Time to Rethink Electric-Only Power

The increasing volatility of today’s energy marketplace means that engineers must provide flexible energy options in the central plants they propose. The alternative is failing to truly serve a client’s long-term and short-term needs.

For years, operators of manufacturing plants, airport terminals, college campuses and office complexes have enjoyed the benefits of central plants to produce chilled water, steam, hot water, compressed air and electricity. Aside from increased efficiency, centralization helped reduce maintenance and operational costs.

And the news only got better as technology advances further increased efficiencies. But now the news is not so good. Traditionally, central plants have relied on only one source of energy, either electricity, coal, natural gas or fuel oil. Environmental concerns, in recent years, have made coal and fuel oil less viable, increasing reliance on electricity as a primary fuel source. And now, as a result of the ongoing deregulation of electric utilities, the cost of electricity is on the rise and service interruptions are becoming more common, creating a great deal of uncertainty for consumers.

At the same time, many existing plants are reaching the end of their useful lives, and in other cases, owners simply may want to upgrade to take advantage of newer, more efficient equipment that also addresses current environmental standards. Consequently, many owners and facility operators are literally at a fork in the road. Fortunately, engineers have the opportunity to guide these clients to the right path by utilizing a compass known as the hybrid central plant. The hybrid advantage

Unlike traditional plants, a hybrid is powered by a combination of energy sources. Such a plant, for example, might combine electric centrifugal chillers with any number of different types of natural gas-fired components—such as absorption chillers, engine generators or combustion turbines. By enabling the production of useful energy from more than one type of fuel, the hybrid plant offers an opportunity to mitigate risk and successfully navigate a turbulent energy market. And because the hybrid plant offers operators increased flexibility when selecting the most economical fuel source during peak and off-peak loads, it promises greater cost-effectiveness. It has the capability to switch fuel sources during an interruption or outage, and it also generates increased reliability. Learning from the past and present

Without question, power reliability and cost-effectiveness have always been important to owners, and the recent changes in the energy marketplace have only intensified these concerns. Before utility deregulation, owners could depend on their local energy company to provide long-term contracts and reliable delivery of gas and electricity. Local utility companies were focused on providing reliable service, and the cost of providing gas and electricity was passed on to ratepayers.

The natural gas utility industry went through deregulation without any major disruptions, but customers began to notice variable pricing based on supply and demand. Similar trends have surfaced in other non-utility, deregulated markets such as the airline, health-care and insurance industries. Electric utilities, however, are the largest industry to ever undertake deregulation.

Electric utility companies are now being reorganized into power-generation, transmission and distribution branches. In some cases, formerly regulated electric companies are restructuring to supply all three services. Others are restructuring just to broker electricity to customers on a national basis.

As a result, consumers are faced with the ultimate costs. Aside from dramatic price fluctuation, some customers are even being asked to pay a premium to “guarantee” a long-term rate. Utilities are also offering variable rates or real-time pricing that encourage consumers to adapt their demand load profile during peak periods to free up resources for other customers.

All these conditions confirm the logic of operating a flexible central plant. A hybrid plant enables owners to better cope with the uncertainty of this energy marketplace. In the event of a shortage, the plant can draw on the alternative source. Having more than one source also offers protection against rate spikes and future rate changes. Moreover, owners are better situated to take advantage of the opportunities for cost savings that accompany deregulation. More importantly, using more than one energy source puts the owner in a more advantageous position for negotiating rates with utility companies. The flexibility to switch sources also allows owners to cash in on variable rates. Choosing a main source

With these arguments put forth, a hybrid plant makes nothing but sense. But how about the cost? The first step in designing a hybrid plant is an evaluation of the relative costs of gas and electric energy, and the impact they have on the life-cycle cost of the plant. As the cost of gas and electricity increases, the life-cycle cost of the plant is affected. Figures 1 and 2 on page 43 indicate the impact on the net present value of the plant as the cost of each energy source increases. As an example, this evaluation was of a hybrid plant comprising two 5-megawatt and four 1,000-ton chillers.

Once the analysis is complete and the “base” energy driver is selected, that source should become the majority provider. For example, if three chillers are proposed for a new plant, then two should be powered by the primary fuel and the third by the alternative source. The balance should be based on the relative reliability of the primary energy source and the stability of its future pricing. If the primary fuel source is fairly reliable, then a higher percentage of the utility plant should be driven from that source. On the other hand, if the primary energy source is questionable, then the split should be more evenly balanced.

In the case of most chiller plants, the primary energy source is electricity with natural gas as the backup. This has been the case historically, because the cost of electric centrifugal chillers is approximately half that of a gas-fired counterpart, including absorption chillers, gas-engine-driven centrifugal chillers and steam-turbine-driven centrifugal chillers utilizing steam from a gas-fired boiler. Today’s market conditions, however, are proving that this may not always be the case. In areas where natural gas is less costly, or its reliability is greater, it should become the primary source. Natural gas generators

If natural gas is the way to go, generators can be provided to match the load of an electric centrifugal chiller. In this arrangement, the chiller can operate on electricity or, if the engine/generator is turned on and connected to the chiller, natural gas or a fuel oil source could be the driver.

The cost of this configuration—electric-driven chiller in combination with a gas engine/generator set—is comparable to the cost of an absorption chiller, with the flexibility of two energy sources. In addition, the engine/generator set could be used to supply other electrical loads in an emergency. Other chiller manufacturers can provide a gas-engine drive mounted on their centrifugal chiller. Here again, the cost is comparable to an absorption chiller and provides a higher coefficient of performance, which can be figured by dividing output cooling BTUs by the energy input to the chiller. Cost comparisons

Once the choice of the fuel or energy source has been made, the selection of plant equipment should be based on the efficiency and cost of the equipment (see Table 1 above).

As these comparisons illustrate, the centrifugal-type chillers have the advantage in terms of input BTUs vs. output cooling BTUs. Therefore, in evaluating the type of chiller, the centrifugal machine should receive prime consideration. However, other factors should also be considered. For example, if usable waste heat is available, an absorption chiller might be a viable option. Other evaluation criteria include maintenance and operating costs.

Of course, the initial cost of the chiller plant is one of the first considerations in evaluating a chiller (see Table 2 on page 44). However, energy cost is the single evaluation criteria that will have the biggest impact on the life-cycle cost of a central chiller plant. For example, for an electric centrifugal chiller, the life-cycle energy cost is approximately five times the initial chiller cost—based on an average energy cost of 5 cents per kWh over the life of the chiller. Therefore, these two economic considerations—energy and initial cost—make up the crux of the economic evaluation of a proposed plant. Thermal energy storage and cogeneration

The use of thermal energy storage also offers owners the potential for cost savings and energy-source flexibility. When a chilled-water thermal-energy-storage tank is used in combination with a chiller plant fueled by electricity and gas, the chilled water stored during off-peak cooling periods can be generated by either energy source. This doubles the alternative energy source’s capacity to cool. This would work particularly well in systems in which the primary energy source is gas and the alternative is electricity. The electric chiller could operate at night when electricity may be less costly, more readily available and less subject to demand charges. The stored capacity could then be used during peak cooling periods when rates might be much higher.

Another type of hybrid plant is the combined-heat-and-power or cogeneration system. Combined-heat-and-power plants recover waste heat from the electric generation process to produce other forms of useful energy. To put it another way, cogeneration is the sequential generation of electricity—or mechanical energy—heat or cooling from the same fuel source.

Again, there are many combinations to investigate. One option includes the generation of electricity with a gas-driven combustion turbine (see Figure 3 below). The exhaust gases from the turbine could then drive an absorption chiller or be run through a heat-recovery steam generator and produce steam to drive a steam-turbine-driven centrifugal chiller. Alternatively, the electricity produced by the combustion turbine/generator set could drive an electric centrifugal chiller. Cogeneration systems can reach energy efficiency levels in excess of 80 percent, well above the 33-percent average for conventional electrical generation technologies.

Like the hybrid chiller plant, the cogeneration system can enable owners to more effectively cope with the uncertainty of the energy marketplace. In addition to offering some protection against rising electric prices, a cogeneration system can protect against losses from shutdowns in the event of power outages. They also offer other advantages. In fact, these systems are being promoted by the U.S. Environmental Protection Agency as a means of producing reliable energy that can dramatically reduce pollution. According to the EPA, cogeneration can reduce the emission of nitrogen oxide, sulfur dioxide and carbon dioxide by as much as 50 percent. As they note, installing a cogeneration system can be a win-win situation that allows companies to have a more cost effective and reliable energy while simultaneously enhancing their public image. Minimizing risk

In the wake of recent blackouts and battles over electric rates in California, the nation’s attention has been focused on the negative aspects of deregulation. Consequently, owners of energy-intensive facilities must search for ways to minimize the impact of rising rates and power outages. At the same time, they need to maximize their ability to take advantage of the opportunities for the cost savings that deregulation promises. The hybrid central plant can fulfill both.

With innovative designs that incorporate more than one source of energy, these plants can give owners the flexibility and reliability they need to survive and thrive in tomorrow’s energy marketplace.

Table 1 – Coefficient of Performance Comparison

Table 2 – Approximate Current Chiller Costs

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