Combined Heat & Power
Recently a customer had us model the energy production and financial return for a new 2MW cogen system at their manufacturing site in the United Kingdom.
Our analysis considered their contract cost for kWh and natural gas, the system’s energy production in kWh and therms, its full installation and annual maintenance cost and their UK tax benefits, including a reduced carbon tax from the UK’s Carbon Reduction Commitment. All in, the capital investment had a simple payback of 2.3 years.
When we built the system’s 10 year PPA model there was one big question – what escalation rate for kWh and gas should we use? Read the rest of this entry »
In the 1967 movie The Graduate, 21 year old Ben Braddock (aka Dustin Hoffman) received a famous bit of advice – “there is a great future in plastics.” The line has lived on since, like an insider stock trading joke – however, VC’s would call the character who delivered this line “a master of the obvious.” If plastics would be a big market, how would Hoffman have chosen the application area or the start up company that would win?
So over roughly the last seven years, new market categories within Cleantech have come into vogue with similar, layman speak descriptions – insert your favorite – “there is a great future in….” batteries – biofuels – carbon software – demand response – green building materials – LED’s – smart grid – solar PV – wind, and even water.
What’s stunning is how many of these now visible companies only received their Series A funding in the last few years. Companies like Hara (Series A in 5/2009), Silver Spring (Series A in 4/2008), Solyndra (Series A in 4/2007), Solar Power Partners (Series A in 9/2007) and SunRun (Series A in 6/2008) are all perceived leaders in big market categories, yet they’ve only been in existence for a few years.
Which makes it that much more fun to speculate on the next favorite hot markets. My votes for three new Cleantech categories which will become more visible (ie. early stage funded) in 2010 are: 1. nuclear power, 2. magnetics and 3. waste heat recapture systems.
Nuclear power, because it makes so much sense. In a market where there has been so little new R&D, one can only imagine what could be developed if entrepreneurs were given capital and support. The fun thing about this one is how real green advocates have a conundrum with the benefits and risks. A relevant company would be NuScale, but there are others as well.
Magnetics, because with so many spinning parts in both existing and newer energy systems the math favors reducing friction (ie. operating more efficiently) and lower lifetime maintenance costs. A relevant company might be Synchrony which recently introduced a computer controlled bearing.
And Waste Heat Recovery, because energy efficiency is in vogue and waste heat is becoming a more known, literally, as a waste of energy. Also we can expect, like cogen and fuel cells, these systems will be supported even more heavily with utility incentives going forward.
Oh, and if you want to follow the professionals who write on this stuff look at GreentechMedia with their top 2009 investment list. Or Jeffries Investment bank who speculates how much more $ will flow into Cleantech.
Combined Heat and Power (CHP) technology is not new – it’s been applied by utilities going back to the days of Thomas Edison. At a utility’s scale it makes so much sense to recapture huge waste heat loads generated during electricity production and apply this energy to a system like a district steam loop for heating within a campus or city.
“Mini” CHP, the type we install at a commercial facility level, is showing signs as having an equally attractive financial and environmental impact. Like utility systems these smaller systems (75kW to 1 MW) produce electricity and heat, typically all consumed at the site, with the heat being applied to domestic hot water or process hot water/steam production.
The basic efficiencies are pretty striking – take a 30% efficient process of burning fuel to generate electricity and make it 85% efficient by capturing and using the waste heat. Our typical economic analysis revolves around the initial system cost, net of incentives, and it’s cost to operate (principally fuel) vs. our customer’s cost of utility delivered electricity and their cost of heat.
Like any asset, the math is best when the CHP system is fully utilized, meaning a facility has a constant use for both the electricity AND the heat. Regardless of whether the system is based on a natural gas powered engine, fuel cell, micro turbine or today’s more green and sexy biomass CHP system, the challenge with these systems remains sizing the system to the largest possible heat load that can be consumed year round at that facility. Economies of scale are the issue here.
Not surprisingly, there are certain types of commercial facilities where this can work extremely well - apartments, hospitals, hotels, manufacturing, nursing homes and universities. So when studying CHP, just remember, if you can use the heat, you might have a good opportunity….
If you’re interested, we’re going to be presenting some of the basics issues around CHP and the latest trends we’re seeing during our upcoming webinar with GreentechMedia.