|Although Ohio’s exisitng installed CHP base is low relative to other US states, it has ambitions to change that|
The US state of Ohio is pushing ahead with plans that benefit cogeneration, including new legislation that redefines CHP and provides financial incentives, says Richard Baillie.
The state of Ohio is being very pro-active in promoting CHP across its territory, and in recent years has been attempting to put a structure in place to build on this effort. The Public Utilities Commission of Ohio is actively engaged in a pilot project with the US Department of Energy (DOE) to remove educational and regulatory barriers to combined heat and power (CHP) development in Ohio and across the nation.
The reasons for this are fundamentally manifold: to create distributed generation in pockets of electricity constraint; to provide “Islands of Power” during outages for sensitive/critical organizations including hospitals and data centers; and to provide black start capabilities for everyone else. Ohio is also looking to assist industries in developing emission compliance strategies and to expand customer choices to remain economically competitive.
Ohio clearly has tremendous opportunity for CHP. Approximately 766 MW of capacity is installed in the state, and the US DOE estimates Ohio’s market could be 15-times that current amount by 2025. Indeed, in 2011, the DOE released a report outlining various scenarios for CHP potential in the state. The findings suggested a potential of approximately 8000 MW if systems were unable to sell power and 11,000 MW if systems could export power.
As a suite of technologies, CHP and waste heat recovery (WHR) have the potential to significantly raise industrial energy efficiency, increase the use of distributed generation of electricity and reduce demand on traditional generation facilities, such as fossil fuel-fired assets. That said, currently, with few actual CHP installations, Ohio is near the bottom in the US for implementation, with its 766 MW of installed capacity.
The reason for the gap in terms of potential versus implementation can be attributed to several factors in Ohio’s law, regulatory environment and investor-owned utility culture. All three of those barriers – legal, regulatory and cultural – must be overcome in order to make industrial efficiency and lower fossil fuel emissions a reality.
To help achieve these goals, American Electric Power Ohio (AEP Ohio) signed a stipulation in a major rate and restructuring case in September 2011. This case lasted several months, and involved the participation of all the major entities that traditionally participate at the Public Utilities Commission of Ohio. The signed settlement includes a provision that requires AEP Ohio to procure 350 MW of CHP or WHR resources. This settlement is seen as a major win for CHP/WHR development interests in Ohio, and for clean energy advocates and their supporters. And as a direct result of just this one case, Ohio is currently poised to increase the amount of CHP/WHR in the state by 46%.
What happened in the case was that the Ohio Environmental Council (OEC) reviewed AEP Ohio’s proposed resource and rate plan, identified gaps and then prepared an aggressive case arguing for the inclusion of CHP/WHR resources.
The OEC then began direct negotiation with the company, working to incorporate CHP and WHR into a global settlement for the case. The OEC also worked directly with other stakeholders to incorporate CHP/WHR goals and objectives into the negotiation efforts by the Ohio Manufacturing Association – who was a critical partner in pushing for a CHP/WHR solution to the case.
This achievement was made possible through legal action and staff, as well as stakeholder engagement with fellow environmental organizations and the manufacturing community. Soon, the OEC will begin work with AEP Ohio and manufacturing stakeholders to build an effective mechanism to secure this new power resource from the marketplace, and achieve essential cost recovery.
Similarly, in Duke Energy Ohio’s three-year rate case, the company’s recent stipulation also contained a provision that moves Ohio closer to CHP reality. In that case, Duke agreed to work with OEC to find and evaluate CHP potential in the company’s Cincinnati service territory. The results will be an integral part of Duke’s 2012 Long Term Forecast filing.
Sources of financing
There are various sources of financing for cogeneration in Ohio. The Energy Loan Fund is a programme that provides low-cost financing to small businesses and manufacturers for energy improvements that reduce usage and associated costs, cut fossil fuel emissions, and/or create or retain jobs. Funding is provided through the Advanced Energy Fund and the federal State Energy Program, as well as the American Recovery and Reinvestment Act.
The Energy Loan Fund is expected to result in ‘energy, economic, and environmental’ impacts that include a minimum reduction of 15% in energy use relative to existing conditions, a return on investment that allows the loan to be paid back within a reasonable time period and job creation or retention plus an improvement in environmental quality
Eligible activities include energy efficiency retrofits, distributed generation, such as CHP systems, as well as high-efficiency traffic signals and street lighting. The maximum loan amounts for the Energy Loan Fund are 80% of eligible project costs up to US$250,000 for small businesses, 80% of eligible project costs up to $1 million for manufacturers and 90% of eligible project costs up to $1 million for public entities and non-profits.
In addition, federal funding is available through the US DOE’s State Energy Program. Authorisation for the State Energy Program is under 10 CFR Part 420, while state funding is also available through the Advanced Energy Fund, which is authorized by sections 4928.61 to 4928.63 of the Ohio Revised Code.
|Energy Loan Fund will cover $250,000 of project costs for small businesses|
The Ohio Air Quality Development Authority also helps to finance air quality facilities for small and large businesses, utilities, government, and universities. Such facilities constitute an key tool that organizations can use to become more competitive and successful in their respective fields, while preserving the environment.
A legislative approach
As well as financial incentives, there have been some recent legislative changes that make CHP in the state of Ohio a much more attractive proposition. Two bills that passed through the Ohio General Assembly in June 2012 support cogeneration projects by qualifying them for use by the state’s investor-owned utilities to meet certain requirements under Senate Bill 221 (SB 221), Ohio’s landmark energy law enacted in 2008.
One bill, known as SB 289, passed by both the Ohio House and Senate — classifies cogeneration technology as a “renewable energy” under the state’s renewable portfolio standard (RPS), which requires utilities to procure 12.5% of their energy from renewable sources by 2025.
The other bill, known as SB 315, introduced in the Senate at the request of Governor John Kasich – classifies CHP technology as both “renewable energy” and “energy efficiency.” Thus, it qualifies it for inclusion in the RPS or as an eligible technology under SB.221’s energy efficiency and peak-demand reduction provisions, which require utilities to achieve certain annual benchmarks for energy savings and demand reduction.
SB 315 allows project owners to choose which classification – renewable energy or energy efficiency, but not both — to apply to a particular project. This bill promotes “waste energy recovery” (WER) and “combined heat and power” projects by qualifying them for use by Ohio’s investor-owned utilities in order to meet certain portfolio standard requirements under SB 221.
Specifically, SB 315 allows WER systems to be used to satisfy requirements under: (a) Ohio’s RPS; or (b) SB 221’s energy efficiency standards, which require utilities to achieve cumulative energy savings of 22% by 2025.
SB 315 also makes a clear distinction between WER and CHP. The bill defines a “waste energy recovery system” as a facility that generates electricity through the conversion of energy from either: (i) exhaust heat from engines or manufacturing, industrial commercial, or institutional sites, except for exhaust heat from a facility whose primary purpose is the generation of electricity; or, (ii) reduction of pressure in gas pipelines before gas is distributed through the pipeline, provided that the conversion of energy to electricity is achieved without using additional fossil fuels.
Generally, WER systems capture waste energy from an industrial or commercial process, but do not introduce additional fossil fuel sources. On the other hand, a “combined heat and power system” is defined as the co-production of electricity and useful thermal energy from the same fuel source designed to achieve thermal-efficiency levels of at least 60%, with at least 20% of the system’s total useful energy in the form of thermal energy. CHP systems often introduce additional fossil fuel energy sources, such as natural gas.
The definitions of WER and CHP are important because SB 315 allows WER project owners to choose whether to qualify a system as a renewable energy or energy efficiency resource.
Notable success stories
The following case study is illustrative of a growing number of facilities that are cutting costs and increasing their generation efficiency through the use of CHP.
With the enrollment of 34,000 students across eight campuses, Kent State University (KSU) is Ohio’s second-largest university. The 880-acre main KSU campus contains 115 buildings, and has an electricity load of close to 80 million kWh annually, and is expected to rise with the continued expansion of campus buildings and residence halls.
Seeing this demand increase on the horizon, KSU engineers began to consider CHP as a strategy to meet growing energy loads and control costs.KSU, in conjunction with the US DOE and Dominion East Ohio, a leading producer and transporter of energyin the US, undertook a study to investigate the benefits of deploying CHP technology at its new power plant facility.The primary objectives were to reduce fuel consumption, decrease emissions, and lower the cost of electricity.
The study concluded that all of these objectives could be met through cogeneration units. What made KSU such a good candidate for CHP was not just its need for power but also the fact that it has a substantial year-round steam demand – in both the winter and summer.
The system consists of a Taurus 60 turbine, which can run on natural gas or fuel oil and a Taurus 70 generator capable of generating 7.2 MW of electricity – supplied by Solar Turbines.
Both feature heat recovery steam generator (HRSG) units, which enable plant operators to use waste steam to chill water. The 60,000 pounds of steam captured by the HRSG units provide more than half of the campus’ steam needs.
In winter, the generators are able to provide almost 90% of KSU’s electricity needs, while in summer they meet 60% of the load. In the event of a power outage, KSU’s power system can also island itself from the grid and produce enough power for most of the university’s functions.
The power plant was built in two phases at a total cost of $23 million. The savings on fuel costs are substantial enough to eclipse the CHP system’s annual maintenance costs of more than $400,000. Total annual savings are expected to be more than $700,000.
Other commericial CHP and WER projects in Ohio, funded by the Office of Energy include Toledo Museum of Art and the Toledo Convention Center,
Ohio’s manufacturing sector also appears to offer strong opportunities for CHP to make inroads (Table 1).
The biggest source of Ohio’s waste comes from inefficiencies in the power sector. Almost one-third of all energy consumed in the state is lost during generation and transmission, largely as a result of an outdated grid. According to official figures, more than 1 quadrillion BTUs of energy, worth an estimated $17.6 billion, was lost in this way in 2009.
Ohio ranks in the top five states in the US for CHP potential but is way down in 44th place as regards its adoption. By distributing generation closer to end users and encouraging the use of CHP and WER, the state has the potential to significantly cut emissions while saving substantial fossil fuel costs.