The continuing reliability problems in western USA have highlighted the vulnerability of a high-tech economy to power supply problems. Caused by a combination of unseasonal weather patterns, a lack of generating capacity and an economic boom, the commercial and industrial sector of California has been hit hard by blackouts and rolling brownouts.
Although California’s woes are a somewhat extreme example of the consequences of an unreliable power supply system, companies are beginning to realise the importance of reliable and high quality power supplies. This is driving demand for distributed generation technologies such as fuel cells, microturbines and reciprocating engines.
This is the conclusion of a recent report by investment bank Bear Stearns into the US market for distributed generation technology. The report – Distributed Energy Services, The World’s Power and Transportation Industries: Set for a Revolution, Part II – states that the confluence of deregulation, advances in power generation technologies and an increased reliance on high-tech IT solutions, could provide the next big investment opportunity in the USA.
One of the main drivers for this emerging trend towards distributed generation is, according to Bear Stearns, society’s increasing reliance on silicon-based technologies for everything from desktop applications to database management and e-commerce. Thus the demand for greater quantities of high-quality, reliable electricity that is cheap and also generated with a low environmental impact is increasing.
Figure 1. Total power costs, centralized power versus distributed generation
According to the Electric Power Research Institute (EPRI), computers and computer-related activity consume around 13 per cent of all power produced in the USA. In addition, such equipment is vulnerable to poor quality power, as voltage sags and spikes can damage a computer’s hard drive and can prove deadly to automation equipment.
According to Bear Stearns, around 45 per cent of computer data losses are caused by power outages or power surges. The cost of this ‘downtime’ to businesses can be huge, ranging from $70 000 per hour to over $6 million per hour depending on the type of business. EPRI has estimated that the annual cost to the USA of poor power quality could be as much as $400 billion.
While most grids and power systems achieve a reliability of 99.9 per cent, approximating to nearly nine hours of downtime per year, the demand for higher reliability – into the “six nines” – is growing. Thus some internet-based companies and financial institutions are seeking power systems where a reliability of 99.9999 per cent can be achieved, equating to just 32 seconds of downtime per year.
Uncertainty over the exact nature of deregulation from state to state in the USA has meant that until two years ago, investment in the power industry was at a low level. Reserve margins across the country have fallen, making it difficult for many utilities to guarantee reliable, good quality power supplies, particularly during times of peak demand.
As Bear Stearns puts it, a “disconnect” has therefore occurred between the needs of the US’ changing economy and the capabilities of the country’s power system, and this is where on-site, or distributed power generation, can play a part.
Distributed technologies such as microturbines, fuel cells, reciprocating engines and small industrial gas turbines can be teamed up with energy storage devices such as flywheels, batteries and superconductors to improve power supply reliability and quality.
According to Bear Stearns, one technology which is poised to play a large role in the distributed generation market is microturbines: they are flexible, commercially viable, easy to install and have a good environmental performance. They also have low maintenance costs and can be controlled remotely.
Significant R&D efforts by several companies over the past few years brought the first commercially available products to the market last year, and two of the leading manufacturers, Capstone Turbine Corp. and Honeywell (recently acquired by GE), have already taken significant orders for their products.
Microturbines are likely to find a niche in generating supplemental power to small manufacturing plants or to portions of plants that have no tolerance for power outages. The likely application for microturbines is commercial, in outputs of anywhere from 25 kW to 500 kW, providing power to restaurants, retail stores, hotels and offices.
Microturbines could be deployed in a number of ways:
- Backup or standby power
- Continuous or UPS
- Peak shaving
- Remote power
- Resource recovery
- Fuel cell hybrids
Cheaper than the grid
Electricity generated by microturbines can be cost-competitive in comparison with grid electricity, particularly when the benefits of backup power and peak shaving are taken into consideration. Unit purchase costs are currently around $600-900/kW but this is expected to fall to around $400/kW when production can be scaled up.
In the USA, electricity purchased by residential users typically costs between $0.06/kWh and $0.10/kWh. Of these costs, approximately 60-70 per cent is generation charges, 1-2 per cent transmission charges and 30-40 per cent distribution charges. Where a new grid needs to be implemented, the cost of the transmission and distribution element will rise. In addition, transmission and distribution grids also experience losses, especially during peak times, further enhancing the economic appeal of microturbines.
Figure 2. Comparison of capital costs for different generating technologies
In 1999 in the USA, electricity rates for commercial end users averaged $0.0712, according to the Energy Information Administration – similar to the average cost of generating power from a microturbine.
In spite of their advantages, microturbines will have to compete in the market with other technologies such as reciprocating engines, small gas turbines and also possibly fuel cells.
According to Bear Stearns, the success of microturbines in the marketplace depends largely on whether economies of scale can be reached. To bring unit cost down to $400 per kW for a 30 kW microturbine, it is estimated that production volumes of 100 000 units per year will be required.
In addition, efficiency and reliability levels require improvement, and durability has yet to be proven. Microturbines generally produce electricity at efficiencies of up to 28 per cent, and can reach 32 per cent when fitted with a recuperator. Meanwhile, reciprocating engines can generate at up to 40 per cent efficiency.
In addition, microturbines are expected to have a reliability of 98-99 per cent, far below grid levels of 99.9 per cent. While 98-99 per cent reliability is not acceptable for stand-alone applications, it is probably sufficient for units that are operating in parallel with the grid.
On the non-technical side, there are still a number of issues to be cleared up for distributed generation technologies, including standards for interconnection and safety, and the removal of the uncertainties surrounding utility fees for such technologies.
Estimates for growth in the microturbine market vary. ABB has estimated that it could reach 2000 MW within five years, equating to a market worth of $1 billion, depending on how quickly costs fall. Honeywell’s predictions are more bold, estimating 200 000 MW of units within five years.
For the distributed generation market as a whole, independent analyses predict that within ten years the market could reach 24 000 MW in the USA alone, with reciprocating engines dominating.