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President's Message 3rd Quarter 2014

By Robert Thornton posted 06-16-2017 20:23

  

From District Energy Magazine, Third Quarter, 2014


The pace of change in the energy indus­try is accelerating. The visibility and value of thermal energy seems to be increasing as well. Is the Environmental Protection Agency's Clean Power Plan the ful­crum we need to leverage more efficiency into the U.S. electricity markets? Will this federal blueprint provide a pathway for states to sup­port more investment in combined heat and power and district energy? Will this accelerate the paradigm shift toward more localized and distributed generation? How can IDEA and its members position our industry most favorably to optimize this policy shift? As usual, the devil will be in the details, and although the Clean Power Plan weighed in at a hefty 645 pages, there is still a lot of detail missing and work to be done to educate policy makers and advance opportunities for district energy/CHP.

For all of my 35 years in the energy industry, I have been confounded by the lack of efficiency standards for our nation's central station power plants. We have efficiency standards for refrigerators, water heaters, air conditioners, computers, automobiles - you name it. These efficiency targets have cata­lyzed innovation and generated energy and environmental savings. But our single-largest source of emissions and energy waste in this country, central station power generation, has largely avoided any real efficiency standards. With an average fleet efficiency of 32.4 percent, more than two-thirds of the energy input to large generating stations is essentially lost or wasted as surplus heat to nearby rivers, bays, oceans or the sky. Sure, in restructured markets, the heat rate (efficiency) of a plant will help to determine its dispatch ranking. More efficient plants are called by the independent system operator to produce first. But when outside temperatures soar, seasonal cooling demand kicks in, all units are activated, and perfor­mance standards become almost secondary to maintaining reliable power supply and flow throughout the grid.

In the last decade, renewable portfolio standards in 38 states have dramatically shifted the energy paradigm, with solar and wind assets becoming the dominant sources of new capacity. By design, these are es­sentially considered distributed generating assets, located in more diverse locations and in smaller footprints. Also by design, wind and solar typically do not provide the energy den­sity required to meet dispatchable demand in clustered load locations like cities, campuses and industrial settings. As we witnessed during Superstorm Sandy, high demand and mission-critical locations are ideally served by highly efficient CHP and district energy where energy resiliency and reliability are paramount. At the same time, the grid can also use district energy/CHP with thermal storage to provide more balancing capacity to optimize the inter­mittent supply of solar and wind.

The Clean Power Plan is designed to give states the flexibility to meet their targets by reducing electricity demand, extending the life of nuclear plants or improving the efficiency of current coal-fired generation as well as by switching to natural gas and renewables. The EPA has set out "reasonable" emissions targets for each state, reflective of their current fuel mix and based on a theoretical application of the "best system or emission reduction" and drawing from four "building blocks" of emission reduction strategies. Those building blocks include (1) heat rate improvements at existing coal-fired electric generating units (EGUs); (2) redispatch from steam generators using coal, oil or natural gas to existing natural gas combined-cycle units; (3) reductions in EGU emissions due to increased low- or zero-carbon generation; and (4) reductions in EGU emissions due to end-use energy efficiency. District energy and CHP fit in each of the cate­gories but will need to be more fully explained to assist regulators with understanding how to support deployment.

In the first instance regarding heat rate improvement, we have a case example at the Kendall Station in Cambridge. Veolia recently invested in plant reconfigurations to harvest waste heat from disposal into the Charles River to be recaptured for distribution via new district heating pipes to buildings in Boston and Cambridge, thereby improv­ing the heat rate of the plant. Recovery of useful heat has been a principal strategy in London and around the U.K. as a means to cut emissions and increase energy efficiency. It will be useful to identify and inventory the location of existing power plants nearby to existing district heating networks that could boost efficiency and improve heat rate by recovering and selling thermal energy. Not only will their heat rate improve, but useful heat also has a market value that will produce an additional source of revenue for existing power plants.

Building block No. 2, moving to combined-cycle natural gas, creates an opportunity again to look at district energy/CHP as an anchor customer for new generation capacity. Recognizing the value of heat and looking for methods to utilize more heat will clearly play to the strengths of the district energy industry, perhaps catalyzing expansion or construction of new district heating or cooling networks. IDEA has identified 289 existing district heating systems in the U.S. that are currently thermal only. Surely, these assets present prime op­portunity to locate new CHP capacity and add local electricity generation to the mix. Building block No. 3, utilizing low- or zero-carbon generation, may very well include biomass CHP or waste-to-energy options that are ideal prime movers for district energy. While this building block seems primarily directed at nuclear, in many instances biomass or geothermal might be a more cost-effective option in many states. Clearly, item No. 4, enhanc­ing end-use efficiency to reduce EGU emissions may fit a number of district energy/CHP scenarios, especially as it relates to district cooling.

It will be important for IDEA to sub­mit substantive comments to the EPA within the 120-day comment period, ending in early October. Our present mission will be to articulate the sce­narios in which district energy/CHP fit the overall "system" objectives. That was another key point raised by EPA - that this Clean Power Plan is intended to be a more holistic approach and not simply a prescriptive end-of-pipeline compli­ance framework. Strategically, it will be advantageous to have district energy/CHP more fully defined and described as a compliance approach so that it becomes easier to advise and deploy at the state level. At the same time, IDEA members who have favorable state or local policy relationships may be called on to help promote business best prac­tices and identify cases to better inform policy makers.

At the same time, at the state level, there is a similar transition to a new elec­tricity paradigm under way in states like New York and Massachusetts. Recently, the New York Public Utilities Commis­sion released its "Reforming the Energy Vision" plan to change how electric energy is manufactured, distributed and managed across the state. The plan cites emerging technological innovation and increasing competitiveness of renewable energy resources - combined with aging infrastructure, extreme weather events, and system security and resiliency needs - as factors leading to significant changes in the electricity industry. The commis­sion recognized that leadership and support for evolution must emerge from both industry and regulators to advance the process and realize regulatory change that will promote more efficient use of energy; deeper penetration of renewable energy resources such as wind and solar; wider deployment of "distributed" en­ergy resources such as microgrids, on-site power supplies and storage; while also promoting greater use of advanced en­ergy management products to enhance demand elasticity and efficiencies.

These changes, in turn, will empower customers by allowing them more choice in how they manage and consume elec­tric energy. This "empowerment" of the consumer will obviously affect the dis­trict energy industry and will require that IDEA members get closer to the customer and support real-time customer informa­tion exchange. Ultimately, this approach should result in the integration of more distributed thermal energy sources to fully optimize intermittent resources and create a more holistic system.

A similar approach, known as "grid modernization," has been undertaken in Massachusetts. State policy makers recognize that within the Massachusetts economy, higher education and health care are core industries that demand very highly reliable energy supply. Likewise, more frequent and severe storms causing grid interruptions have highlighted the need for more resilient infrastructure.

In both New York and Massachusetts, reforms and revision of utility rate-making will be critical to shaping incentives and encouraging the right public and private investment behavior to develop a cleaner, more efficient and more resilient energy system. As we get more deeply involved in the evolution, it will be important to learn from the lessons of Germany, where the government's plan to replace nuclear power with wind and solar has unwitting­ly created competition between renew­ables and efficiency - the key attribute of CHP. Clearly, change is under way. Please stay tuned...



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