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President's Message 2nd Quarter 2013

By Robert Thornton posted 06-16-2017 20:12

  

From District Energy Magazine, Second Quarter, 2013


Over the past year or so, it seems like I have been traveling endless­ly, presenting the district energy/CHP story to audiences big and small. From business groups at the local Kiwanis luncheon, to large global symposiums of impressive government and industry leaders, to college lecture halls brimming with bright millennials seeking a path to a career in sustainability, my remarks usually revolve around the fundamental common sense of district energy/CHP and how it can deliver dual economic and environmental benefits along with greater resiliency for local economies.

At times I feel like Johnny Appleseed, walking endlessly and planting small seeds that may someday germinate into fruitful and nutritious district energy systems. Other times, I feel more like Diogenes, ambling about with a lantern, challenging the central generation model and seeking an honest discussion on how to catalyze and incent power plant efficiency to move beyond the stultifying status quo that perpetuates chronic waste and nega­tive environmental impact. In either case, we continue to face long odds until we promulgate better policies that properly recognize the value of thermal energy that are accompanied by readily accessi­ble funding sources to fertilize those good ideas we've planted.

Of late, I have developed a new sense of urgency when delivering the IDEA message. As I get older and the gray hairs multiply, my tolerance is declining for those simply retreading old claims around stranded costs and other obfusca­tions to maintain regulatory status quo. After all, I have been at this energy game since the late 1970s and witnessed more than one cycle on the climate/carbon conundrum. But coupled with this urgency is a growing sense of opportunity. The future belongs to more distributed, more robust district energy microgrids that are needed for tomorrow's economy. Remote fossil-fired central generating stations that dump two-thirds of their fuel as wasted heat are being relegated to the dust heap of history, and rightly so.

On a recent Saturday afternoon, I spoke at my alma mater at the Tufts Energy Conference on a panel focused on military energy planning. It was an inter­esting opportunity to explain how district energy microgrids could produce both operating savings and greater resiliency for the $4 billion spent annually on ener­gy on our nation's military bases. That same day, at the nearby MIT Energy Con­ference, NRG CEO David Crane remarked that part of the problem with bringing innovation to the electricity sector is that "we exist in an industry of Neanderthals ... the least innovative industry in history." As reported in MIT News, Crane said, "The energy model that exists is really at the end of its useful life," adding that in a few decades, "we'll be pulling down power lines because power generation will be so distributed. Centralized power will go away."

Meanwhile, on that same Saturday, the Tufts and MIT student-run conferences shared a common keynote speaker in for­mer New Mexico Governor Bill Richardson. In the morning at MIT, Richardson (who is also a former Energy Secretary and UN Ambassador) echoed Crane's view on the diminishing future for coal, citing climate change and the overwhelming march toward cleaner energy by 145 countries. At Tufts in the afternoon, Richardson called for field-leveling financial policies like the Master Limited Partnership Parity Act to provide competitive funding for clean energy at scale. He challenged us all to "move from a static energy policy reli­ant on fossil fuels to sustainable, renew­able clean energy" and cited natural gas as a "bridge fuel."

A real-world example of this transi­tion is occurring right now in Massachu­setts at the Brayton Point Power Plant. At 1,536 MW, it is the largest fossil fuel power plant in New England. I grew up in the next town over from Somerset, Mass. and saw the plant's very begin­nings. When operations began in 1964, the plant, like so many others of its era, burned coal and was designed with once-through cooling, withdrawing up to 1 billion gal per day from the Taunton River to condense the steam produced to generate power and rejecting that heat into Mount Hope Bay - a lot of heat, actually, on average 37 trillion Btus per year. If that heat were captured and utilized in a district energy scheme, it would have a market value of around $300 million annually. That's a lot of energy to literally dump in the ocean for nearly fifty years.

Like many power plants, the facility has had multiple owners over five decades. Ever since I can remember, the plant has been the focus of environmental battles and litigation over emissions, particulates and thermal pollution, fomenting the for­mation of "Save the Bay," a local citizens group conceived to protect the coastal environment. Over the past seven years, the current utility owner has invested over $1.1 billion in environmental compliance, including new scrubbers to reduce stack emissions and particulates. In the past three years, I witnessed construction of twin forced-draft cooling towers rising to 500 ft, nearly the height of Hartford's CityPlace, the tallest office building between Boston and New York. These cooling towers now dwarf their commu­nity surroundings, imposing an ominous profile on the horizon. The owner is to be commended for complying with the National Pollutant Discharge Elimination System (NPDES) regulations by investing $570 million in new cooling towers to reduce thermal discharge into the bay. However, the cooling towers simply shift wasted thermal energy from the water below to the sky above, with no improve­ment in plant efficiency.

In the competitive New England elec­tricity market, an independent system operator (ISO) sets the market clearing price for power every day. Plant heat rate, or fuel conversion efficiency, impacts dispatch priority in the New England ISO. So as the plant heat rate increased (effi­ciency declined), the capacity factor and revenues dropped, and ultimately the value of the asset declined. The drop in plant capacity factor is due in part to com­petition with lower-cost natural gas assets, economic slowdown from the recession and effective energy conservation efforts. In Sept. 2012, the owner announced that the plant was for sale. Then in Jan. 2013, in its fourth-quarter 2012 SEC filings, they disclosed an impairment charge of $731 million, writing down the value of Brayton Point. The utility has decided to retreat from the uncertainty of the merchant power market in New England to re-focus on business in the more traditional regu­lated utility environment in their backyard.

If you really think about it, $570 mil­lion spent on cooling towers can buy a whole lot of district heating piping. For comparison, building out the wholesale district heating network in greater Copenhagen cost around $500 million and today supplies heat to around 500,000 homes and businesses in 18 interconnected municipalities. Granted, the low-grade heat source from Brayton Point would need retooling for true CHP, and more economic analysis is required for an energy map of the market near the plant. But instead of an impaired asset with a 16 percent capacity factor and poor economics, Brayton Point could potentially be selling surplus heat rather than just dumping it. The increased reve­nue, lower emissions and improved heat rate might have enabled the plant to transition to burn more natural gas or even lower-carbon biomass given the inherent solid fuel capabilities.

This more favorable CHP scenario is taking place right now in Cambridge, Mass. on a smaller scale. A 256 MW gen­erating station in Cambridge has entered into an agreement with Veolia Energy NA to recycle thermal effluent that was being exhausted into the Charles River to be recovered as useful heat into a newly-con­structed pipeline across a bridge to provide steam to the downtown Boston district heating network. A thermal liability has thus been reconfigured as a thermal asset that will save money, conserve fuel and cut emissions equivalent to taking 50,000 cars off the road. In this case, district energy can produce major environmental benefits, cutting thermal discharge and cooling water withdrawals by 95 percent and potentially displacing other high-emissions steam sources.

Of course, the smaller scale of the Cambridge project and its proximity to the existing Boston district heating system are not directly comparable to the Brayton Point scenario. Solutions like this will involve multiple parties including utilities, regulators and communities. Legislators and state environmental staff need to promulgate policies that properly recog­nize the value of thermal energy as a means to cut energy waste, strengthen trade balances and reward power plant efficiency. More holistic solutions such as the pending energy waste legislation in Minnesota would stimulate better eco­nomic behavior across the industry with­out being too prescriptive. With the eco­nomic and environmental liabilities of central station power plants, particularly coal-fired facilities, it becomes increasingly obvious that now is the time for transi­tion to more distributed, cleaner systems.

I think the scenario of Brayton Point is not an isolated incident, but a harbinger of things to come. There is clearly awareness and movement to smaller, cleaner gener­ating plants - 25 to 100 MW units that can be constructed in a reasonable time period and where there is a ready use for thermal energy, like downtown district energy facilities. The intransigent electric utility industry will require guidance and nudging from legislators and regulators. As long as regulated utilities are rewarded for simply adding to rate base and are neither incentivized nor penalized for the efficiency of generating assets, change is not likely to occur. The current regulatory regime resembles a form of co-dependency that perpetuates structural inefficiency and inhibits movement to the more resilient energy infrastructure sought by mayors nationwide to withstand more frequent and severe weather events. Building local district energy networks would increase penetration of distributed generation and - by capturing and using surplus heat in networks - reduce regional emissions of greenhouse gases and displace redundant combustion for space heating in nearby cities. The seeds of greater energy resil­iency have been planted. Let's get to work.



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