Power up: Considerations to help understand the potential of cogeneration
M. HEIGOLD, Burns & McDonnell, Calgary, Alberta, Canada
Combined heat and power (CHP), also known as cogeneration, converts one form of energy to two usable forms, typically heat and power. By simultaneously producing on-site electricity and heat, cogeneration systems can provide reliable energy at reduced overall costs. Cogeneration is a very effective pathway to executing decarbonization strategies when coupled with renewable natural gas (RNG) or other low-carbon fuels.
Cogeneration systems are most effective in facilities with balanced electrical and thermal loads, such as those found in industries like oil, gas and chemical, education, healthcare and heavy industrial manufacturing. Reasons for adding a cogeneration system to a facility include providing a stable electricity supply or updating aging thermal assets. Every facility is unique, and there are no cookie-cutter solutions.
While there are many forms of cogeneration facilities, a common way to upgrade an existing facility is to use gas-turbine-based power generation as its hot exhaust is well suited for heat recovery. The heat recovered will displace existing thermal units (i.e., fired heater or boiler); however, since the turbine is producing both heat and power, its fuel consumption is higher. One of the associated costs of self-generation is the supplemental increase in fuel, and there are other factors to consider, as well.
The economics of a cogeneration system. The decision to install a cogeneration system is primarily driven by economics, and the factors that are used to assess the benefits are complex. On one side, you must commit to a capital expenditure, and your costs will increase for fuel and maintenance. On the other side, direct costs for electricity will drop, and certain tax credits may become available.
The final assessment largely depends on which is less expensive: electricity imports plus the cost of dedicated resources providing heat, or the cost of the combined generation for both heat and electricity in a cogeneration facility.
To give an example of what a difference costs can make, a recent study in Alberta (Canada) showed the advantages of installing a cogeneration system at a gas processing facility. At the time of the study, considering market prices for natural gas and electricity, maintenance costs, and the federal carbon tax, the equivalent cost of electricity provided by cogeneration was reduced by nearly 70%.
However, this does not tell the full story. Fluctuations in operating costs over time can change the viability of a project, so a set of future assumptions must be made to identify worst- and best-case scenarios.
Sustainability and incentivizing cogeneration. While the decision to implement a cogeneration system is primarily economical, there are efficiency advantages. The utilization of waste heat as usable energy in a facility is a benefit due to reduced energy consumption.
Governments also see the benefit of cogeneration and provide tax incentives to help projects that may be on the edge of profitability. Focusing on efficiency, both Canada (Class 43) and the U.S. (investment tax credits) have programs in place to encourage the installation of cogeneration systems. Tax credits and other incentives—no matter where in the world an operation is located—can impact the decision to add a cogeneration system.
Feasibility considerations. When conducting an economic assessment, projected electric and natural gas pricing is an important factor, and the design of the cogeneration system is also very important as it determines how much capital will be spent, how much fuel will be burned and how much electricity will be produced.
The key to the design is gas turbines, which are not customizable to the extent that the perfect power generation level can be selected with just the right amount of available waste heat. Each manufacturer has a line of turbines that produces electricity at specific levels to cover market segments. In addition, each turbine within that line has a unique efficiency level that determines how much fuel is consumed to produce its electricity and how much waste heat is available for recovery.
When the gas turbine is selected, the associated equipment required to integrate the cogeneration system into a facility can be determined. The trick is to pick the right turbine. Other factors that are essential for a successful gas-turbine cogeneration integration include:
- Understanding a facility’s heat and power needs
- Determining the size and functionality of required equipment
- Contemplating the number of machines needed to be installed
- Evaluating transition complexities between cogeneration and non-cogeneration operating modes.
Analyzing all costs and benefits. A full lifecycle analysis will help owners understand how a project’s capital and operating expenses balance with the reduction in direct electricity costs. While a cogeneration project’s justification is typically financially based, there are other benefits that can be derived. Besides the reduction in overall carbon and pollutant emissions due to the efficiency of cogeneration, these projects also present the opportunity to further decarbonize both electrical and thermal production using a low-carbon fuel, including renewable natural gas, hydrogen, ammonia, renewable diesel or other options.
The project economics are further supported through avoidance of carbon penalties or leveraging fuel market incentives. Examples of how these help project economics can be through avoidance of the Canadian carbon tax and leveraging credits such as the Low Carbon Fuel Standard (LCFS) in California (U.S.).
There is an increased interest in cogeneration facilities. For a variety of industries, cogeneration solutions are being implemented to maximize long-term operational efficiency and cost-effectiveness, along with providing a valuable way to progress toward decarbonization goals.
About the author
Mark Heigold is a Department Manager and Associate Process Engineer. In his role, he counsels clients in a variety of industries on the challenges and opportunities of incorporating cogeneration in facilities. He has nearly 30 yr of direct experience with many aspects of cogeneration operations, including a number of projects built in Canada.
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