Economic analysis of small-scale cogeneration. You are considering an investment

Question

Economic analysis of small-scale cogeneration. You are considering an investment in three 60-kW microturbines, that generate both electricity and DHW, for a large apartment complex. The microturbines will displace output from the existing natural gas-fired boiler for DHW such that 100% of the demand is met by the microturbines. The microturbines start running at 5 a.m. in order to generate DHW for the morning peak; they then run continuously at full power until they have made enough DHW for the total day’s demand. Thus the cogen system supplies 100% of the DHW need. It can be assumed that when the system turns off for the night, there is enough DHW in storage to last until it comes back on the next morning. The prices of gas and of electricity are $10.75/GJ and $0.105/kWh, respectively. The turbines cost $85,000 each, with an additional $0.02/kWh produced maintenance contract cost; the project life is 20 years with an MARR or 3%. The turbines convert 26% of the incoming energy to electricity, and 55% of the incoming energy to DHW. The existing boiler system transfers 83% of the incoming energy to DHW. Questions: (a) To the nearest whole hour, what time does the system turn off? (b) Determine the net present value and state whether or not the investment is economically viable. (c) If the complex uses 8000 kWh of electricity per day, what percentage of this total demand do the turbines deliver? (d) Suppose that for 5 months of the year (assume 30 days/month), the system can provide heat for space heating with no additional upfront capital cost, and is therefore able to run 24 h/day. How does the answer in part (b) change?

Explanation / Answer

We return to the systems approach to combustion technology that was discussed at the beginning, with a view toward some of the challenges that await in the future. All evidence suggests that the bulk of the changes over the next several decades will involve major transformation of technology rather than incremental improvements. These types of transformations include major changes in core technology (e. g., from single to combined cycle), changes in fuel (e. g., increasing the use of biofuels), or changes in end use application (e. g., increased use of cogeneration with new applications for by-product heat). In this environment, systems engineering and systems thinking will have an important role to play. Here are several examples of systems issues:

• Bridge versus backstop technologies: A backstop technology is one that fully achieves some desired technological outcome, for example, eliminating CO2 emissions to the atmosphere. Thus an advanced combustion plant of the type discussed in Sec. 6-3 is an example of a bridge technology, and the FutureGen zero-emissions plant is a backstop technology. When making investment decisions, utility owners must consider the level of advancement of bridge and backstop technologies, and in some cases choose between them. In the short run, if the backstop is not available, the owner may have no choice but to adopt the bridge technology in order to keep moving forward toward the goal of reducing CO2 emissions. Eventually, if the backstop technology proves successful, the owner would need to carefully weigh whether to continue building even very efficient versions of the bridge technology, or whether to transition to the backstop technology.

• Importance of advance planning for cogeneration and other multiple use applications: Decision makers can help to expand the use of cogeneration by considering possible cogeneration applications at the time of building new power plants or renovating existing ones. This time period provides a window of opportunity to simultaneously develop process heat or space heating applications, for example, by bringing new industries to the plant site that can take advantage of the available process heat. Otherwise, once the plant is built, operators may face the problem of retrofit syndrome in that they find it technically impossible or economically prohibitive to add an application for by-product heat after the fact.

• Maintaining use of infrastructure when transitioning between energy sources: Along with end-use energy applications and the energy resources themselves, energy systems include a substantial investment in infrastructure to convert and distribute energy products. It is highly desirable to continue to use this infra­structure even after discontinuing the original energy product involved, so as to maintain its value. For example, many commercial and residential properties have pipes that bring in gas from the natural gas distribution grid. With modifications, this infrastructure might be some day used to deliver a different gaseous product that has a longer time horizon than gas or is renewable, such as compressed hydrogen, or a synthetic natural gas substitute made from biofuels.

• Pushing technology toward smaller scale applications: One way to expand the positive effect of an energy efficient technology is to expand its potential market by replicating it for use in smaller-scale applications. Thus the cogeneration technology that began at the 500 MW power plant level has become established at the 100 kW building complex level. Could this technology go even smaller? Already household size cogeneration systems are beginning to appear on the market, that provide enough hot water for a house and generate electricity at the 1 kW level. Given the number of single-residence water heating systems in use around the world, this technology might greatly expand the total amount of electricity produced from cogeneration if it proves reliable and cost-competitive.

• Creating successful investments by coupling multiple purposes: In some cases, the business case for a transformative technology can be improved if the technology addresses more than one energy challenge at the same time. In the case of the FutureGen zero-emission plant concept, the technology addresses one issue requiring a major transformation but also promising great benefit in the future, namely carbon separation and sequestration. At the same time, it addresses another fundamental need, namely, for a clean energy resource for transportation, by generating hydrogen as a by-product of the water-shift reaction. The success of this application of hydrogen requires the development of a satisfactory hydrogen fuel cell vehicle (HFCV) technology. It is possible that the FutureGen plant with sequestration and the HFCV technology are more attractive as a package than they are separately.

6-9 Summary

Combustion technologies that convert energy in fuel resources into electrical energy are crucial for the energy systems of the world, since they generate the majority of the world’s electricity. Many of these technologies are built around two combustion cycles, namely, the Rankine cycle for vapor and the Brayton cycle for gaseous fuels. The basic Rankine and Brayton cycles convert only 30 to 40% of the energy in the working fluid into mechanical energy, with additional losses for combustion and electrical conversion, so over time engineers have achieved a number of technological breakthroughs to improve the overall efficiency of power plants in order to increase efficiency and minimize operating costs. Some of the most important of these breakthroughs are the result of a radical redesign of the overall energy conversion system: (1) the combination of a Rankine and Brayton cycle in combined cycle systems and (2) the addition of other applications for by-product exhaust energy in the case of cogeneration systems. A systems approach to combustion technologies will be useful in the future to help adapt and expand the ecologically conscious use of combustion technologies in an environment of changing costs and energy resources.

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