Industrial and Industrial and Commercial Cogeneration Commercial February 1983 Cogeneration NTIS order #PB83-180547 . -' - _ - ..... — — Library of Congress Catalog Card Number 83-600702 For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402 Foreword This assessment responds to requests by the House Committees on Banking, Finance, and Urban Affairs; Energy and Commerce; and Science and Technology for an evaluation of the economic, regulatory, and institutional barriers to the develop- ment of cogeneration systems by utilities, industries, and businesses. This report com- plements a forthcoming OTA analysis of Industrial Energy Use in evaluating the poten- tial for onsite energy production in industry. The findings also will serve as part of the material to be used in future OTA assessments of other electricity-generating technol- ogies. The report describes the available and promising future cogeneration technologies, including their likely costs and operating characteristics, and reviews the potential ap- plications for these technologies in industry, commercial buildings, and rural/agricultural areas. It also describes the technical requirements for interconnecting cogeneration systems with the utility grid, and discusses advanced combustion and conversion tech- nologies (fluidized bed and gasification systems) that will enable cogenerators to use fuels other than oil and natural gas. The analysis of cogeneration’s market potential focuses on the competitiveness of cogeneration when compared to investments in con- servation or in conventional separate thermal and electric energy systems (e.g., an in- dustrial boiler and a central station utility powerplant). In addition, the report examines the possible effects of the widespread use of cogeneration systems on utilities and their ratepayers, and on air quality. Several options for changes in Federal policy in order to enhance cogeneration’s market potential, to optimize its ability to displace oil and natural gas, and to mitigate its possible adverse economic and environmental impacts are discussed. We are grateful for the assistance of the project advisory panel and the advice of numerous individuals in utilities, industry, State governments, trade associations, and universities. Also the contributions of several contractors, who performed background analyses, are gratefully acknowledged. . Ill Industrial and Commercial Cogeneration Advisory PaneI James J. Stukel, Chairman University of Illinois Roger Blobaum Theodore J. Nagel Roger Blobaum & Associates American Electric Power Service Corp. William H. Corkran Thomas W. Reddoch American Public Power Association University of Tennessee Claire T. Dedrick* Bertram Schwartz California Land Commission Consolidated Edison Co. of New York Steven Ferrey Harry M. Trebing National Consumer Law Center Michigan State University Todd La Porte Thomas F. Widmer University of California at Berkeley Thermo Electron Corp. Evelyn Murphy Robert H. Williams The Evelyn Murphy Committee Princeton University * Ex officio. Dr. Dedrick is a member of the OTA Technology Assessment Advisory Council. iv OTA Industrial and Commercial Cogeneration Project Staff Lionel S. Johns, Assistant Director, OTA Energy, Materials, and International Security Division Richard E. Rowberg, Energy Program Manager Jenifer Robison, Project Director Eric Bazques Steven Plotkin David Strom Clark Bullard Charles Holland J. Bradford Hollomon* Research Assistants Lois Gottlieb George Hoberg Martin Hsia Administrative Staff Virginia Chick Marian Grochowski Lillian Quigg Edna Saunders Contractors and Consultants Thomas Casten Decision Focus, Inc. Energy and Resource Consultants, Inc. ICF, inc. Edward Kahn L. W. Bergman & Co. William Snyder OTA Publishing Staff John C. Holmes, Publishing Officer John Bergling Kathie S. Boss Debra M. Datcher Joe Henson Doreen Cullen Donna Young l Project Director through July 1980. Acknowledgments OTA thanks the following— people who took time to provide information or to review part or all of the study: Dwight Abbott Elliot Levine Aerospace Corp. Argonne National Laboratory Weible Alley Glenn Lovin Arkansas Power & Light Co. International Cogeneration Society Douglas Bell Frederic March U.S. Environmental Protection Agency Consultant Ben Blaney Tom Marciniak U.S. Environmental Protection Agency Argonne National Laboratory Merrilee Bonney Alan S. Miller U.S. Environmental Protection Agency Natural Resources Defense Council Josh Bowen Ralph C. Mitchell, Ill U.S. Environmental Protection Agency Arkansas Power & Light Co. Joel P. Brainerd David Morris New York Public Service Commission Institute for Local Self-Reliance John Dadiani Dale Pahl TRW Corp. U.S. Environmental Protection Agency Douglas C. Dawson Robert Podlasek Southern California Edison Co. Illinois Commerce Commission Fred 1. Denny Wilson Pritchett Edison Electric Institute National Rural Electric Cooperative Association Richard Donovan Arnold Rosenthal National Aeronautics and Space Administration Consolidated Edison Co. of New York Fred Dryer Blair A. Ross Princeton University American Electric Power Service Corp. Lowell J. Endahl Barry Saitman National Rural Electric Cooperative Association California Energy Commission Peter Freudenthal Fred Sissine Consolidated Edison Co. of New York Congressional Research Service Howard Geller Elinor Schwartz American Council for an Energy Efficient Economy State of California, Washington Office Marty Gordon Walt Stephenson Edison Electric Institute U.S. Environmental Protection Agency Tom Grahame John Williams U.S. Department of Energy U.S. Department of Energy J. Steven Herod L. J. Williams U.S. Department of Energy Electric Power Research Institute Ronald Johnson R. L. Williams Aerospace Corp. EBASCO Services Inc. R. Eric Leber Mike Zimmer American Public Power Association Cogeneration Coalition, Inc. Tom Lepley Arizona Public Service Co. vi Contents Chapter Page I. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . $ . . . . . . . . . . . . . . . . . . . . . 3 2. issues and Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3. Context for Cogeneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 4. Characteristics of the Technologies for Cogeneration . . . . . . . . . . . . . . . . . . . 117 5. lndustrial, Commercial, and Rural Cogeneration Opportunities . . . . . . . . . . . 171 6. impacts of Cogeneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 7. Policy Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267 Appendixes A. Dispersed Electricity Technology Assessment Model . . . . . . . . . . . . . . . . . . . 283 B. Emissions Balances for Cogeneration Systems . . . . . . . . . . . . . . . . . . . . . . . . . 286 C. Acronyms, Abbreviations, and Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288 index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295 vii Chapter 1 Overview Contents Page Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Cogeneration Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 The Potential for Cogeneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Cogeneration Opportunities .. .. ... ... . . . . . . . . . . . . . . . . . . . . . . . . . . 11 industrial Cogeneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 11 Commercial Building Cogeneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Rural Cogeneration Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Interconnection Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 impacts of Cogeneration . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. ... ... ..... . . . . . 15 Effects on Fuel Use..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 impacts on Utility Planning and Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Environmental Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Socioeconomic Impacts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Policy Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Oil Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Economic incentives for Cogeneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Utility Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Interconnection Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Air Quality Considerations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Research and Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Chapter 1 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Tables Table No. Page l. Summary of Cogeneration Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2. lnstalled lndustriaI Cogeneration Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figures Figure No. Page I. Historical Overview of Electricity-Generating Capacity, Consumption, and Price, 1902-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2. Conventional Electrica! and Process Steam Systems Compared With a Cogeneration System . . . . . . .. .. .. .. .. .. ... ... ...... . . . . . . . . . . . . . . . . . . . . . 7 O Chapter 1 Overview INTRODUCTION A major focus of the current energy debate is Cogeneration is an old and proven practice. how to meet the future demand for electricity Between the late 1880’s and early 1900’s, oil- and while reducing the Nation’s dependence on im- gas-fired cogeneration technologies were increas- ported oil. Conservation in buildings and in- ingly used throughout Europe and the United dustry, and conversion of utility central station States. In 1900, over 59 percent of total U.S. elec- capacity to alternate fuels will play a major role tric generating capacity was located at industrial in reducing oil use in these sectors. But cost- sites (not necessarily cogenerators) (see fig. 1). effective conservation measures can only go so Because electric utility service during this period far, and the industrial and commercial sectors was limited in availability, unreliable, unregu- ultimately will have to seek alternative sources lated, and usually expensive, this onsite genera- of energy. Moreover, electric utilities may face tion provided a cheaper and more reliable source financial, environmental, or other constraints on of power. However, as the demand for electric- the conversion of their existing capacity to fuels ity increased rapidly and reliable electric service other than oil, or on the construction of new alter- was extended to more and more areas in the early nate-fueled capacity. 1900’s, as the price of utility-generated electric- ity declined, and as electric generation became A wide range of alternate fuels and conversion a regulated activity, industry gradually began to technologies have been proposed for the indus- shift away from generating electric energy onsite. trial, commercial, and electric utility sectors. One By 1950, onsite industrial generating capacity ac- of the most promising commercially available counted for only about 17 percent of total U.S. technologies is cogeneration. Cogeneration sys- capacity, and by 1980 this figure had declined tems produce both electrical (or mechanical) to about 3 percent. At the same time, cogenera- energy and thermal energy from the same pri- tion’s technical potential (the number of sites with mary energy source. Cogeneration systems a thermal load suitable for cogeneration) has recapture otherwise wasted thermal energy, usu- been increasing steadily. ally from a heat engine producing electric power (i.e., a steam or combustion turbine or diesel en- There has been a resurgence of interest in re- gine), and use it for applications such as space cent years in cogeneration for industrial sites, conditioning, industrial process needs, or water commercial buildings, and rural applications. A heating, or use it as an energy source for another cogenerator could provide enough thermal ener- system component. This “cascading” of energy gy to meet many types of industrial process use is what distinguishes cogeneration systems needs, or to supply space heating and cooling from conventional separate electric and thermal and water heating for a variety of different com- energy systems (e.g., a powerplant and a low- mercial applications, while supplying significant pressure boiler), and from simple heat recovery amounts of electricity to the utility grid. Because strategies. Thus, conventional energy systems cogenerators produce two forms of energy in one supply either electricity or thermal energy while process, they will provide substantial energy sav- a cogeneration system produces both. The auto- ings relative to conventional separate electric and mobile engine is a familiar cogeneration system thermal energy technologies. Because cogener- as it provides mechanical shaft power to move ators can be built in small unit size (less than 1 the car, produces electric power with the alter- megawatt (MW)) and at relatively low capital cost, nator to run the electrical system, and uses the they could alleviate many of the current prob- engine’s otherwise wasted heat to provide com- lems faced by electric utilities, including the dif- fort conditioning in the winter. ficulty of siting new generating capacity and the 3