Control of you (energy) destiny

Not very long ago, the primary users of On-Site Power technology were utilities and large manufacturing operations. Today, facility executives at hospitals, universities,

Some energy management teams are installing On-Site Power to reduce electric utility expenses. Other operations seem to be tailor-made for the local production of both heat and electricity. Still other facility strategists advocate installing On-Site Power systems to assure their organization's buildings will have a more reliable and "cleaner" source of power.

For today's energy planners, the ability to customize energy generation to match increasingly unique and exotic energy requirements is becoming less of a luxury and more of a reality of doing business. And in an era of uncertain deregulation impact from region to region, public pressure for .clean and green" power production from coast to coast (and more and more variables that make it virtually impossible to predict tomorrow's energy costs) On-Site Power generation capability means peace of mind.

ECONOMIC FEASIBILITY OF ON-SITE POWER

When does On-Site Power generation make financial sense? For different operations, different economic parameters are at work. Hospitals must have standby power, because building codes and accreditation organizations require it. Universities often install On-Site Power in a cogeneration format to control costs and ensure critical labs have dependable power. Mission-critical facilities cannot afford the hours that utility-- generated power failures may take to correct.

Large commercial establishments and industrial plants may opt for On-Site Power to allow them to continue operations during possible brownouts and to benefit from utility curtailment rates.

In general, sensitivity regarding reliable power - now that all commercial establishments are brimming with computer terminals - is changing the complexion of what it takes to justify an investment in On-Site Power. Today, for example, many facilities executives want smaller On-Site Power systems capable of producing 100 kilowatts or less, according to Donald Becker, manager of government sales for Kohler Power Systems.

"The feasibility for On-Site Power generation requires looking at code requirements, available fuels, the organization's application for that power, the quality of utility-supplied energy or the lack of it and environmental conditions," explains Gary Kidwell, president of the Electrical Generating Systems Association (EGSA) and western regional sales manager for Automatic Switch Company.

"All these elements have to be studied to determine a payback for the system," explains Kidwell.

"When cogeneration was popular 15 to 20 years ago, customers were looking for a three- to five-year payback," he says "Today, the payback period almost has to be two to three years to make it economically viable, unless the organization must have clean power or emergency power. In those situations, On-Site Power's payback period is less of an issue because the power has to be there."

Another reason companies and organizations are moving to On-Site Power generation is the cost of electricity.

"Organizations have an economic need for On-Site Power in locations where utility rates are onerous," says Leo LeBlanc, EGSA vice president and senior business development manager for GE Distributed Power. According to LeBlanc, when the cost of electricity is more than 8.5 cents per kilowatthour, the location is a good candidate for power generation.

LeBlanc advises that there are two primary reasons organizations embrace On-Site Power: energy economics and clean, reliable power. "For mission-critical and certain manufacturing operations with sensitive production equipment, dips and surges in power can literally destroy the product in process," he says.

"Dirty power can seriously hurt financial institutions, as well," he points out. "The number I regularly hear from banking centers and brokerage houses is $1 million an hour. That's the cost of losing power for one hour. At that level, payback for standby power is very quick."

DEFINING ON-SITE POWER

On-Site Power is any method of producing power to be used on or near its generation site. On-Site Power plants operate in parallel with local utilities and can contribute to the local grid - the current scenario at Rutgers University. Or, the generation site can provide the sole power for buildings - the case at the Anchorage Mail Processing Center, the U.S. Postal Service's largest facility in Alaska. The Anchorage project relies on a fuel cell system for its sole source of power, without the aid of a power grid or other generation devices.

The Anchorage mail processing center uses a 1-megawatt fuel cell system manufactured by International Fuel Cells. The generation site represents the largest commercial fuel cell system in North America. The five fuel cells are owned by Chugach Electric, Alaska's main electric utility. The postal service paid for five years of electricity service from the fuel cells in advance. In return, Chugach supplies all electricity required from the fuel cells and benefits from any excess power by selling it back into the grid. Until this application, fuel cell projects traditionally handled some of the electricity load, but the main load remained on the grid.

The generation site at Rutgers University in New Jersey, located on its Busch campus, was built as an addition to the existing central heating plant, which now acts as a supplemental heat source. The Busch plant is the primary provider of thermal and electrical energy for both the Busch and Livingston campuses. Heat production is accomplished through the waste heat from three gas turbines manufactured by Solar Turbines Inc., and three duct burners manufactured by Forney Corp. Both technologies rely on natural gas as their primary fuel. When necessary, however, low sulfur diesel fuel can be used as a backup fuel. The turbine exhaust, which is augmented by the burners as necessary, passes over three heat recovery water heaters manufactured by Energy Recovery International to produce hot water.

The 13.5 million watts of electric power generated by the Busch cogeneration plant meets more than 90 percent of the campus' electrical needs. The university benefits because it significantly reduces the amount of power Rutgers would need to purchase. The cogeneration facility is connected to the power grid served by local utility PSE&G.

STANDBY GENERATORS PROVIDE POWER RELIABILITY

For hospitals, critical labs on university campuses and mission-critical facilities, power reliability is probably the primary reason for installing On-Site Power generation. Mission-critical facilities are concerned, as well, about the impact of downtime on the bottom line.

Minutes down for energy-related problems can cost millions in lost revenues for mission critical facilities. Chicago's Commonwealth Edison estimates that a typical data center filled with Internet servers and computers might use as much as 10 times more power than a conventional office building.

"Mission-critical facilities cannot afford any outages," says Gary Kidwell. "These facilities are not as concerned with cogeneration capabilities; they are simply willing to pay to ensure that a power outage does not occur."

Producing On-Site Power also allows facilities executives to have better control of their energy costs, particularly if the company is on a utility program that charges for the time of day when energy is used. During peak, summertime afternoons, these facilities may be paying 12 to 14 or more cents per kilowatt-hour used. On-Site Power systems can operate during those peak hours, generally at a fraction of the cost associated with a utility's rates.

WHEN POWER INTERRUPTIONS CoST MILLIONS

The customers of software giant Oracle Corporation, Redwood Shores, Calif., depend on non-stop, 24/7 technical support. So do the company's software developers. Power interruptions can be extremely costly.

"It can mean as much as $5 to $10 million per day for us in lost sales and productivity," maintains Jeff Byron, Oracle's corporate utility manager. "It also affects our customers who have mission-critical support needs."

The need for reliable power led Oracle to establish a 13-megawatt electrical distribution system, its own power station and a power monitoring network. The project's total cost was $6 million, but the company expects the savings to pay for that initial investment in about three years.

Hospitals and healthcare campuses are less concerned with the investment's payback period and more concerned with protecting the lives of their compromised patients who depend on electric-powered life-support systems or other sensitive medical equipment.

COGENERATION OPTION

For colleges and universities, commercial office buildings and governmental facilities, LeBlanc often looks for a "good thermal footprint. Something to use the waste heat from the engines for, such as domestic hot water use."

For facilities executives at these locations, On-Site Power generation often is cogeneration, also known as combined heat and power systems. Whether such installations will benefit from the Energy Act of 2001, currently under scrutiny by the U.S. Senate Energy and Natural Resources Committee, remains to be seen. Tax credits for energy-efficient upgrades of commercial buildings and combined heat and power technologies are under consideration by the Senate committee, chaired by Senator Jeff Bingaman (D-NM).

PREVAILING ENERGY MARKET

Thanks to the rolling brownouts in California this year, more people are aware that today's electricity demands can exceed the capacity of their local utility. In fact, the North American Electric Reliability Council's data suggests a 50:50 chance that electricity demand will exceed supply in this decade. And that problem is not going away, even if all currently planned generation projects are completed on time.

As monopolies in a regulated marketplace, utilities could afford to install peaking generator units to run for a short period of time at a relatively high cost, because public service commissions generally allowed utilities to pass those costs on to customers. But with deregulation's emphasis on competitive energy pricing, some utilities can't survive, let alone justify many technology investments.

Some utilities that remain regulated, and some that are in the early phases of deregulation, incorporate demand charges in their electrical rate structure. These charges can be $9 and $10 or more per kilowatt of demand. By monitoring electrical demand, operators can anticipate a peak period. If On-Site Power generators are brought online before the peak is reached, the demand charges can be significantly reduced.

A number of companies and organizations with onsite generation already in place are using their capabilities to negotiate better electricity rates with their utilities. For instance, a manufacturing company with emergency standby generators that are managed through its energy management system may negotiate with the local utility to bring the standby generators online whenever the utility company is experiencing an unusually high demand. The capability gives a company significantly lower power rates. But more important, the company receives advance warning and can bring the generators online before its production facilities become crippled by brownouts or blackouts.

Independent System Operators (ISOs) and Regional Transmission Organizations, as well as local utilities, also will negotiate curtailment rates with customers. Many traditional utility groups also are willing to set up demand response and load curtailment programs to compensate those companies willing to temporarily reduce their demand for power by using their standby electrical generation plants.

If the record keeping is thorough, facilities executives may even be able to sell the power represented by their reductions during those periods at wholesale energy prices. According to a recent Federal Energy Regulatory Commission ruling, curtailed energy loads are to be treated the same as generated energy. Companies doing so, however, must have a recorded historic baseline with hourly readings to compare with the load profile during the curtailment.

The basic operation of standby and cogeneration power systems has changed substantially in the last five years. Efficiencies have improved by 15 percent, according to Kidwell. "The primary areas that have seen improvements are in engine technology, electrical efficiencies and thermal technology," he says.

"Emergency power today is set up to work in concert with utilities' systems," adds Kidwell. "The logic in controls and switchgear has evolved so that On-Site Power plants today can be monitored, controlled and networked."

Because of advances in engine generator controls and paralleling switchgear, modern On-Site Power generators can be networked and controlled by Web servers over the Internet.

"Facilities executives can have a master station in New Jersey manipulating the power from the company-owned generating plant and either direct it to the stores or sell it back to the electricity grid," explains Kidwell. "Because you can run the plant over the Internet, you also can change how you are directing power any time during the day."