meeting 100209 hedman
TRANSCRIPT
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CHP: The State of the MarketCHP: The State of the MarketU.S. EPA Combined Heat and Power PartnershipU.S. EPA Combined Heat and Power Partnership
2009 Partners Meeting2009 Partners Meeting&&
NYSERDA CHP RoundtableNYSERDA CHP Roundtable
Bruce HedmanBruce HedmanICF InternationalICF International
October 1, 2009October 1, 2009
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Acknowledgements
Based on work supported by:
EPAs Combined Heat and PowerPartnership
DOEs Industrial Technology Program
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CHP Market Status
Where have we been?
Where are we now?
Where are we going???
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CHP Is a Significant Resource for the US
82% Manufacturing 5% Other Industrial
13% Commercial/Institutional
9% U.S. GeneratingCapacity (MW)
12% Generation (MWh)
CHP Growth 1970 to Present
0
20
40
60
80
100
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Cumul
ativeCapacityAdditions
(GW)
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Over 32 GW of New Capacity Has BeenInstalled Since 1995
Capacity Additions, 1995 to Present
40
50
60
70
80
90
100
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Cumula
tiveCapacityAdditions(GW)
Source: CHP Installation Database ORNL/DOE
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But Growth Has Slowed Since 2005, andSome Existing Capacity Has Been Retired
Net Capacity Growth, 1995 to Present
40
50
60
70
80
90
100
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Cumula
tiveCapacityAdditions(GW)
Source: CHP Installation Database ORNL/DOE
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New CHP Capacity Additions Have BeenBelow 1 GW/Year Since 2006
Annual Capacity Additions, 2000 to Present
0
1
2
3
4
5
6
7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
AnnualCapacityAdditions(GW)
Source: CHP Installation Database ORNL/DOE
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But the Number of New CHP System AdditionsHas Remained Steady
Annual System Additions, 2000 to 20091
0
100
200
300
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
AnnualCapacityAdditions(GW)
Source: CHP Installation Database ORNL/DOE
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Non-Traditional Users Are Growing
6%Other Industrials
42%Manufacturing
52%Commercial/Institutional
7%Other Industrials
66%Commercial/Institutional
27%Manufacturing
2000-2009: 1,374 sitesUp to 1999: 2,585 sites
Source: CHP Installation Database ORNL/DOE
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But Industrials Drive Capacity Additions
7%Other Industrials
82%Manufacturing
11%Commercial/Institutional
3%Other Industrials
15%Commercial/Institutional
82%Manufacturing
2000-2009: 24.8 GWUp to 1999: 63.0 GW
Source: CHP Installation Database ORNL/DOE
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Industrial States Installed the Most Capacity
7,498 MWTexas
3,085 MWLouisiana
1,969 MWAlabama
1,372 MWCalifornia
1,361 MWOregon
805 MWNew York
7,910 MWRemaining States
CHP Capacity Additions: 2000 - 2009
755 MWIndiana
Source: CHP Installation Database ORNL/DOE
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But Other States Have Active Markets
60 SitesNew Jersey
54 Sites
Texas
64 Sites
Massachusetts
337 SitesCalifornia
83 SitesConnecticut
217 SitesNew York512 Sites
Remaining States
CHP System Additions: 2000 - 2009
47 SitesIllinois
Source: CHP Installation Database ORNL/DOE
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Heavy Steam Users Dominate IndustrialApplications
7,285 MWRefining
1,957 MWPaper
1,062 MWFood Processing
7,693 MW
Chemicals
700 MWOther Industrial
898 MWOther Mfg
1.466 MWFabrication
CHP Capacity Additions: 2000 - 2009Source: CHP Installation Database ORNL/DOE
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Universities and District Energy Represent TwoThirds of the Commercial/Institutional Capacity
1,060 MWUniversities
601 MWUtilities
101 MW
WWT
1,333 MW
District Energy
477 MWOther
125 MWHospitals
CHP Capacity Additions: 2000 - 2009Source: CHP Installation Database ORNL/DOE
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Market Development 2000 - 2009
Early capacity additions driven by large
merchant plants with industrial steam hosts Growing deployment in commercial and
institutional applications
Development stalled by high natural gasprices and growing economic uncertainties
Significant retired and idled capacity
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CHP Market Status
Where have we been?
Where are we now?
Where are we going???
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Policymakers Appear to be Getting theMessage about CHP
CHP is a critical energy efficiency resource
CHP can quickly and cost-effectively reduceCO2 emissions
CHP can enhance economic competitiveness
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$234 billion private sector
investment
Nearly 1 million new jobs
Reduces fuel use and CO2
emissions
Source: ORNL
What If CHP Represented 20% of US GeneratingCapacity in 2030?
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20% CHP Could Reduce Projected Increasesin CO2 Emissions by More than 60%
Source: ORNL
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Energy Independence and Security Act of 2007
Title IV, Section D, contained provisions designed toimprove energy efficiency by promoting CHP, waste
energy recovery and district energy. Called for EPA to establish a Waste Energy Recovery
Registry to identify the quantity and quality of recovery
potential Authorized funding of regional Clean Energy
Application Centers (not appropriated)
Authorized a Waste Energy Recovery IncentiveProgram (not appropriated)
Production incentive of $10/MWh during first three years
of operation
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Energy Improvement and Extension Act of 2008
Provided a 10% investment tax credit (ITC) for the first15 MW of CHP property
Systems
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American Recovery and Reinvestment Act of 2009
Provides refundability to investment and production tax creditsthrough a grant program within the Department of Treasury
Allows bonus depreciation for CHP: 50% of depreciation value can be taken in the first year
Remainder over the following four years
Allows CHP tax credits even if projects are financed with localdevelopment bonds
Allows biomass projects to claim a 30% investment tax credit
Provides some $100 billion of additional government-backed loan
guarantees for clean energy projects
Potential funding for shovel ready projects
$156 million of cost-share grants for CHP, waste energy recovery, districtenergy, and industrial-efficiency projects (DOE ITP FOA44)
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CHP Eligible for Similar Benefits asother Clean Energy Technologies
EnergyProperty
2007 2009
45PTC
45ITC
RefundableITC
45PTC
48ITC
RefundableITC
CHP - - - -10% of
1st 15 MW10%
Biomass open loop
$20/MWhfor 10 yrs
- -$20/MWhfor 10 yrs
30% 30%
Wind$20/MWhfor 10 yrs
- -$20/MWhfor 10 yrs
30% 30%
Solar - 30% - - 30% 30%
Geothermal$20/MWhfor 10 yrs
10% -$20/MWhfor 10 yrs
10% 10%
If a technology is eligible for both PTC and ITC, then one of the two types oftax credit must be selected
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Proposed Tax Enhancements
Increased ITC of 30% for highly efficient CHP
Increase ITC eligibility from 15 to 25 MW forprojects of unlimited size
Remove prohibitions against cofiring inbiomass PTC
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State Initiatives
Thirteen states include CHP or waste energyrecovery in portfolio standards Nevada, Oregon, South Dakota, North Dakota ( B.C. and
Saskatchewan) -waste heat recovery projects equivalent to otherrenewable electric generation resources
Specific incentives for CHP New York
Connecticut
New Jersey
Massachusetts
California
Texas
Midwest Governors Association
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New York
CHP technology demonstration and fleet program Energy Efficient Power Systems
Existing Facilities Program pay for performance
Multi-family Facilities Program pay for
performance RPS
Anaerobic Digesters under customer-sited tier
Fuel cells
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Connecticut
An Act Concerning Energy Independence, June2005
Customer CHP and DG Incentives
$450/kW, additional $50/kW in congestion area
Utilities receive $200/kW (down to $50 in 2011) Low interest financing
Natural gas distribution cost rebate
No back-up power for new systems
More than 80 applications representing 300 MWbetween 2006 and 2008
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New Jersey
Clean Energy Program supports increased energyefficiency and installation of clean energy
technologies Calls for 1,500 MW of CHP as part of state energy plan
Provides $450/kW incentive (first $70 million offeringrecently closed)
Utility-based Energy Efficiency Incentive programs
PSE&G announced $190 million program $450/kW rebates for CHP in hospitals
50% of design costs
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Massachusetts
MA Alternative Energy Portfolio Standard CHP iseligible technology
250 MW by 2020
$20/MWh equivalent
CHP credit includes electricity and thermal
Metered power output and useful thermal reportedquarterly with independent verification
Gas and Electric Rebates for CHP Green Communities Act directs utilities to purchase all
cost-effective efficiency and makes CHP eligible
MicroCHP eligible for Renewable Trust
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California
CARB set a target of 4,000 MW of new CHP by2020 in response to AB 32
AB1613 calls for feed in tariffs for excess powerfrom CHP systems < 20MW
CPUC considering must-take contracts for excesspower from large CHP (>20 MW)
Bill to reinstate Self Generation Incentive Programfor fossil-fueled CHP on Governors desk
$600/kW for first 1 MW, systems up to 5 MW
Waste heat recovery projects not regulated as GHG
sources
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Texas
Active Texas CHP Initiative
State emergency preparedness bills include CHPprovisions
State and local government buildings that must operatebefore, during and after major events and >500 kW
Mandated to evaluate CHP before construction and majorrenovation
Consider implementing if payback is less than 20 years
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Midwest
Midwest Governors Association to announce carbonreduction plan
Doubling amount of CHP by 2030
Increase current 10.4 GW to 21 GW
Increase CHPs share of generating capacity from 4.3% to7.1%
City of Chicago considering its own target
Increasing current 117 MW to 317 by 2019
N CHP C it Additi H B
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New CHP Capacity Additions Have BeenBelow 1 GW/Year Since 2006
Annual Capacity Additions, 2000 to Present
0
1
2
3
4
5
6
7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Annu
alCapacityAdditions(GW)
Source: CHP Installation Database ORNL/DOE
O 1 800 MW f N CHP C it I
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Over 1,800 MW of New CHP Capacity IsCurrently in Construction or Engineering
Annual Capacity Additions, 2000 to 2010/2011
0
1
2
3
4
5
6
7
200
0
200
1
200
2
200
3
200
4
200
5
20
06
20
07
20
08
20
09
2010/11
AnnualCapacityAdd
itions(GW)
Source: CHP Installation Database ORNL/DOE
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Market Development - Current Conditions
Most activity in states with favorable regulatorytreatment and/or specific incentives
Natural gas CHP in areas with supportable sparkspread (Northeast, Texas, California)
Biomass and opportunity fuels in Southeast, Midwestand Mountain
Hot applications: universities, hospitals, waste watertreatment, food processing
Growing interest in waste heat to power applications
Increasing interest in carbon reduction and in power
reliability benefits of CHP
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CHP Market Status
Where have we been?
Where are we now?
Where are we going???
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We Seem to be at Inflection Points
Credit and financing
Natural gas prices Technical innovation
Carbon policy Other
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Natural Gas Prices
Henry Hub Prices of $13.00/MMBtu in July 2008and $3.50/MMBtu in September 2009
$13.00 in October 2006 and $5.00 in October 2006
Prices depressed by economic downturn
Long term impact of shale resources New large resource base that will place a ceiling on gas
prices, or
Just enough to offset production declines in conventionalresources
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Recent Natural Gas Production (Bcf per year)
Supply Area 2005 2006 2007 2008
Northern RockyMountainBasins
2,284 2,461 2,700 3,081
MidcontinentShales
652 813 1,265 2,142
Other U.S. and
Canada 22,071 22,433 22,510 21,695
Total U.S. andCanada
25,007 25,707 26,475 26,918
The Market Is Expecting Higher Prices For
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The Market Is Expecting Higher Prices ForNow
NYMEX Natural Gas Futures - 9/30/09
3
4
5
6
7
8
9
10
Nov-0
9
Jan-10
Mar
-10
May
-10
Jul-1
0
Sep-10
Nov-1
0
Jan-11
Mar
-11
May
-11
Jul-1
1
Sep-11
Nov-1
1
Price,$/MMBtu
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Technical Innovation
Higher efficiency engines and turbines enteringthe market
Fuel cells and microturbines both demonstratingrobust performance and evolving toward largersystems
More interest in packaged systems and modularity
MicroCHP entering North American market
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MicroCHP
High efficiency, thermally-based CHP below 10 kW
Over 100,000 systems inJapan; 20,000 in Europe
200 engine-driven systems
installed in the U.S.ECRInternationalfreewatt
Installation
Medway,MA
MarathonEcopower
Installation
NewYork,NY
Pilot programs in New Yorkand Massachusetts
Potential technology for EPAClimate Choice program
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Carbon Policy
How to treat CHP under cap and trade?
Will there be national renewable and energyefficiency resource standards?
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Discussion
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Traditional Power Generation Wastes Energy
Electricity Generation is the Largest Source
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Electricity Generation is the Largest Sourceof CO2 Emissions
Source: RED calculations based on data from Emissions of Greenhouse Gases in the United States 2007;State Energy Data Report; and Annual Energy Review.
0%
10%
20%
30%
40%
50%
1950 1960 1970 1980 1990 2000
CO2 Emissions by theU.S. Electric Pow er Sector
%
ofUSC
O2Emissions
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US Electricity Generation Remains Inefficient
RED | the new green - 47 - www.recycled-energy.com
Source: U.S. Energy Information Agency
U.S. Delivered Electric Eff iciency
0%
50%
100%
1900 1920 1940 1960 1980 2000
Inefficientgeneration
Wastes energy
Inflates costs
Increases pollution
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The Potential for Additional CHP Is Nationwide
Source: ORNL
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The Future Is Smaller, Thermally-Based CHP
Thermally-sized systems providing heat and powerprimarily for on-site use
Almost one-half of the potential is in commercial /institutional applications
Much the potential is in systems below 20 MW in size
Much of the potential is in applications with limitedexperience with CHP
Industrial food processing, fabrication and assembly
Commercial lodging, office buildings, multifamily
Institutional hospitals, schools, government facilities
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40
42
44
46
48
50
52
54
56
58
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Gas Price at Henry Hub
(Nominal$ per MMBtu)
$0
$2
$4
$6
$8
$10
$12
$14
$16
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
The Natural Gas Balance
Relative Price Stability
Price Spike
Winter 2000-01 Rising PricesWinter 2002-03
Source for Historic Data: Platts Gas Daily
Hurricane Ivan
Lower-48 Dry Gas Production Vs. Dry GasCapacity (BCFD)
Hurricane Katrina& Rita
Hurricane Gustav& Ike
The recent downturn in the economy has led to arelatively looser balance between natural gas supply
and demand.
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Henry Hub Natural Gas Prices ($ per MMBtu)
$2
$3
$4
$5
$6
$7
$8
$9
$10
$11
$12
$13
$14
Jan
-05
Apr-05
Jul-05
Oct-05
Jan
-06
Apr-06
Jul-06
Oct-06
Jan
-07
Apr-07
Jul-07
Oct-07
Jan
-08
Apr-08
Jul-08
Oct-08
Jan
-09
Apr-09
Jul-09
Oct-09
Jan
-10
Apr-10
Jul-10
Oct-10
Jan
-11
Apr-11
Jul-11
Oct-11
ICFs Projected HenryHub Prices
Futures Gas Price,Sept. 29, 2009
Historical Henry Hub Pricesfrom Platts Gas Daily
Oil Prices ($/Bbl):
Light Crude Futures 72.92
ICF WTI 79.55
Gas Prices ($/MMBtu):
Natural Gas Futures 6.53ICF Henry Hub 6.10
Average Prices, 2010-2011