Big things in small packages

Alan M. Herbst, US Energy Practice Area Manager, Datamonitor

Strong interest in microturbines has been seen from the business sector, including financial institutions
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In recent years, microturbines have become one of the premier forms of distributed generation currently available in the market. The hydrocarbon-driven, high speed generators can operate either connected to the electric grid or on a stand alone basis. When operating independent of the grid, they are not constrained by problems with and distribution infrastructure.

Energy deregulation has created opportunities to develop and market more sophisticated forms of distributed generation. During the last decade microturbines have become commercially available in limited numbers. While its market share is small in comparison to other forms of generation, it has the potential to revolutionize the structure of the electric industry from both the supply and demand perspective.

Microturbine drivers

While microturbines are currently being used in specialized niche applications, several market drivers, besides deregulation and environmental concerns, should push this form of generation into a wider range of market applications. These drivers include:

  • Advances in technology
  • A need for superior power quality
  • Enhanced reliability
  • Greater efficiency.

But the uptake and commercialization of microturbines is being held up by a lack of production capacity. Several microturbines with proven operating track records have been developed and there is genuine global interest. At $800-900/installed kW, their cost is well within the means of most businesses. Microturbines can generate electricity at prices competitive with traditional grid-based power as long as an affordable supply of natural gas is present. Should natural gas prices spike, however, these units might lose any cost advantage they might have. At the present time, however, the greatest hurdle to meaningful market penetration microturbines face is simply that production is not being ramped up fast enough to meet the potential demand.

The technology utilized in microturbines, while complex, is not that exotic and is currently available from more than one supplier. While microturbines, which operate at around 30 per cent efficiency, tend to be a little less efficient than other forms of generation, they are relatively inexpensive and have a high heat rate. These features make them competitive against electricity produced from centralized generation for certain commercial applications.

Strong interest in microturbine technology has been seen from the business sector, especially health care facilities, financial institutions, manufacturing plants, commercial establishments and large agricultural enterprises. Currently, more than 66 per cent of all US businesses own or lease some sort of emergency or backup generation. Many of these firms have expressed interest in installing back up generation equipment during the year 2000.

Healthcare and educational facilities are leading the charge to on-site power generation with approximately 20 per cent of their numbers looking to install some sort of backup power. While the agriculture industry might surprise some as a potential user of distributed generation, when one learns that the sector experiences an average of four electric outages per year (twice the number that other business sectors experience) it becomes a logical source of demand. An average of two outages a year is still not acceptable for many businesses, 28 per cent of these recently surveyed said that power interruptions had a ‘significant impact’ on their businesses.


There are currently two manufacturers of microturbines that claim to have commercially available units, Allied Signal (75 kW) and Capstone (30 kW). While both company’s microturbines are being sold by a network of distributors, only a handful of these units are actually being produced and most of the sold units are on backorder.

Allied Signal (Honeywell): The company recently merged with Honeywell to form Honeywell Power Systems and is headquartered in Albuquerque, New Mexico. Allied Signal has designed and developed a 75 kW microturbine, the Parallon 75, that runs on a variety of gases or liquid fuels. It can be quickly installed and operates either in parallel to the utility grid or as an independent source of power.

The Parallon 75 is specifically designed for small- to mid-size commercial businesses. Most businesses are expected to use these microturbines to help meet intermittent electric load and in some cases for peaking purposes. At this time, however, most commercial operations utilizing these units are not expected to remove themselves entirely from the grid. Allied Signal’s microturbine does provide organizations with the flexibility to switch to the grid or produce their own power, enabling them to use the most cost effective power supply option available to them. Larger corporations will be targeted once units with greater generation capacity are developed.

The Parallon 75 has just one moving part. This produces very little internal friction, lower maintenance costs and higher reliability. The unit is designed to operate unattended and all operations are automatic.

Allied Signal’s Parallon 75 is currently available for sale and according to company officials is being produced at a rate of one per day. One unit is currently producing electricity at an Illinois McDonald’s. The company is developing a larger unit, capable of generating 375 kW, which will be able to provide more energy-intensive businesses with power.

Capstone Turbine Company: Capstone is headquartered in Woodland Hills, California. The company’s 30 kW, 330 model, exceeded 6000 hours of continuous operation in early November of 1999 and is aimed at both commercial and industrial applications.

Capstone is known for producing air-cooled units that have lower maintenance costs than traditional forms of generation. Its microturbines also have the ability to run on both high and low pressure natural gas, propane, diesel and up to seven per cent H2S ‘sour gas’. All the rotating components are mounted on a single shaft that is supported by air bearings.

The company claims to have the capacity to make 20 000 units per year and currently has more than 200 orders for its 30 kW model.

While Allied Signal and Capstone currently have commercially available units, other firms, such as Northern Research, Bowman and Elliot, are in various stages of microturbine development and could have products in the market within a year or two.

Northern Research is currently developing a line of microturbines called PowerWorks for use in a variety of commercial and industrial applications ranging in size from 30-250 kW. The company claims that its product is a cost effective alternative to other manufacturers’ since it uses ‘off-the-shelf’ components such as turbochargers.

It is taking an innovative approach in designing its microturbines, using a two shaft turbine instead of a single shaft turbine used by other manufacturers; it believes a two shaft design has the capability to better match the unit’s mechanical drive load.

Microturbines and fries

Fast food restaurant McDonald’s is a participant in a distributed generation test that could have far reaching implications for the future uptake of microturbine technology by the market. A franchise in Bensenville, Illinois, known as The Energy Efficient McDonald’s (TEEM), has been the test site for a Parallon 75 unit since August 1999. It is one of four McDonald’s in the USA currently testing some sort of new energy related technology.

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The Bensenville McDonald’s microturbine burns natural gas and is in compliance with all federal clean air requirements. The unit responds to computer commands telling it to begin and cease operations. This type of control system is essential for McDonald’s since it intends to use the microturbine as part of a parallel power hook up in a ‘demand avoidance’ strategy. The restaurant runs the microturbine during the day (9 am to 6 pm) when it is being billed at peak electric rates by local utility Unicom and then turns the microturbine off and switches back to the electric grid at night when less expensive, off peak power can be purchased.

This initial application of microturbine technology has yielded favourable results. According to Anthony Spata, building systems manager for McDonald’s Corp., the restaurant was able to produce its own electricity for à‚¢0.5-1.0/kWh less than their traditional grid-based source even after including the cost of maintenance amortized over the cost of the unit.

Using the microturbine over the course of the summer, the franchise saved over $1000 a month. Spata is quick to caution that the unit has not been operating very long and that a longer test period is required to have enough data to make conclusions on total savings.

In September of 1999, Allied Signal upgraded the microturbine and installed a model that possessed black start capability. This unit allows the restaurant to switch over entirely to the microturbine should grid power be lost with little or no interruption in service. The upgraded microturbine can provide power in 15 seconds if the unit is ‘warm’ (idling) and in about two minutes if the unit is ‘cold’. Before this is done, however, the restaurant must be disconnected from the grid.

The ability to switch from off peak grid power to power produced from a microturbine may seem like a trivial benefit, but to commercial business owners the savings can be significant. One 75 kW microturbine can provide enough power to run a typical fast food restaurant and could save the restaurant up to $35 000 a year in energy costs. This is a substantial saving when one considers that the Allied Signal unit costs approximately $900 per installed kW. Others within McDonald’s put the cost savings on the electricity component at a minimum of ten per cent. The microturbine is therefore expected to pay for itself in about three years.

As of the fourth quarter of 1999, McDonald’s has not made a decision whether or not to install microturbines at its 1800 company owned outlets. Datamonitor has learned that it plans to install a pair of Capstone microturbines at a restaurant in Atlanta after January 1, 2000. One of the 30 kW turbines will handle the site’s baseload, the other will cycle on and off depending on demand.


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After more data is obtained and evaluated by McDonald’s, and if favourable results are obtained, individual franchise owners could be given the right to install microturbine equipment if they choose. There are approximately 2700 franchise owners who operate more than 10 000 restaurants. This puts the total number of McDonald’s restaurants at approximately 11 800. It takes a lot of electricity to make those ‘billions of hamburgers sold’. Table 1 shows an estimate of the total McDonald’s daily electrical load.

The Table shows that the use of microturbines by McDonald’s and other multi-outlet fast food establishments holds tremendous potential. These types of business generally operate in competitive environments with razor thin margins of just pennies on the dollar.

Any cost savings that are obtainable, not to mention lower levels of electrical service interruptions, could make all the difference between a successful operation and going out of business.

Examining the commercialization potential of microturbine technology, Datamonitor believes that:

  • Niche applications for microturbines, such as uninterruptible power supplies will continue to develop into the middle of the next decade, especially for consumers of power who require enhanced power quality and reliability.
  • Many organizations currently possess standby generation, which sits idle for most of the year. This form of ‘dead investment’ strategy serves as a hedge against unplanned power events, but for little more than the price many organizations have paid for these backup units they can purchase and install a microturbine. This will provide them with a guaranteed source of power and the ability to sell power back to the electric grid.
  • Continued electricity deregulation in the USA, along with the public’s acceptance of ‘retail choice’, is required for microturbines to increase their market penetration.

While microturbines are being used on a commercial basis in increasing numbers, they still need to establish themselves in the market. This can only be done with a proven track record.

A favourable operating record will bring greater public interest and acceptance and stimulate larger commercial applications and greater market penetration.

The application behind the electricity purchase will dictate how various forms of distributed generation will be used. While the cost of microturbines and other forms of generation have varying degrees of importance in the decision making process, the knowledge of the customer and their applications are the keys for the successful growth of the microturbine industry.

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