ORNL/TM-2001/169 Assessment of On-Site Power Opportunities in the Industrial Sector September 2001 Prepared by: Onsite Energy Corporation Under contract No. 85X-TA008V 701 Palomar Airport Road, Suite 200 Carlsbad, California 92009 Teresa Bryson William Major Ken Darrow ORNL/TM-2001/169 ASSESSMENT OF ON-SITE POWER OPPORTUNITIES IN THE INDUSTRIAL SECTOR Energy Division September 2001 Prepared by OAK RIDGE NATIONAL LABORATORY P.O. Box 2008 Oak Ridge, Tennessee 37831-6285 managed by UT-Battelle, LLC for the U.S. DEPARTMENT OF ENERGY under contract DE-AC-00OR22725 TABLE OF CONTENTS LIST OF FIGURES........................................................................................................................... vii LIST OF TABLES............................................................................................................................. ix ACRONYMS..................................................................................................................................... xi ACKNOWLEDGMENTS.................................................................................................................xiii EXECUTIVE SUMMARY ...............................................................................................................ES-1 INTRODUCTION....................................................................................................................... ES-1 EXISTING ON-SITE GENERATION IN THE INDUSTRIAL SECTOR................................ ES-1 REMAINING POTENTIAL FOR ON-SITE GENERATION IN THE INDUSTRIAL SECTOR.................................................................................................. ES-2 REMAINING CHP POTENTIAL IN THE INDUSTRIAL SECTOR....................................... ES-3 CHP ECONOMICS .................................................................................................................... ES-3 ENVIRONMENTAL BENEFITS OF CHP................................................................................ ES-5 BARRIERS TO ON-SITE GENERATION................................................................................ ES-5 POLICY AND TECHNOLOGY RECOMMENDATIONS....................................................... ES-5 1. INTRODUCTION....................................................................................................................... 1-1 2. ON-SITE GENERATION POTENTIAL IN THE INDUSTRIAL SECTOR ............................ 2-1 2.1 TECHNICAL APPROACH ............................................................................................. 2-1 2.1.1 Database of Large Industrial Sites....................................................................... 2-1 2.1.2 Database of Small Industrial Sites....................................................................... 2-2 2.1.3 Database of Operating CHP and Small Power Plants.......................................... 2-2 2.1.4 Agriculture and Mining Analysis ........................................................................ 2-2 2.2 POWER-ONLY AND CHP TECHNICAL POTENTIAL............................................... 2-2 2.3 MECHANICAL DRIVE MARKET................................................................................. 2-6 2.3.1 Chillers ................................................................................................................ 2-6 2.3.2 Refrigeration........................................................................................................ 2-7 2.3.3 Air Compressors.................................................................................................. 2-7 2.3.4 Sales of Selected Industrial Prime Movers.......................................................... 2-7 3. BENEFITS OF CHP ................................................................................................................... 3-1 3.1 INTRODUCTION ............................................................................................................ 3-1 3.2 ENERGY BENEFITS ...................................................................................................... 3-1 3.3 ENVIRONMENTAL BENEFITS AND EMISSIONS REDUCTION ............................ 3-2 3.4 ECONOMIC BENEFITS ................................................................................................. 3-3 3.5 ANCILLARY BENEFITS................................................................................................ 3-4 3.6 BENEFITS CALCULATION FOR EXISTING AND POTENTIAL INDUSTRIAL CHP.......................................................................................................... 3-5 3.6.1 Energy Savings .................................................................................................... 3-5 3.6.2 Environmental Benefits ....................................................................................... 3-7 4. CONCLUSIONS AND RECOMMENDATIONS...................................................................... 4-1 4.1 MARKET ANALYSIS CONCLUSIONS........................................................................ 4-1 4.2 TECHNOLOGY RESEARCH NEEDS ........................................................................... 4-1 4.3 MARKET AND REGULATORY NEEDS...................................................................... 4-2 iii 4.4 INDUSTRY SPECIFIC INITIATIVES............................................................................ 4-3 4.4.1 Agriculture........................................................................................................... 4-3 4.4.2 Food Processing................................................................................................... 4-3 4.4.3 Mining Industry ................................................................................................... 4-3 4.4.4 Forest Products Industry...................................................................................... 4-3 4.4.5 Chemical Industry................................................................................................ 4-4 4.4.6 Petroleum Refining Industry................................................................................ 4-4 4.4.7 Glass Industry...................................................................................................... 4-4 4.4.8 Steel Industry....................................................................................................... 4-4 4.4.9 Aluminum Industry.............................................................................................. 4-4 4.4.10 Metal Casting....................................................................................................... 4-4 4.4.11 Non-IOFs............................................................................................................. 4-5 5. BIBLIOGRAPHY....................................................................................................................... 5-1 APPENDIX A: ENERGY USE IN THE IOFs.................................................................................. A-1 A.1 IMPORTANCE OF THE IOFs TO THE U.S. ECONOMY ............................................ A-1 A.2 AGRICULTURE .............................................................................................................. A-2 A.3 MINING ........................................................................................................................... A-3 A.4 FOOD PROCESSING...................................................................................................... A-3 A.5 FOREST PRODUCTS ..................................................................................................... A-4 A.6 CHEMICALS ................................................................................................................... A-4 A.7 PETROLEUM REFINING............................................................................................... A-5 A.8 GLASS INDUSTRY ........................................................................................................ A-5 A.9 ALUMINUM INDUSTRY............................................................................................... A-6 A.10 STEEL INDUSTRY ......................................................................................................... A-6 A.11 METALS CASTING........................................................................................................ A-7 A.12 ENERGY USE IN THE IOFs........................................................................................... A-7 A.13 EXISTING CHP IN THE IOFs ........................................................................................ A-10 APPENDIX B: IMPACT OF ELECTRIC INDUSTRY RESTRUCTURING ON THE IOFs......... B-1 B.1 IMPACTS OF RESTRUCTURING ON INDUSTRY..................................................... B-1 B.1.1 Regional Price Variability ................................................................................... B-1 B.1.2 Customer Class Variability.................................................................................. B-2 B.1.3 Noncompetitive Assets........................................................................................ B-2 B.2 A NEW ROLE FOR ON-SITE GENERATION.............................................................. B-3 B.2.1 Combined Heat and Power .................................................................................. B-3 B.2.2 Standby Power..................................................................................................... B-4 B.2.3 Peak-Shaving......................................................................................................