Cogeneration Can Add To Your Profits

Abstract

The predicted rapid escalation of gas and electric costs, particularly in those utility systems predominantly fired by gas, make it important for both industry and utilities to evaluate the role of cogeneration in their future plans. Industries requiring a continuous supply of steam and with fuel available at a cost not significantly higher than the utility will usually find that cogeneration with its higher fuel effectiveness can offer a significant saving in their costs of steam and powers at a return on investment above their required 'hurdle rate.'

Also, cogeneration can offer important advantages to utilities, particularly those faced with the need to increase near term capacity but uncertainty as to the long term load growth. Cogeneration plants have a permit/construction period of two to three years and are rarely over 100 MW in size. To the extent sizable continuous steam loads are present in the utility system, cogeneration alleviates the uncertainty in projecting the need conventional large utility plants, adds efficient capacity in smaller increments and if jointly or wholly owned by industry reduces the capital costs to the utility. The PURPA regulations, with their procedures for calculating avoided cost, limit the benefits the utility and their customers can directly receive from industrially-owned cogeneration. They can share in the benefits if they are adequate to permit industry to receive a reasonable savings and return on their investment and a contract is negotiated to permit the utility and its customers to receive the remainder. Under the present PURPA, the utility can own up to 50% of a cogeneration plant and under this ownership arrangement, the utility and its customers can directly receive the benefits of cogeneration.

When is cogeneration advantageous and what are the interactions between the industrial sites' energy requirements, the cogeneration plant configuration and its economics? Economics are the 'bottom line' in determining the potential for installing a cogeneration plant. In this paper, the performance and cost characteristics of various types of cogeneration plants, with emphasis on gas turbine plants, will be described together with their matching to the site energy requirements and the effect that these interactions together with fuel cost and electric power rates have on the economic benefits