Combined Heat and Power More Attractive Than Ever


Due to the availability and reliability of natural gas at stable and historically low prices the case for CHP is better than ever. In addition to this we have significant changes in how the RTO and ISO systems are addressing ancillary services that can have significant impacts on the sizing and design of CHP. These are a direct result of FERC Order 745 and FERC Order 755.  We also are now considering how CHP can provide hardening of assets and provide power during grid emergencies or blackouts.

Together this means that there are now opportunities to more efficiently and economically design CHP facilities.  In typical CHP projects, the CHP plants are sized based on operating economics which require the host site to utilize most of the recoverable waste heat. Under this paradigm the engine generator units are capable of providing between 60% and 75% of the facility Electric Peak.  This enables them to provide up to 85% of the total annual electric power due to the very limited number of hours per year that the actual load exceeds the capacity of the engine generator sets.  During off peak hours, the units are set to follow the electric load and turn down as needed to avoid exporting power.  This is necessary to preserve the operating economics of the CHP plant.  The highest value product of these plants is the electric power produced when it displaces the purchase of full retail priced electricity.

This operating scenario while very typical contributes to one of the major challenges facing the regional electric grids.  The peak energy needs of these facilities are being met by the electric power grid. This in turn contributes to an increase in summer peak demand.  We would have much greater economic return if CHP plants were built to meet the full site electric demand but reserved part of this low duration hour capacity to be monetized through the ISO Ancillary Markets as dispatchable peak power, spinning reserve and frequency regulation.

In 2007, it was estimated that the value of reserved capacity through the ISO would be worth up to $300,000/MW/yr.  Recent actual data now demonstrates that each MW of reserved CHP can be worth $590,000/MW/yr.

This CHP sizing and economic paradigm is even more relevant today, especially post Super Storm Sandy.  Sizing CHP in this manner also makes it much easier to operate during a power blackout with the CHP in island mode.

Contributor: Joseph Sullivan
Date: November, 2014


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