Combined Heat and Power (CHP)

1. Combined Heat and Power (CHP) ENERGY 2014 Orlando, Florida July 23, 2014 Christopher Lindsey clindsey@antaresgroupinc.com (301) 731-1900 ext. 216

2. Presentation Outline • How to Start Off Right • Feasibility Study (go/no go) • Case Study Information • Development Tips • You Probably Already Know • Something about CHP technologies • Why CHP is important

3. Start Right – Energy Measurements • Measure Your Energy Use! • Investment Grade Audit by an INDEPENDENT third party • Why is this critical? • Project sizing driven by your energy loads • Engineering estimates can be problematic • Oversizing equals underused capitaland lower operating efficiency • Under sizing equals operational issuesand reduced savings.

4. Start Right – Energy Measurements • Know your thermal energy loads in as muchdetail as you can afford • You will NEVER regret good information about your loads • If your meters or submeters don’t work – fix them • If you don’t have meters – consider data logging for a limited time – budget for it! • If you have distribution/condensate system problems – know what is fixable and what is not • Understand existing steam/hot water boiler performance as best as possible • Make a list of thermal energy savings measures that might be good to implement before CHP project

5. Start Right – Energy Measurements • Know your electrical loads • Try to collect some detailed information on big loads (like chillers). When did they run, how much energy being used, etc. • Ask your utility about interval data • Consider sub-meters or smart meters where it makes sense • Collect data from BuildingManagement Systems • Make a list of electrical energy savings measures needed before CHP project will be implemented

6. Start Right – Energy Measurements Hopefully it won’t be as hard as this guy thinks it is • Cross Check Data • Develop facility performance metrics and cross check results with utility bills, correct for weather • That includes: • Electric • Gas • Fuel Oil • and Water! • Good time to cross check bill against interval data too

7. Start Right – Energy Measurements • But isn’t this the ESCO’s problem? • Don’t you believe it! • Energy Service Agreements may have minimum take requirements, protections against energy cost changes or other clauses that place risk back onto host • When major things go wrong ESCO may or may not be on the hook to fix them (contract). • Load/operational changes • Facility side equipment failures • What about ESCO bankruptcy / financial trouble?

8. Warning Litigation: A machine which you go into as a pig and come out of as a sausage.– Ambrose Bierce

9. Step 1 – Feasibility Study • Key Elements • Define Objectives/Standards • Review Energy Loads • Preliminary Techno/Economic Screening • Selection of Technologies for Analysis • Detailed Performance Estimate • Life Cycle Cost Analysis • Technology Selection (Go/No Go)

10. Renewable Energy Targets - Sample

11. Thermal Load Analysis

12. Electric Load Analysis

13. Screening Analysis/Selection

14. Detailed Performance Estimate • Detailed bin or 8760 hourly analysis • Back-up energy supply requirements • Detailed review of tariff impacts • Special attention to change in tariff and demand charge changes • Detailed review of environmental/regulatory changes • DEC, Historic Preservation, habitat

15. Small CT Example

16. GHG Analysis

17. Life Cycle Cost Analysis • More than ENERGY SAVINGS! • For Federal Facilities • Typically use BLCC guidance which dictates • Discount rates • Inflation rates • Escalation rates for electricity and natural gas • Includes Status Quo • Alternative Financing Option Review • UESC, EUL, ESCO, Direct Fund

18. This is not an LCCA

19. Final Selection • MUST PRIORITIZE WHAT’S IMPORTANT • Economics (usually, but not always)? • Meeting Agency/Facility energy intensity, GHG, sustainability goals? • Improved operations? • Showcase? • WARNING – if Economics – be sure to review the economic assumptions carefully!

20. EIA Gas/Electricity Prices Annual escalation ~ 2% per year @ 3%, 2040 would equal 31 cents/kWh In some states, actual escalation over past 20 years was less

21. So You Think You Have a Project… Ideally Feasibility Study will be used to generate bid specification documents Start RFP process Selecting a Contractor Negotiating Contract Construction, Start-up YEAR 1 Operation

22. Development Tips • Use and Independent Engineer even if planning a Turnkey-EPC type project • Feasibility Study • Design (maybe) • Commissioning • Monitoring and Verification • Arbitration/Litigation • Get input from your O&M staff and make them stakeholders in the entire process

23. Development Tips • Understand ALL of the possible project development options • Third party ESA has lots of advantages-but there are other options • Design/Build, Build Own Operate Transfer? • Understand project risks and your tolerance • How different is the new project from what you your O&M staff are used to dealing with • Is this a bleeding edge technology (plasma-arc waste gasification with a recip engine?)

24. Contract, Contract, Contract Early in Project Owner Contractor PAID OUT Late in Project Owner Contractor IF YOU ARE GOING TO OWN IT - write an Owner’s Requirement Document that provides cover Understand your contract leverage, how it changes over time--be stingy Change Orders should be limited to cosmetic, minor things YOU change your mind on Understand minimum takes, price risk pass through, warranty claim limitations, contractor liability. SPEND SOME MONEY HERE!

25. Contract, Contract, Contract • If you are not going to own it… • Think like a banker! • Imagine the unimaginable (both sides of fence) • Strikes, natural disasters, Contractor financial trouble • Not everything you think of will be reasonable to protect against, but not everything you do won’t • Protect yourself for performance failures • Ensure you can walk away or control your fate • Be prepared for ligation • What is your back-up plan if Contractor pulls the plug or “new” system fails?

26. What about Biomass CHP? Can accommodate a baseload Geographically diverse resource Can be cost competitive Well established options/technologies RENEWABLE Energy Mandates

27. Biomass CHP in the US-for now District heating – displace higher cost fuels such as #2 oil with woody biomass For C&I applications (< 5 MW, i.e. hospital, college / university, manufacturing facility)- Close coupled gasifiers with medium pressure steam driving back pressure steam turbine For larger C&I applications (> 5 MW, i.e. pulp mill, large district heating system) – Fixed bed / fluidized bed gasifiers with higher pressure steam

28. What Biomass Fuel Are You Using? Runaway if someone tells you that their technology works equally well with any fuel!

29. Conclusions • CHP projects can be a viable opportunity • Usually • Require high electricity prices, lowish gas prices to make work (spark spread) • Best projects in the presence of good information about loads (current, planned) • Lots of options to choose from – pick one that is appropriate to your operation • The more level your steam load – the better • Get outside help if you can

30. Conclusions hassle • Biomass is a special case • Need the space • Higher O&M • Works best displacing fuel oil or high priced gas • Longer development time • Make sure to include the “hassle factor” • Brace yourself for Year 1

31. www.antaresgroupinc.com