Recent weeks have been unforgettable. But for different reasons. At one end of the scale, the World Trade Centre bombing* was a reminder of how ugly the world can be. At the other end of the scale, there was Copacabana beach.
This year’s Latin America Power & Gas conference allowed me the pleasure of visiting Rio for the first time. I can confirm: it is a city of sun, breathtaking views, beautiful people and great football. However, frustration soon set in when we tried to schedule a night time tennis match at the hotel. The floodlights could not be switched on at the weekend due to the country’s power rationing. If ever there was a case for distributed generation (DG), this was it.
Unfortunately (no tennis that night), for various reasons DG has not yet truly taken hold in Brazil, or on a global scale for that matter. At the conference Eduardo Blotta, marketing manager of Sao Paulo power company, CPFL Business, explained that in October 2000 manufacturers had been urged to build their own generation when the blackouts were forecasted. Commenting on this, and the move towards a deregulated power market, Blotta noted: “Traditional utilities will have to offer ‘premium energy’ and look for innovative ways to serve its customers.”
CPFL set up a new business unit which covered leasing, installation, operation and maintenance of standby or emergency power units – all for a single monthly fee. This was aimed at clients involved in sectors such as oil, food, plastics etc. within the CPFL service area. The company put out some 45 proposals in a month – none were taken up. Blotta claimed that the leasing concept was the main problem.
This may have been the case here, but the uptake of distributed generation has not met the early expectations of those in the business. With difficulties in siting large plants – resulting in consumption outstripping new capacity in many countries – microturbine suppliers argue that this is where DG should have a role to play, i.e. in complementing central generation.
True. But there are more pieces to the puzzle. Tony Hynes, vice president of Bowman Power Systems Inc. got to the root of the true challenge facing DG technologies, and that is “trying to get low cost/kWh”.
Stephen Torres, director of business development at Capstone Turbine Corporation said that costs were currently at about $1000-2000/kW. He claimed that there had been “tremendous growth” in distributed generation over the last ten years but conceded that the 800 units Capstone had shipped last year was “not many” and these small volumes were the reason for high costs. He believed that costs would come down as volumes increased through installations at oil and gas recovery plants (using flared gas) and cogeneration plants.
Torres argued that in addition to power quality, one of the main benefits of distributed generation is “control over your own destiny”. He explained: “The ability to predict power and fuel costs can help manufacturers plan.” Certainly this is a good argument. Hynes gave a good example of where an installation for cogeneration made a lot of sense.
In October last year, Bowman carried out a study for a microturbine-based system at a Quality Inn Hotel in San Diego, Southern California. The primary objective of the study was to show the hotel how such an installation could lower operating costs.
At the time of the study, the hotel was paying 22¢/kWh from the grid. Gas costs were $1 per therm. In July 2001, power prices had risen to 45 ¢/kWh. Meanwhile gas costs had gone up to $1.70 per therm. The cost of the San Diego installation would be $35 000. Based on the economics at the beginning of the study, the payback period was 2.3 years.
“In current conditions the payback time would be nine months. With the situation getting worse in California, hotels are losing money and are consequently having to charge more.” He said that as a result of the crisis, hotel operating costs have gone up by 50 per cent which converted into surcharges ranging from $1 to $4 per room per night.
This sounds like a good argument for any hotel to “control its own destiny” with such an installation. It would certainly help our pockets, and my tennis.
*Special note: Our heartfelt condolences go out to families who lost loved ones in the WTC bombing.