—for example, in San Luis Obispo, Santa Maria, and Laguna Beach.
Silva learned that the recuperators—the main part of the microturbine—have to be replaced every five years. This short shelf life did not allow for good cost recovery, so he started researching other technologies, including Ingersoll Rand microturbines, Caterpillar, Yanmar, and Solar-Infinia engines. He finally settled on Guascor engines because of their low RPMs and meeting low emissions with continuous emissions monitoring systems in California. “We needed to find an engine that could handle filtered waste gas and Guascor could do that due to the low RPMs. We got all our engines permitted before they increased emissions requirements five years ago and they are still running,” he says.
There are a lot of contaminants in the methane produced in wastewater treatment plants, prompting the company to create a fuel treatment technology to take out contaminants in a variety of generation equipment, says Silva. The technology can be built to address generation applications ranging from 30 kW and up.
The company has installed cogeneration systems at wastewater treatment plants in Santa Barbara, Oceanside, and Burlingame, where the Caterpillar engine is still running after 13 years. “Reciprocating engines have long shelf lives,” he says. “We build our systems to last 20 years.
“We install engines sized for the amount of available biogas and that is usually 500 kW to 600 kW. These units are most reliable and have to have at least 10-year lifetimes to be economically viable,” says Silva.
California Power Partners owns, operates, and maintains the wastewater treatment plants in Santa Barbara and Oceanside. By arranging the sale through a power purchase agreement, Silva says, the cities don’t have to capitalize the project. The company sells power to the city at about 10% less than the current utility rate.
Silva describes the installation at Santa Barbara’s El Estero treatment plant as a “cookie cutter project.” A 700-kW Guascor reciprocating engine replaced 400-kW fuel cells, installed in 2004, which failed because of the contaminants in the methane. It needed a very expensive fuel treatment system, he says.
GUASCORS ARE RELIABLE
Alelia Parenteau, energy program supervisor at the City of Santa Barbara, says the fuel cell stacks kept getting poisoned by the methane and the fuel treatment system did not work.
The Guascor has been trouble-free with a 96% availability, says Parenteau, adding that it is a tried-and-true technology. “The beauty of it is that it’s so simple. It’s just been a productive source of energy.” It supplies 60% of the wastewater plant’s electrical needs and there’s enough waste heat so not all of it is used in the digesters. The department plans to use the additional heat to pasteurize sludge so it can be used as compost. It also wants to use some waste heat to create swamp cooling for the offices.
Parenteau says the department is eager to expand the cogeneration system to help meet the city’s goal of relying on 100% renewable energy for both the municipal buildings and the community as a whole by 2030. The intermediate goal is to have its municipal facilities be served by 50% renewables by 2020. Expansion to produce more electricity will depend on two things: increasing the treatment plant’s fuel stock by finding more sources and completing an infrastructure upgrade. The plant’s electrical grid is being rebuilt.
Silva has found that cities jump at the opportunity to sign power purchase agreements where the company installs, owns, and operates the project. He says wastewater plant operators often don’t understand cogeneration and consider maintaining the cogeneration system extra work on top of their assigned duties. If they have the responsibility of operating it, they will simply turn off the unit when something goes wrong, Silva argues.
Power purchase agreements are a big niche for us, says Silva. “When PPAs came to cities, they jumped at it. Our ability to maintain and operate a plant is key [to the project’s success].”
Silva says the cost of installing engines under the new emissions standards in California is now $500,000 higher. The South Coast Air Quality Management District, for example, does not take this cost into consideration when setting standards—the criteria is proof that the new standards can be met, he says.
In California, incentives to offset the costs of a cogeneration system are available through the California Public Utilities Commission Self Generation Incentive Program administered by the investor-owned utilities, Pacific Gas & Electric, San Diego Gas and Electric, and Southern California Edison. Some municipal utilities may also have incentives.