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Home , Hospital, Smart grid, Utility frequency

The Economist & NRG Energy Case Study:

Optimizing the 21st Century

Team: Watt’s Up Doc

Abdulkamal Abdullahi

Michael Brown

Jose Poblete

Watt’s Up Doc NRG Energy Case Study 1 Table of Contents

I. Executive Summary II. Abstract of New Jersey Hospital a. Hospital Description b. Location Description c. State Incentives III. Summary a. CCHP, Combined Cooling, Heating, and Power b. Photovoltaics c. Battery Storage IV. Operating Summary a. Hospital Power Requirements b. CCHP, PV, Battery Storage Implementation, Operations, and Cost V. Financial Summary a. Financing b. Employment of Cash Flows c. Financial Metrics VI. Conclusion

Watt’s Up Doc NRG Energy Case Study 2 I. Executive Summary People and organizations usually take supply of electricity for granted, but natural disasters and other threats remind us how dependent modern society is on energy reliability and how vulnerable the can be. comprise a subset of systems that can be categorized as whose “assets, systems, and networks that, if incapacitated, would have a substantial negative impact our society”1.

The need for reliability and the opportunity to increase efficiency led Watt’s Up Doc to select the New Jersey Hospital as its project. Hospitals are on average the most energy-intensive facilities in the , spending more than $8B on energy per year and representing 10% of total energy used in commercial buildings2. Their operational nature subjects them to high costs of energy during peak months and of the , without opportunity for taking advantage of interruptible services for its power and energy needs.

We recommend a CCHP system, Solar PV panels, and battery storage to make the Hospital’s energy supply independent, reliable and resilient for years to come. controls allow our system to make the best use of electricity and heat generated with . Solar energy produced and stored in batteries optimizes fuel consumption and provides ancillary services in- and for utilities. The 5MW energy solution will cost $23M in capital investment, and will pay out in 7 years with an IRR of 12%. Given the debt environment and public status of our hospital, we elected to finance the project with debt and municipal bonds. Our project is expected to save the hospital over $100M in efficiency improvements over 20 years, improve power reliability, and reduce CO2 emissions by 14,564 ton/year.

1 “Combined Heat and Power: Enabling Resilient Energy infrastructure for critical facilities” ICF International, March 2013 2 Energy.gov: Energy Department’s Hospital Alliance Helps Partner Save Energy and Money

Watt’s Up Doc NRG Energy Case Study 3 II. Abstract of New Jersey Hospital

A. Hospital Description

A hospital located in New Jersey presents an attractive opportunity for a renewable infrastructure upgrade. Our hospital operates a total of 2,000 beds and has energy demands of 5

MW, landing in the top 15% of all US hospitals in terms of size and energy consumption3; with such a large size, we conclude that the hospital operates in a high population density area on the

New Jersey side of the or metropolitan areas. We also assumed that the hospital is a general facility providing services in emergency care, general practice, and all standard specialty practices. Therefore, it operates large, energy-intensive equipment including tomography and MRIs, creating spikes in demand.

At this size, our team carried the assumption that this hospital is a public entity operated like a VA hospital or large non-profit. Therefore, it has access to financing through bank debt, municipal bonds, and existing capital. It does not have access to equity capital investments.

B. Location Description

Our hospital is in the Edison township in Middlesex , New Jersey on the north side of the Raritan river and New Brunswick. A hospital in this location could serve local townships, universities and associated research scientists, and cities from Philadelphia to New York by train,

New Jersey is in climate zone 2 meeting requirements for less than 2,000 cooling degree days (CCD) and 5,500-7-000 heating degree days (HDD)4. The high number of HDD influenced our decision to provide an energy solution that could meet the high energy demands of a hospital in such a climate.

3 Energy Information Administration: 2007 Commercial Buildings Energy Consumption Survey 4 Source of Energy consumption in hospitals, by end use, for five U.S. climate zones https://www9.nationalgridus.com/non_html/shared_energyeff_hospitals.pdf

Watt’s Up Doc NRG Energy Case Study 4

Figure 1: Tentative location of Target New Jersey Hospital

Figure 2. U.S. Climate Zones – Energy Requirement Forecast

Watt’s Up Doc NRG Energy Case Study 5 Utility Service:

Due to the size and location of the hospital and proximity to a large population, utility service is provided by Public Service Electric & Gas Company (PSEG). PSEG services the corridor from Philadelphia to Newark. This utility is primarily serviced by nuclear and power systems, and supplemented by gas, steam, and combined cycles during peak periods.

PSEG is also the gas utility for our operating area and market prices are available on the Henry

Hub. All primary and gas distribution prices for PSEG were used in our operating and financial models.

Figure 3. PSE&G Generation Stack5

C. State Incentives

New Jersey offers several incentives that make our investment in CCHP and PV an attractive solution. As of 2016 the NJ Public Board of Utilities introduced a CCHP incentive program that rebates on-site power generation that has a proven payback in under 10 years. New

Jersey targets 4.10% of the state’s electricity to be solar by 2028; to achieve this New Jersey and

5 PSE&G Generation Information

Watt’s Up Doc NRG Energy Case Study 6 Pennsylvania have created an SREC market that is now the largest in the country, with 1 MW now selling for over $2006.

Figure 4. New Jersey SREC Credit Market LTM

III. Technology Summary

A. CCHP, Combined Cooling, Heating, and Power

A combined cooling, heat and power (CCHP) consists of a combination of equipment able to produce electricity and use the heat generated in the process to deliver heat and cooling solutions.

Hospitals are an excellent fit with CCHP because their energy demand is composed by electric and large heating and cooling needs. CCHP systems have the same efficiency of electric generation as utility-scale plants, around 35% but, as a resource, achieves approximately an additional 40% of efficiency by using the heat.

The main element of the system is the gas , which transforms fuel, natural gas in our case to have a more environmentally friendly fuel, into mechanical energy. We have selected the

Siemens SGT-1007 for our system, a 5.4 MW turbine. The mechanical energy is then converted to electricity in a generator. The exhaust heat generated by the turbine is harnessed by a

6 SRECTrade: http://www.srectrade.com/srec_markets/new_jersey 7 http://www.energy.siemens.com/us/en/fossil-power-generation/gas-turbines/sgt-100.htm#content=Technical%20data

Watt’s Up Doc NRG Energy Case Study 7 Heat Recovery Steam Generator (HRSG), transforming it into steam, which is used by our thermal loads. The HRSG selected is the Cleaver Brook’s Max-Fire8, that includes additional natural gas burners, which would allow running the CHP at a lower output while meeting the thermal needs

(in the event exporting excess electricity becomes less profitable). Our Heating needs are comprised mainly by hot water and room heating. Finally, for the Cooling needs we recommend using steam, instead of additional transfers to hot water, new backup boilers or electricity, to drive a LG WCSS9 capable of producing approximately 4,000 RT.

This solution offers the opportunity to improve critical infrastructure resiliency, providing independence and mitigating the impacts of an emergency by keeping critical facilities running without any interruption of service. Any excess of electricity could be exported to the grid and additional heat needs could be satisfied with the HRSG burners. The system allows to reduce carbon emissions in 14,564 tons of CO2 per year10.

Figure 5. CCHP Process Flow Diagram

8 http://www.cleaverbrooks.com/products-and-solutions/boilers/hrsg/max-fire/index.aspx 9 http://www.lg.com/global/business/download/resources/sac/Leaflet_F_LG_Absorption_Chiller.pdf

10 Based on 2014 Electric grid study https://www.epa.gov/energy/emissions-generation-resource-integrated-database-egrid

Watt’s Up Doc NRG Energy Case Study 8 B. Photovoltaics

Solar Photovoltaic panels allow our system to have an additional renewable component and take advantage of favorable conditions to reduce the systems fuel intake. The rationale behind the selection of roof-top photovoltaic panels is two-fold: first, installing solar panels reduces the overall of the hospital by taking advantage of the considerable rooftop space

(137,000 ft2) and offsetting part of the electrical power demand (330 kW). , because utility companies in the state of New Jersey reward customers for clean energy production, via net metering11, the panels could serve as an additional revenue source for the hospital. In our financial model we have used the solar production to reduce our natural gas consumption, therefore our system could have an upside by selling our solar production to the market.

C. Battery Storage

Battery Storage systems are quoted as a 1 MW power per 4- energy service (4MWh), and is scalable up to optimize load requirements. NEC’s GSS system provides the necessary elements for our system, although other providers offer storage, control software or both in different types of models that could be beneficial. For example, Tesla and BYD provide scalable battery solutions, and STEM provides a SaaS12 option that doesn’t require storage investment. Storage control algorithms have advanced at a fast pace during the past years and the systems can provide correction, dynamic load learning for and voltage regulation13, provide black-start capability, among other applications. Additionally, the smart grid control can route energy generated by the solar panels or the generator to the storage, or discharge energy to the hospital or the grid, allowing an optimization and flexibility of resources.

11 New Jersey Clean Energy Program: and Interconnection | Net metering in New Jersey 12 STEM would own the batteries and provide the service of energy management for the goals the Hospital requires. 13 https://www.linkedin.com/pulse/nigeria-electric-grid-spinning-reserve-inadequate-control-igbokwe provides an illustrative example of the voltage/frequency problem. Utilities pay for these services in addition to the energy it is consumed during the service, so our solution would also benefit from cheaper generation.

Watt’s Up Doc NRG Energy Case Study 9 A 2014 study on Hospital equipment14 indicates Computed Tomography (CT) and Magnetic

Resonance Imaging (MRI) operate frequently in a narrow range of Power, but maximum Power demand can be 17 times more in CTs and almost 5 times more in MRI . The study also shows that these peaks can last from to 45 intervals, and have random occurrences between days, allowing only to separate similar behavior among weekdays and holiday/weekend days. These situations translate to unexpected demand for the CHP system and can stress the system by inducing voltage and frequency variations that can eventually shut down generation or cause heating in wiring or equipment and overcharge certain circuits.

Figure 6. Power Surge Frequency and Size

In Figure 7 we can observe the basic function of the peak correction. If the imaging equipment produce a peak in demand, the battery storage would provide the excess power and energy above a predetermined threshold. In hospitals certain machines are highly predictable, for example most MRIs and CTs are usually scheduled in advance (except emergency room machines), which allows the algorithm to optimize readiness for charge and discharge. For the

14 “Healthcare Energy End-Use Monitoring”, Michael Sheppy, Shanti Pless, and Feitau Kung, National Laboratory, Technical Report, NREL/TP-5500-61064, August 2014

Watt’s Up Doc NRG Energy Case Study 10 solar panels the algorithms can consider the weather and adapt to take part of the charging load from the solar panels.

Figure 7. Battery Peak Demand Correction Example

IV. Operating Model Summary

A. Hospital Power Requirements

Power and Steam: The power requirements for a hospital can be divided into 5 consumption categories. Figure 8 indicates the energy each category consumes a percentage of total energy and utilizes either steam or electricity or steam to operate.

Figure 8. Hospital Energy Consumption (% of total)

18.1% 54.5% 64.9% 4.5% 10.4% 12.5%

Fans Imaging Equipment Light, Offices Chiller Heat & HW

Watt’s Up Doc NRG Energy Case Study 11 Calendar Demand Adjustments: Our 5MW New Jersey hospital was modelled over a 12- month period to account for seasonal changes in steam and electrical consumption. Our CCHP system has been sized to address the entire demand of power and energy and not as a complement to the grid connection. In sizing the system, we have assumed a 10% security factor for the

Hospital’s energy demand. The power and steam requirements were then sized using standards for efficiency: 40% steam capture, and 35% electrical capture to determine the nominal demand of our technology solution. Our annual power requirements are shown below in Figure 9.

Figure 9. Hospital Calendar Seasonal Demand (MMBtu) 3,500

3,000

2,500

2,000

1,500 MMBTU

1,000

500

- 1 2 3 4 5 6 7 8 9 10 11 12

Heat & HW Fans Chiller Imaging Equipment Light, Offices

Our 12-month projection of hospital power demand is detailed in Exhibit 2.

B. CCHP Operations and Costs

Given the higher efficiency of the steam and heating component (40%) of the CCHP, the equipment is designed to provide head most efficiently. Electricity can be more easily exported

(sold to grid) or any shortfall is supplied by storage or acquired (purchased) to provide adequate electricity. This design methodology also minimizes cost of equipment. The capital cost of

$3,000/MW represents the high range of capital costs assuming this is a greenfield installation and

Watt’s Up Doc NRG Energy Case Study 12 leveraging a $3MM project rebate from the NJBPU. Installed costs represent design, procurement, installation, and commissioning of all major equipment.

The CCHP will be run at maximum availability, with scheduled 4000-hour preventative maintenance services. We expect a 94% run time efficiency, and flat fixed and variable O&M costs. The primary cost driver of the CCHP is natural gas price. Gas consumptions was calculated based on monthly demand, unit efficiency, and market price.

Table 1. Cost Model for CCHP Cost Line Total Unit CCHP Installed Cost 3,000 $/MW CCHP Fixed O&M 15.37 $/kW/year CCHP Variable O&M 3.27 $/MWh

C. Solar PV Operations and Costs

Our PV installation was modelled using an assumed roof surface area of the hospital, seasonal efficiency, and operating costs. Efficiencies ranged from 12%-18% of capacity depending the month of the year. Even though PV installations using already acquired land cost less than $2,500 per MW, we modeled our installation cost on the high end of the spectrum considering additional equipment to make a smart grid, appropriate operational expense, and

SREC credits.

Table 2. Sizing Model for Solar PV Hospital Data Solar PV Beds 2,000 beds Roof area 137,143 ft^2 Size 960,000 ft^2 Solar PV Space 60% availability ft^2/ 480 ft^2/bed Roof area 1.89 acres available Floors 7.0 floors PV Capacity* 5.50 acres/MW Floor size 137,143 ft^2 PV Installed 0.34 MW PV Efficiency* 18%

Watt’s Up Doc NRG Energy Case Study 13 Table 3. Cost Model for Solar PV Cost Line Total Unit Solar PV Installed Cost 2,500 $/MW Variable O&M ($) 19 $/kW/year SREC Revenue 0.01 $/kWh

D. Battery Storage

Battery storage will be available to curb equipment peak power loads, provide backup power, and serve to sell solar PV at optimal market time. The battery system will provide 1MW for 8 hours of service. Our electrical requirements are primarily for Imaging equipment but could serve to power Fans and lights/offices as well.

Table 4. Cost Model for Battery Storage Description Total Unit Batter Installed Cost 60,000 $/MW Service 8 hrs. Capacity 8 MWh

From our estimate of the imaging equipment in a 2,000 bed Hospital, the peak power demand for a simultaneous use of all the equipment, with every equipment demanding its maximum load, would be 1.4 MW. Our system has a 2MW storage system able to provide 8

MWh, which covers the maximum expected peak and allows our solution to provide Ancillary

Services to our Utility (frequency and voltage , peak energy demand during weekends/holidays) and open a new revenue stream. In our financial model, we assumed a revenue stream the provided a 7.0% IRR for the storage system investment.

Table 5. Peak Demand Model Assumptions Imaging Equipment Power Demand Unit Demand Aggregate Demand Equipment Type Peak Demand (kW) Avg Demand (kW) # Units Max Average CT Scan 115 7 9 1035 63 MRI 55 12 7 385 84 Total 170 19 16 2720 304

Watt’s Up Doc NRG Energy Case Study 14 V. Financial Summary

The 3-solution project to construct a CCHP, install solar PV and battery storage will cost

$23 million including financing fees, has an internal rate of return (IRR) of 11.7% and 7-year payback. As a municipal project, we will leverage bank debt and the municipal bond market to secure long term fixed rate financing.

Bank Debt: Local bank debt will finance $8M of the project. The project will incur a 3% financing fee and be 100% amortized over 5 years. Bank debt and cash on hand will be withdrawn to pay for planning, front-end engineering design, (FEED), and permitting.

Municipal Bond: We will work with a bank to syndicate $15M of municipal debt. The project will incur a 5% financing fee and be redeemed at maturity of 15 years. Coupon rates for municipal bonds for NJ Healthcare systems range from 4%-5%. Proceeds will be put toward procurement and general construction.

Risks: A fixed rate long maturity bond presents several risks. If interest rates fall the project could pay financing costs above the market. Bonds contain covenants that may restrict the hospital's overall capital structure for the duration of the bond life. Bank debt is senior secured, which may negatively influence the coupon rate the project can secure. Interest payments will be required prior to full realization of savings. We have increased our exposure to gas price volatility by increasing our consumption, this should be mitigated by futures contracts. There are no contract costs considered in our model.

Benefits: By financing with debt, we will increase our savings by eliminating a PPA that floats on an index. However, service contracts must be established under our estimated variable costs to manage the facility.

Watt’s Up Doc NRG Energy Case Study 15 A. Employment of Cash Flows The project’s cash flows consider the amortization of the bank loan starting at year 1, generating

$16.6M in cash flow extinguishing the bank debt in year 5. Through year 6 until the payment of the municipal bond the project generates $45.5M in cash flow paying the municipal bond in year

15.

Table 6. Consolidated Statement of Project Cash Flows Condensed Statement of Cash Flows 2018-2022 2023-2032 2033-2037 Total Project EBIDA (no paid) $ 20,825,061 52,069,086 32,452,391 105,346,538 Interest Expense $ (4,184,770) (6,599,475) 0 (10,784,245) Debt Ammortization $ (8,240,000) (14,665,500) 0 (22,905,500) Project Free Cash Flow $ 8,400,290 30,804,111 32,452,391 71,656,793

B. Financing Infrastructure

Bank debt and municipal bonds offers stable long term financing for our CCHP, PV, ad

Battery storage solution. Construction is expected to take 18 months and will be handled by a 3rd party developer.

C. Sensitivity Analysis

As we have said before, by projecting higher installation costs and low divergence of natural gas to electricity prices, we believe our base scenario is conservative. We have performed a sensitivity analysis that captures the impact of different scenarios.

First, looking at our financial costs, our base scenario considers a weighted average interest rate of 4.1% (3.5% for bank loan 35.9% and 4.5% for bond 64.0%). Increasing interest rates have an average 0.3% IRR decrease per 50 basis point. It is important to mention that this is a general conclusion due to the different structure of our financing option.

Watt’s Up Doc NRG Energy Case Study 16 Table 7. IRR CAPEX vs Interest Rates Weighted Avg Project Interest Rate % 11.7% 4% 4.000% 4.500% 5.000% 150000.0% 21.2% 21.1% 21.0% 20.9% 1750 19.2% 19.1% 19.0% 18.9% 2000 17.4% 17.3% 17.2% 17.1% 2250 15.8% 15.7% 15.6% 15.6% 2500 14.3% 14.2% 14.2% 14.1% 2750 13.0% 12.9% 12.9% 12.8%

3000 11.7% 11.7% 11.6% 11.6% $/kW CHP Capital Investment Investment Capital CHP 3300 10.4% 10.3% 10.3% 10.2%

Approximately 30% of our ROI relies on savings from a higher growth in utility rates

(PSE&G) compared to gas price growth rates. Our base scenario considers gas prices growing at

2% from $ 2.5 per MMBTU and electricity rates growing at 3% (total). Our analysis shows that our project’s IRR is more sensitive to PJM energy prices, approximately 0.9% IRR per 50 basis point change, and less sensitive to Gas prices, approximately 0.3% IRR per 50 basis point change.

Table 8. Gas vs. Utility Growth Rates Power PJM/PSE&G Growth 11.7% 2% 2.500% 3.000% 3.500% 4.000% 2% 9.8% 10.7% 11.7% 12.6% 13.5% 2.5% 9.5% 10.5% 11.5% 12.4% 13.3% 3.0% 9.2% 10.3% 11.2% 12.2% 13.1% 3.5% 8.9% 10.0% 11.0% 11.9% 12.9%

Gas Price Growth Price Gas 4.0% 8.6% 9.7% 10.7% 11.7% 12.7% A detailed operating and financial model are included below in Exhibits 1, 2, and 3.

Watt’s Up Doc NRG Energy Case Study 17 VI. Conclusion

The selection of a comprehensive CCHP, solar and battery solution will not only provide the hospital’s daily energy needs, but is flexible and robust enough to adequately manage anticipated power demand spikes and feed electricity back to the grid during times of excess production.

Financing this project using a combination of bank loans, NJBPU grants, and municipal bonds will yield a payback period of <7 years and create value for the hospital in the long run.

Watt’s Up Doc NRG Energy Case Study 18 Exhibit 1. Operating Model

Infrastructure CAPEX Installed Cost Gas Turbine Solar PV Battery Min $/kW $ 1,200 $ 2,493 Capacity (hrs) 8 Max $/kW $ 3,000 $ 2,500 Cost $/kWh 600 60000 Demand (MW) 5.5 0.3 Capacity kWh 8000 CAPEX $ 16,547,143 $ 860,000 $ 4,800,000

PSE&G Monthly Cost Forecast 2017 Month 1 2 3 4 5 6 7 8 9 10 11 12 % of Peak 94% 94% 97% 86% 66% 69% 69% 69% 62% 86% 100% 94% Demand (MW) 6.29 6.29 6.50 5.78 4.40 4.61 4.61 4.61 4.15 5.78 6.70 6.29 Hours 730 730 730 730 730 730 730 730 730 730 730 730 kWh 4,590,886 4,590,886 4,742,726 4,221,281 3,211,354 3,363,194 3,363,194 3,363,194 3,026,552 4,221,281 4,894,566 4,590,886

1 LMP ($/kWh) 0.02955 0.02677 0.02394 0.02768 0.02323 0.02565 0.03221 0.03178 0.02896 0.02821 0.02573 0.0319 2 Cap ($/kW) 20.1095 20.1095 20.1095 20.1095 20.1095 29.7275 29.7275 29.7275 29.7275 20.1095 20.1095 20.1095 2 T&D ($/kWh) 0.0342 0.0342 0.0342 0.0342 0.0342 0.0342 0.0342 0.0342 0.0342 0.0342 0.0342 0.0342 O&M ($/kWh) 0.011 0.011 0.011 0.011 0.011 0.011 0.011 0.011 0.011 0.011 0.011 0.011 Cost ($/kWh) $ 0.064 $ 0.061 $ 0.058 $ 0.062 $ 0.057 $ 0.060 $ 0.066 $ 0.066 $ 0.063 $ 0.062 $ 0.060 $ 0.066

Utility Cost ($) $419,000 $406,000 $406,000 $377,000 $273,000 $338,000 $360,000 $359,000 $314,000 $380,000 $428,000 $430,000

3 CCHP Operating Cost ($) $88,000 $88,000 $91,000 $80,000 $59,000 $62,000 $62,000 $62,000 $55,000 $80,000 $95,000 $88,000 3 Solar PV Operating Cost ($) $240 $240 $170 $170 $90 $90 $90 $90 $170 $170 $240 $240

1. PJM Historical Monthly Average of Day-Ahead LMP 2. PSE&G Primary Voltage Service Costs 3. Refer to CCHP Operating Model

Watt’s Up Doc NRG Energy Case Study 19 Exhibit 2. Infrastructure Engineering Model NJ Hospital Total Demand demand of Hospital

Safety Factor (demand) 1.1 Month 1 2 3 4 5 6 7 8 9 10 11 12 Relative CCD 1 1 2 3 3 4 4 4 4 3 3 1 Relativd HHD 9 9 9 7 4 4 4 4 3 7 9 9 Hospital Energy consumption (MWh) 35.1% A Electricity 1,409 1,409 1,409 1,409 1,409 1,409 1,409 1,409 1,409 1,409 1,409 1,409 12.5% A Fans 502 502 502 502 502 502 502 502 502 502 502 502 Steam 4.5% B Imaging Equipment 181 181 181 181 181 181 181 181 181 181 181 181 18.1% C Light, Offices 727 727 727 727 727 727 727 727 727 727 727 727 10.4% D Chiller 152 152 304 456 456 607 607 607 607 456 456 152 54.5% E Heat & HW 3,030 3,030 3,030 2,356 1,347 1,347 1,347 1,347 1,010 2,356 3,030 3,030 CCHP Sizing Month 1 2 3 4 5 6 7 8 9 10 11 12 A+B+C 1.9 MW Electricity 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 G CCHP Electrical Efficiency 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% F/G 5.5 Total (MW) 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 CCHP Steam Efficiency 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% Total Steam Recovery (MW) 3,182 3,182 3,333 2,812 1,802 1,954 1,954 1,954 1,617 2,812 3,485 3,182

Fuel Demand (Mmbtu/mo.) 27,140 27,140 28,436 23,987 15,372 16,668 16,668 16,668 13,796 23,987 29,731 27,140 Price Gas ($/MMBtu) 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50

Fuel Cost ($) 67,851 67,851 71,089 59,969 38,431 41,669 41,669 41,669 34,490 59,969 74,327 67,851 Fixed O&M ($) 7,065 7,065 7,065 7,065 7,065 7,065 7,065 7,065 7,065 7,065 7,065 7,065 Variable O&M ($) 13,167 13,167 13,167 13,167 13,167 13,167 13,167 13,167 13,167 13,167 13,167 13,167 Total Variable Cost ($/yr) 88,082 88,082 91,320 80,200 58,662 61,901 61,901 61,901 54,721 80,200 94,558 88,082

Solar PV Assumes Solar PV panels in roof, production is substracted from CHP's fuel demand. Solar PV Efficiency 12% 12% 15% 15% 18% 18% 18% 18% 15% 15% 12% 12% Energy production (MWh) 30.09 30.09 37.61 37.61 45.13 45.13 45.13 45.13 37.61 37.61 30.09 30.09 O&M Cost ($) $544 $544 $544 $544 $544 $544 $544 $544 $544 $544 $544 $544 SREC Revenue (0.01 $/kWh) $301 $301 $376 $376 $451 $451 $451 $451 $376 $376 $301 $301 Total Variable Cost ($/yr) 243 243 168 168 93 93 93 93 168 168 243 243

Battery Storage Imaging Equipment (MW) 0.248 0.248 0.248 0.248 0.248 0.248 0.248 0.248 0.248 0.248 0.248 0.248

Watt’s Up Doc NRG Energy Case Study 20 Exhibit 3. Financial Model Operating Assumptions: CHP+Fuel Cell CAPEX $22,207,143 Power Inflation 3% Percent Funded with Debt 100% Gas Inflation 2% TOTAL FINANCING $22,905,500 PPE Useful Life 20.00

Source of Funds Funding Source Leverage Total Rate Fee Amor. Maturity BANK LOAN SENIOR NOTE $ 8,240,000 3.50% 3% 100.00% 5 4% NJ HEALTHCARE FAC MUNI NOTES $ 14,665,500 4.50% 5% 0.00% 15

TOTAL DEBT $ 22,905,500 4.14% 0 1 2 3 4 5 6 7 8 9 10 Cash Flow Statement 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Earnings (Cost Savings) $ 3,926,069 4,041,781 4,161,194 4,284,425 4,411,592 4,542,819 4,678,231 4,817,961 4,962,141 5,110,912 Interest Expense $ 948,348 894,566 838,903 781,291 721,663 659,948 659,948 659,948 659,948 659,948 Depreciation 1,110,357 1,110,357 1,110,357 1,110,357 1,110,357 1,110,357 1,110,357 1,110,357 1,110,357 1,110,357 Debt Amortization $ 1,536,607 1,590,388 1,646,051 1,703,663 1,763,291 0 0 0 0 0 Free Cash Flow $ -22207143 1,441,115 1,556,827 1,676,240 1,799,471 1,926,638 3,882,871 4,018,284 4,158,013 4,302,194 4,450,964 CASH FLOWS FROM FINANCING ACTIVITIES: Payments on Bank Debt $ $1,536,607 $1,590,388 $1,646,051 $1,703,663 $1,763,291 $0 $0 $0 $0 $0 Payments on Bonds $ $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other Financing Items: $ CASH FLOW for INTEREST REPAYMENT BANK LOAN SENIOR NOTE $ 288,400 234,619 178,955 121,343 61,715 0 0 0 0 0 NJ HEALTHCARE FAC MUNI NOTES $ 659,948 659,948 659,948 659,948 659,948 659,948 659,948 659,948 659,948 659,948

Balance Sheet 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Assets 16,547,143 16,451,651 16,418,090 16,448,279 16,544,087 16,707,433 20,590,304 24,608,588 28,766,601 33,068,795 Project Cash 0 1,441,115 2,997,942 4,674,182 6,473,653 8,400,290 12,283,162 16,301,445 20,459,458 24,761,652 Net PP&E 16,547,143 15,010,536 13,420,149 11,774,097 10,070,434 8,307,143 8,307,143 8,307,143 8,307,143 8,307,143 Liabilities BANK LOAN SENIOR NOTE $ 8,240,000 6,703,393 5,113,006 3,466,954 1,763,291 0 0 0 0 0 0 NJ HEALTHCARE FAC MUNI NOTES $ 14,665,500 14,665,500 14,665,500 14,665,500 14,665,500 14,665,500 14,665,500 14,665,500 14,665,500 14,665,500 14,665,500

Net Debt: $ 22,905,500 19,927,779 16,780,564 13,458,273 9,955,139 6,265,210 2,382,338 1,635,945 5,793,958 10,096,152

Finacial Summary Capital Investment 22,207,143 Payout (years) 7 IRR 11.7%

Watt’s Up Doc NRG Energy Case Study 21