The Economist & NRG Energy Case Study: Optimizing the 21st Century Hospital 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. Technology 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 Infrastructure 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 electrical grid can be. Hospitals comprise a subset of systems that can be categorized as critical infrastructure 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 United States, 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 hours of the day, 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. Smart grid controls allow our system to make the best use of electricity and heat generated with natural gas. Solar energy produced and stored in batteries optimizes fuel consumption and provides ancillary services in- house 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 Philadelphia or New York City metropolitan areas. We also assumed that the hospital is a general health care 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 County, 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 coal 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 voltage 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 distributed generation resource, achieves approximately an additional 40% of efficiency by using the heat. The main element of the system is the gas turbine, which transforms fuel, natural gas in our case to have a more environmentally friendly fuel, into mechanical energy. We have selected the Siemens Gas Turbine 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 carbon footprint of the hospital by taking advantage of the considerable rooftop space (137,000 ft2) and offsetting part of the electrical power demand (330 kW). Second, 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-hour 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 business models that could be beneficial.