Combined Heat and Power in North Carolina Replacing Large Power Plants by Putting Wasted Energy to Work

Combined Heat and Power in North Carolina Replacing Large Power Plants by Putting Wasted Energy to Work Anna Moorefield Jim Warren February 2013 Prepared for CONTENTS Summary of Findings . .3 Introduction . .5 How CHP Works . .6 The CHP Market in North Carolina . .8 Inhibiting Factors to Growth . .9 An Opportunity for Duke Energy . .10 Conclusion . 11 Notes . 13. Anna Moorefieldis paralegal and lead researcher for NC WARN. Jim Warren has been executive director for NC WARN since 1993. NC WARN is a member-based nonprofit tackling the accelerating crisis posed by climate change — along with the various risks of nuclear power — by watch-dogging utility practices and working for a swift North Carolina transition to energy efficiency and clean power generation. In partner- ship with other citizen groups, NC WARN uses sound scientific research to inform and involve the public in key decisions regarding their wellbeing. NC WARN: Waste Awareness & Reduction Network PO Box 61051, Durham, NC 27715-1051 • 919-416-5077 www.ncwarn.org Combined Heat and Power in North Carolina: Replacing Large Power Plants by Putting Wasted Energy to Work SUMMARY OF FINDINGS Combined heat and power, also known as cogeneration, represents a tremendous untapped source of energy — and a timely opportunity to dramatically reduce carbon emissions while avoiding soaring electricity rates in the Carolinas . CHP technology combines the on-site pro- approximately 6 cents per kilowatt hour — cesses of electricity generation and heating cheaper than most customers now purchase or cooling in order to allow a wide range of power from the grid. facilities to use energy far more efficiently — by capturing and putting to work large CHP expansion is now being promoted by amounts of thermal energy that is otherwise both the U.S. Department of Energy and Envi- simply wasted into the environment. Many ronmental Protection Agency. Their research facilities already have existing waste heat inspired a presidential executive order in streams and add electric generating equip- August 2012 calling for the equivalent of ment to their existing components when 40 large power plants from CHP by 2020. adopting CHP technology. Duke Energy and subsidiary Progress Energy Although the fossil fuels that power CHP- could follow the lead of other U.S. utilities equipped facilities are not clean, more effi- that are investing in CHP by installing and cient usage greatly reduces overall pollution leasing systems to customers, or by launch- including greenhouse gases. ing utility-owned distributed CHP programs. As a proven energy efficiency technology in Utility-owned CHP programs would be paid use worldwide for several decades at large for by all Duke-Progress ratepayers but would industrial plants, recent advances make CHP be far less expensive than new, centralized practical and cost-effective at smaller facilities. nuclear or natural gas-fired power plants. Thus, CHP can help save all North Carolina Thousands of facilities in North Carolina — customers from rate hikes year after year. including industrial plants, schools, hospitals, prisons, health clubs and hotels — could North Carolina’s CHP capacity might be the decrease their annual energy bills by 30% or equivalent of around ten large power plants. more by adding CHP to their current heating Therefore, construction of new centralized or electric generation systems. power plants — and repeated rate hikes for electricity customers — can be avoided if Paybacks on facility CHP investments average even a substantial fraction of distributed 4–7 years, but can be as low as 2–3 years. The CHP is implemented. estimated cost of CHP-generated electricity is COMBINED HEAT & POWER IN NC: REPLACING LARGE POWER PLANTS BY PUTTING WASTED ENERGY TO WORK 3 CHP capacity is also ready to be tapped in With a monopoly over electric sales in North South Carolina, which shares Duke’s distribu- Carolina, Duke-Progress has a duty to take tion system with North Carolina customers. advantage of distributed CHP as an invest- ment opportunity that will prove beneficial The greatest barriers to the expansion of to the corporation and, more importantly, to CHP in North Carolina are the lack of educa- the people of the state. tion about technology advances, and resis- tance by the state’s electric utilities to adopt With so much electric generation capacity CHP-friendly policies. simply being wasted at present, the NC Utili- ties Commission must ensure a full examina- A current legislative proposal to eliminate tion of CHP before allowing Duke-Progress to North Carolina’s renewable energy tax credit move forward with plans for construction of would, if enacted, harm efforts to create jobs billions of dollars in fossil-fueled or nuclear and energy savings from CHP. power plants. A growing CHP market is a key step on the path toward stabilizing our climate and avoiding staggering rate hikes to pay for new power plants that simply are not needed. NC WARN does not support use of dirty energy sources such as fossil fuels, biomass or waste incineration . We are concerned about the use of natural gas, which can pollute water sources and — if recovered by fracking — can produce even more damaging greenhouse gas emissions than coal . However, we are advocates of energy efficiency as a mechanism for reducing dependency on these sources within North Carolina’s energy mix, and combined heat and power systems — though most often used in facilities pow- ered by natural gas — are an energy efficiency technology that greatly reduces the amount of energy used and wasted .1 Like weatherizing an old home or using energy-efficient light bulbs, CHP will not eliminate a customer’s use of dirty energy sources but will contribute to a decrease in demand which greatly reduces carbon emissions, steers utilities away from the resources that harm our environment and deters them from building unnecessary plants that are financed out of ratepayers’ pockets . COMBINED HEAT & POWER IN NC: REPLACING LARGE POWER PLANTS BY PUTTING WASTED ENERGY TO WORK 4 INTRODUCTION A surge in CHP deployment, along with increases he energy resource that can have the in other efficiency measures and implementation of Tgreatest impact on our energy future is renewable energy, is the right path forward to preserv- efficiency — implementing strategies that maximize output from the energy we use. ing our climate and avoiding staggering rate hikes to North Carolina is host to thousands of pay for new power plants. schools, hospitals, prisons, hotels, health clubs, military, manufacturing, industrial and Implementing CHP as a distributed resource commercial facilities that use a tremendous more widely across the state would make the amount of natural gas, coal or biofuel energy biggest energy users more efficient — paving — some of them around the clock. The boil- the way for a large decrease in the amount of ers, furnaces and generators that keep these coal, nuclear and natural gas resources that facilities running are extremely inefficient are needed. A surge in CHP deployment, — with over half of the energy from the fuel along with increases in other efficiency mea- that powers them being wasted. One solu- sures and implementation of renewable ener- tion to this dissipative energy use is com- gy, is the right path forward to preserving bined heat and power. our climate and avoiding staggering rate hikes to pay for new power plants. Combined heat and power (CHP), also known as cogeneration, is a suite of efficien- With low natural gas prices, the CHP market cy technologies that could make a huge con- is poised to move forward. However, several tribution to a cleaner, cheaper energy future factors are obstructing such improvements in North Carolina. CHP systems allow a facil- — including a current legislative threat to ity to combine electricity generation and North Carolina’s renewable energy tax credit, heating or cooling processes in order to use lack of widespread knowledge about CHP by energy more efficiently. Combining the two potential investors, some negative policies processes improves the combined efficiency put in place by electric utilities and the utili- from approximately 45% efficient to as much ties’ lack of initiative to pursue CHP as a as 80% efficient.2 component of their business plans. Thousands of possibilities across North Carolina The Four Seasons Hotel in Philadelphia, PA installed a 200 kW CHP system in 2009 . The three microturbines take up minimal space on the facility’s rooftop and make almost no noise, so they don’t interfere with the hotel’s day-to-day operations . Still, they make a tremendous impact . The system accommodates 30% of the hotel’s electricity needs, 100% of its daily hot water use, and 15% of its heating needs . Hotel management expects that the system will pay for itself three to four years . Although this CHP system is out-of-state, it is a testament to the opportunity that the technology represents . There are literally thousands of facilities like the Four Seasons in North Carolina — including schools, colleges, hospitals, prisons, health clubs and hotels — that could make their daily operations more efficient with CHP Photos: Capstone and decrease their annual energy use more than 30% . Turbine Corporation COMBINED HEAT & POWER IN NC: REPLACING LARGE POWER PLANTS BY PUTTING WASTED ENERGY TO WORK 5 HOW CHP WORKS ombined heat and power technology Callows for the simultaneous produc- Two Types of Combined Heat and Power tion of electricity and heating or cooling by an integrated system using one fuel. Figure 1: Gas turbine or reciprocating engine CHP CHP allows a large amount of otherwise systems creating heating and cooling from electricity wasted heat, such as from a facility’s boil- generation. er or electricity generator, to be captured and put to use at the facility.3 Many facilities already have existing waste heat streams and add electric generating equipment to their existing components when adopting CHP technology.

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