integrated home energy business cases and development plan tom horgan, noa simons february 26, 2009

Integrated Home Energy

Business Cases and Development Plan

Tom Horgan, Noa Simons

February 26, 2009

Outline• Executive Summary (Horgan)• Concept Description (Horgan)

– What it does and why people will want it– Estimate of monthly savings– This works because Biomass & NG is way cheaper than electricity

• Business Case (Horgan)– State by state payback and returns– Detailed calcs for one state

• Marketing Analysis (Simons)– How many could we sell & how much would we make

• Competitive Analysis (Horgan)– Why MicroCHP & Woodgas Generators aren't realistic

• Product Design(Zanoni)– How will we build this and how much will it cost?– What is our IP?

• Proforma Business Plan (Simons)– How much money do we want

Executive Summary• Integrated Home Energy Systems

– Electricity is the most expensive energy we buy. It is 2x natural gas, 3x gasoline and 10x biomass on $/BTU basis.

– MicroCHP units combine NG generators and heat exchangers to improve overall efficiency and reduce energy costs, but capital investment is too high and efficiencies still too low for commercial viability.

– The Integrated Home Energy System combines a fuel gas generator and a biomass gasifier to supply up to 90% of energy needs from low cost biomass with grid security and back up capability.

– Renewable, green home energy system reduces monthly energy costs up to 70% and pays for itself in two years.

Concept Description

Concept Description• Integrated Home Energy System Concept

– Generates residential heat and power from natural gas, propane and biomass (wood, wood pellets or coal)

– Integrates a natural gas generator and wood pellet gasifier with heat exchangers and peak heater.

– Outdoor system follows electric load and combines generator heat with peak heater to meet heat demand.

– Excess heat discharged in warm conditions

Biomass Biomass GasifierGasifier

NG or LPG

WoodWood pelletsCoalDry biomass

ElectricityElectricity

HeatHeat

Concept Description• Integrated Home Energy System Concept

– Unit operates in grid stand-by mode, supplying primary power using the grid for surges and back up.

– Unit serves as back-up power during grid outages.– Proprietary control algorithm determines proper ratio of biofuel, NG,

propane, etc.

Picture of Unit Here

Business Case

Business Case• Configuration Options:

– Heating System Replacement • Generator/Peak Heater/Gasifier:

– Grid Parallel, Heat Following. Blended NG and/or Syngas. Connected for net metering. Generator operates at fixed load with peak heater based on heat demand. Excess power rolled over, reimbursed.

– Grid Parallel, Electric Load Following, Connected for net metering. Generator operates at variable based upon electric demand. Excess heat wasted or dumped to 2nd hot water tank.

– Energy System Add-on• Generator/Gasifier:

– Grid Parallel, Electric load following. Generate electricity and rollover excess. Do not want reimbursement at ‘avoided cost rate’. Include hot extra water tank for stored heat.

Business Case• Residential Energy Use

– Energy use varies significantly nationwide depending on climate. – Roughly 69% of space/water heating is by natural gas– Warmer states use less energy in total but more electricity

• ~125 MBTU/yr, ~27% electric, ~72% thermal

– Colder states use less electricity and quite a bit more heat • ~137 MBTU/yr, ~22% electric, ~78% thermal

• Residential Energy Costs– Energy costs vary significantly depending on a number of factors

(data in $/MBTU)

Electricity NG Wood Pellets CoalAverage: $ 25.86 $ 13.81 $ 2.51 $ 3.15 $2.88Max: $ 60.72 $ 37.72Min: $14.42 $ 7.68

Business Case• Residential Energy Costs

– Natural Gas is about half the cost of electricity ($/MBTU)– Woody biomass has roughly half the heating value of NG but is

less than ¼ of the cost.– Electricity and NG are conveniently available from utilities– Wood is also available either from local suppliers or hardware

stores in the form of pellets

– With current technology, electricity can be made from NG and biomass at fractions of grid costs.

– Moreover, consumers are looking for …• Self sufficiency in unstable times• Reliable back up power• Environmentally friendly energy

Business Case• New York State:

– 2400 sq ft home. Energy Usage: 26 MBTU/yr electric, 124 MBTU/yr thermal

– Electricity Price : $ 44.75/MBTU, NG price: $ 15.22/MBTU– Total Annual Fuel Cost: $3,051

– Integrated Home Energy System at 80% Renewables

Wood RequirementEnergy to Generator = 0.80 x 26 MBTU/yr ÷0.17 = 122.4 MBTUEnergy to Gasifier = 122.4 MBTU/0.6 = 203.9 MBTUAmount of Wood = 203.9 MBTU ÷0.018531 MBTU/kg = 11,004 kg/yr ~ 1.3 fifty pound bags of wood pellets per dayCost of Wood = 11,004 kg/yr x 0.06 $/kg = $660/yr



– Electricity Price : $ 44.75/MBTU, NG price: $ 15.22/MBTU– Total Annual Fuel Cost: $3,051

– Integrated Home Energy System at 80% Renewables

Natural Gas RequirementEnergy from NG = 0.20 x 26 MBTU/yr ÷0.25 = 20.8 MBTUHeat from Wood = 203.9 MBTU x 0.6 x 0.63 = 78.3 MBTUHeat from NG = 20.8 MBTU x 0.63 = 13.01 MBTUAddition NG for Peak Heater = (124 – 78.3 – 13.1)/0.92 = 35.4 MBTUCost of NG = (20.8 + 35.4) x $15.22 = $856/yr



– Electricity Price : $ 44.75/MBTU, NG price: $ 15.22/MBTU

– Total Annual Fuel Cost, no IHES: $3,051

– Total Annual Cost w/ IHES: $660 + $856 = $1516

– Total Annual Savings: $3,051 - $1516 = $1536

– Payback Term at $5,000 installed cost, $3000 Deferred, $150/year maintenance:

($5000 – $3000 – $150)/$1536 = 1.2 yr

Business Case• OK, so why not just buy a pellet stove and make heat?

– Pellet stove ~ 85% Efficient, providing 80% of heat, $3,000.– For NY…

• Wood Pellet Cost = 0.8 * 124 MBTU/yr /0.85 * $3.15/MBTU = $375/yr• NG Cost = 0.8 * 124 MBTU/yr * $15.22/MBTU = $1509/yr• Savings: $1142/yr, $300 less than IHES

– Also…• No deferred costs (need heating system)• No back up power• Payback: ~3 yr

Marketing Analysis

Competitive Analysis

• Competitive Systems (Standalone Micro CHP)– Climate Energy “Freewatt” – $14K

• Heat following 1.2kW system using • Honda MCHP generator w/ integrated furnace/boiler• 20% electric, 85% overall• System produces about 50% of electricity needs• Not grid independent.• Annual savings - ~$1K

– Marathon Engine Systems – up to $35K• Electric load following 2 to 4.7kW, supplemental heat required• Up to 27% electric, 92% overall• 2000 systems in Europe• Can be Grid Independent• Uses heat from generator


http://www.freewatt.com/product_detail.asp?key=169

• Climate Energy “Freewatt” – $14K

At $2500 At $2500 installed installed

cost, cost, payback is payback is still 6 yrsstill 6 yrs


http://www.freewatt.com/product_detail.asp?key=169

• Marathon Engine Systems – ~$35K

Payback WORSE with Payback WORSE with Maximum Electricity Maximum Electricity

Generation – Need %40 Generation – Need %40 Efficiency for grid buybackEfficiency for grid buyback


• ECO -5, 5kW Wood Pellet gasifier/generator - $9,495

Max Gen w/ Grid Max Gen w/ Grid Reimbursement Reimbursement up to four fold up to four fold improvmentimprovment


Competitive Analysis- Expensive/large battery bank for grid

independence- Always need an inverter for power quality

requirements- What new batter technology could work

INSIDE a unit?

Product Design Details

Product Design Details• Big Questions

– How big does the battery bank or hot water tank have to be?

– How big a daily surge should we account for?– What about unit reliability? Possible to make a unit

requiring less then 1/yr service call?– Is it possible to seamlessly connect to the grid?

Product Design Details• Configurations:

– Space heating: Forced hot air, Water heating: Gas Hot Water Tank

– Space heating: radiant (hot water), Water Heating: Gas Hot Water Tank

– ELF Mode Options:• Generator operates intermittently, allowing batteries

to draw down to some SOC and then recharging. If generator is on, heat is supplied to home if needed. Home heat Peak heater is primary

Product Design Details• Control Logic, ELF Mode:

– Sensors: Electric Load, Inside Air Temp, Water Temp, Outside Temp, Wood Availability, Battery SOC, Syngas flow, PH/Gen two-way valve

– Actuators: Air Pump to Gasifier, NG pump, Grid/IHES relay, Wood feed screw, Gen HX Circulating Pump, Gasifier HX Circulating Pump, Peak Heater

– Wood Available System States:• Cold Start Up: Unit powers up on NG and supplies required

heat & power. Wood Igniter fires. As Syngas becomes available, NG flow is proportionally decreased. Power is generated and batteries are charged as necessary

Product Design Details• Operating Modes(Electric Load Following):

– Start up– Steady State:

• Heat Demand Met or Exceeded by Generator– Divert all syngas to generator. Waste excess heat. Mix NG as necessary.

Controller determines (1) amount heat to collect from generator, peak heater and gasifier, (2) amount of heat to send to space and hot water (3) amount of heat to environment (radiator)

• Heat Demand Not Met by Generator– Controller determines optimum flow of syngas & NG to generator and peak

heater. Controller determines (1) amount heat to collect from generator, peak heater and gasifier, (2) amount of heat to send to space and hot water (3) amount of heat to environment (radiator)

– Shut Down

Schematic 2

Gen Heat

PeakHeater

GasifierHot

Water Tank

Blower/ Circulator

Electric Demand

Space Heat

Hot Water

Grid

NG

Wood

CPU

V1

V2

V7

V6

Radiator

Syngas

Syngas

Exhaust

Electric DemandSpace Heat DemandHot Water DemandWood LevelSyngas FlowCoolant Temp

Air P1

P2

R1

http://commons.wikimedia.org/wiki/File:Heat_exchanger_no_cross.svg






Backup Slides

Schematic 1

Gen Heat

PeakHeater

GasifierHot

Water Tank

Blower/ Circulator

Electric Demand

Space Heat

Hot Water

Grid

NG

Wood

CPU

V1

V2

V3

V4

V5V7

V6

radiator

Syngas

Syngas

Exhaust

Electric DemandSpace Heat DemandHot Water DemandWood LevelSyngas Flow

Air P1P2

R1





In Door NG In Door NG Micro CHP UnitMicro CHP Unit

OutdoorOutdoorGasifierGasifier

- Under 3 yr payback w/out net metering in LF mode

- Faster payback with grid buyback on systems over 10 kW (very high wood requirement)

- NG can be used to fire gasifier and or dry feed

- User controls renewables use- Wood chips ($0.05/kg) or wood

pellets ($0.06/kg)- Pellets available by the ton at

Home Depot

• Integrated Home Energy System– 5/25 kW Grid Parallel/Grid Backup System, $5,000– Fuel: NG/LPG and Renewables– Benefits….


Integrated Home Energy• System Schematic

Biomass Biomass GasifierGasifier

NG or LPG

WoodWood pelletsCoalDry biomass

ElectricityElectricity

HeatHeat

Integrated Home Energy• Configurations

– Heat Following:• System operates based upon heat demand from hot water/home

thermostat.

• Excess electrical energy stored in battery bank

• Need battery bank, hot water tank

– Electric Load Following• System operates based on electric demand from residence. Excess heat

stored in water tank

– System automatically switches to gas if wood is not available.

• Case 1: Heating System replacement/upgrade, 2400 sq ft house, 25%/17% Electrical, 63% Thermal, 80% Renewables, $5,000 Installed Cost

• 10 kW system shows annual revenue in MA however wood demand is excessive – 9 fifty pound bags of pellets /day

• Note: 3% improvement in Syngas Electric Efficiency triples revenue and decreases wood demand by 12%


5 kW5 kW

10 kW10 kW

• Case 1: Same conditions, except….


5 kW

10 kW

15 kW

5 kW

10 kW

15 kW

• Analysis:– Heating System for 2400 sq ft house, $5K (no deferred cost)

• Diminishing returns from Max Generation as Renewable fraction increased above %70.


• Analysis:– Heating System for 2400 sq ft house, $5K (no deferred cost)

• Improved Syngas Electrical Efficiency results in heat deficit (NG must be purchased from utility)


• Net metering by State– States that offer NEG Reimbursement (up to full amount)

• Massachusetts, Minnesota, Nebraska, New Mexico, North Dakota, Pennsylvania, Connecticut, Colorado, New Jersey, New York, Ohio, Wyoming, Washington, Illinois

– States that offer Net Metering for Biomass, CHP & MSW• Maine, Massachusetts, Minnesota, Nebraska, New Mexico, North Dakota,

Oklahoma, Pennsylvania, Wisconsin

– States that offer Net Metering for Biomass & CHP• District of Columbia, Vermont

– States that offer Net Metering for Biomass & MSW• Connecticut, Iowa, Michigan, Texas, Virginia

– States that offer Net Metering for Biomass• Colorado, Delaware, Hawaii, Idaho, Louisiana, Maryland, Nevada, New

Jersey, New York, North Carolina, Ohio Oregon, South Carolina, West Virginia, Wyoming

• 6 States offer net metering and grid buyback for IHES product. 5 more probable.


Integrated Home Energy • Federal Incentives (available for Biomass)

– Tax Credit: 30% up to $1500– Various loan programs

• State Incentives (available for Biomass)– Massachusetts

• 100% Tax Deduction. • Grant money available from Renewable Energy Trust Fund and

LORI.

– New York• Property Tax Exemption. • Grant money available from NYSERA (Micro CHP)

– Connecticut• Property Tax Exemption. • Grant money available from Connecticut Clean Energy Fund

Integrated Home Energy• Development Plan

– Proof of Concept (6 months). Assemble prototype from retrofit commercial NG generator, gasifier and CHP• Downselect and purchase gasifier, gas generator, chipper, etc

• Research/validate wood gasification (mc, wood type, etc).

• Assemble/test and develop heat rejection, gas cleaning

• Research/development/test CHP functionality

– Cost Estimates• Hardware: 2 gasifiers, 2 NG generators (~ $20 to 305K)

– Misc tools/test equipment ($1 to $3K)– One Computer - ($1K)– Additional Hardware for BOP ($3 to 5K)

• Contract Services: $20/$25K• Salaries: 2 x $90K * 0.5 = $90K• Rental: $1 to $1.5K /per month = $6 to $9K• Total: ~ $150,000

Integrated Home Energy• Development Plan

– Prototype Demonstration (6 months). Integrate advanced gasification, generator and CHP loop into homogeneous unit• Validate CHP functionality/software & controls• Develop detail drawings, design system layout & enclosure• Assemble and test prototypes

– Cost Estimate• Hardware:

– Custom designed gasifier & system components ($100 to $150K)– NG Generator ($3K)– Shift reactor, software & controls ($15K)

• Contract Services: $20/25K• Software: Solid Works ($10K)• Salaries: 2 x $90K * 0.5 = $90K• Rental: $1 to $1.5K /per month = $6 to $9K• Total: ~ $250/300K

Summary

• IHES System can payback in two to three years in some states and generate revenue after that through grid buy back

• Larger systems are required and wood requirements are excessive due to low efficiency

• Small improvement in Syngas Electrical Efficiency mitigates problem and increases revenue

• IHES Model– Conversion efficiencies, electricity/NG prices and usage conditions

interact counter intuitively at times to effect economics of IHES– Spreadsheet model built to evaluate economics of microCHP,

wood gas generators and IHES– Includes state by state electricity and NG prices (www.eia.gov)– Includes state by state net metering policies and utility

reimbursement for states offering it (www.newenergychoices.org)– Total energy usage determined by home size. Distribution

between NG and Electricity determined by location

• Note: Used commercial price for NG calcs in previous IHES analysis discussion. This made residential stand alone Micro CHP seem more viable than it actually is.


• Net metering by State


• Net metering interview with Rex Bradford– Installed Solar Panels in Ipswitch, Ma– Had issues with LOCAL utility who can claim exemption from

state law. Ultimate got local laws changed to allow for net metering.

– System is not grid independent (would need battery bank w/ controls)

– Solar covers half of electricity on annual basis– Installed cost, $26,000 less $2,000 in incentives

• Massachusetts - National Grid Website - 220 CMR 11.04c) Net Metering. A Customer of a Distribution Company with an on-site Generation Facility of 60 kilowatts or less

in size has the option to run the meter backward and may choose to receive a credit from the Distribution Company equal to the average monthly market price of generation per kilowatthour, as determined by the Department, in any month during which there was a positive net difference between kilowatthours generated and consumed. Such credit shall appear on the following month's bill. Distribution Companies shall be prohibited from imposing special fees on net metering Customers, such as backup charges and demand charges, or additional controls, or liability insurance, as long as the Generation Facility meets the Interconnection Standards and all relevant safety and power quality standards.


Integrated Home Energy • Lessons learned from model analysis…

– Under two year payback possible with high renewables usage but wood requirement excessive

– Small improvement in syngas electrical efficiency result in large payback improvements (research area)

– MSW does not impact payback appreciably (later add-on)– Straight NG Micro CHP does not really pay for itself even at low

cost. Efficiency too low/NG cost too high– Improving electrical efficiency on syngas is good to a point in LF

mode (NY/Ma)• More electricity means less heat and more NG that must be purchased

from grid.• Always good in MG mode. More efficiency means more money and

your making excess heat anyway

– Renewables are cheap but overall electrical efficiency is about 10%. Still a very good deal.

• IHES Model– Conversion efficiencies, electricity/NG prices and usage conditions

interact counter intuitively at times to effect economics of IHES– Spreadsheet model built to evaluate economics of microCHP,

wood gas generators and IHES– Includes state by state electricity and NG prices (www.eia.gov)– Includes state by state net metering policies and utility

reimbursement for states offering it (www.newenergychoices.org)– Total energy usage determined by home size. Distribution

between NG and Electricity determined by location

• Note: Used commercial price for NG calcs in previous IHES analysis discussion. This made residential stand alone Micro CHP seem more viable than it actually is.


IHES Model

• Model assumptions– All electricity and heat not provided by IHES purchased from grid – Unit has separate peak heater so heat demands always met.– No recovered heat from gasifier – MSW = 4.6 lbs/person/day (EPA Website) – All heating is NG. For heat following mode fraction renewable is on

thermal – For maximum gen/electric load following mode fraction renewable

is on electricity – Electricity measured at meter - no efficiency loss. – Use average heating unit efficiency of 83% to calculate actual

energy needs from purchased NG.

Energy Demographics• Warmer states use more electrical energy, colder states

use more thermal energy

• Total Energy use somewhat correlated to region

• Total Energy use highly correlated to house size

• Number of occupants less correlated to house size

• Ideal State: Low Average Electrical Demand with NEG Reimbursement

State of NG & LPG• NG Demand

State of NG & LPG• Available Reserves

State of NG & LPG• Grants

State of NG & LPG• Microturbines

– DOE has program for microturbine development (> 100kW)• http://www.eere.energy.gov/de/microturbines/

– Program Goals:• High efficiency — Fuel-to-electricity conversion efficiency of at least 40% • Environment — NOx <7 ppm (natural gas) • Durability — 11,000 hours of reliable operations between major overhauls and a service

life of at least 45,000 hours • Cost of power — System costs <$500/kW, costs of electricity that are competitive with

alternatives (including grid) for market applications • Fuel flexibility — Options for using multiple fuels including diesel, ethanol, landfill gas,

and biofuels.

– Program Partners• Capstone (PDF 61 KB) • GE (PDF 57 KB) • Ingersoll-Rand (PDF 82 KB) • Solar Turbines (PDF 52 KB) • UTC (PDF 71 KB).

Conclusions