Cogeneration: is it Right for Your Factory?

The Natural Gas Boom

The natural gas “boom” has created opportunities for manufacturers to decrease electrical grid-based power purchases, increase power quality, stability and reliability, and potentially run in island-mode if, or when, the grid goes down, using Cogeneration / Combined Heat and Power (CHP).

The long list of motivating factors includes:

  • Average national electricity cost increases of 6% per year
  • Attractive incentive programs for renewable energy systems and co-gen
  • Large scale climatic events such as Super Storm Sandy, and disruptions to the supply chain caused by the shortage of fuel oil
  • Round-the-clock production demands
  • Lean “pull-systems” of their customers demanding daily deliveries
  • Mission-critical technologies that are highly sensitive to fluctuations in power quality, brown-outs, dropped legs, etc.
  • Avoiding damage to sensitive electronics such as CNC controls, variable speed drives, and robotics

In 2011, the US Office of Energy Information Agency predicted a 3%-7% growth rate in the CHP market, with the lion’s share of this in the manufacturing sector. The actual increase has been close to 10%. [Source:]

Germany has also recently made headlines with large increases of CHP use in the manufacturing sector. Why Germany? The country has ambitious plans to be nuclear-free as a result of the events in Fukushima, Japan; and their current cost of electricity, which averages $0.37/ kWh (US$ – 2013) is one of the highest in Europe. For comparison, Hawaii pays $0.37/kWh, and the continental US ranges from $0.08 (Louisiana) to $0.18/kWh (New York.) [Source:]

Another benefit from on-site generated power is the tax savings. For example, the chemical giant BASF makes power on-site in Ludwigshafen and saves US$700,000 per year just in taxes.

Mercedes / Daimler has invested US$54 Million in its largest production site [a new gas turbine for its plant in Sindelfingen]. The investment will allow the company to increase its power output there by 44%.

Daimler management cites these reasons for making the sizeable investment:

  • reduce dependence on external suppliers
  • increase supply security
  • stabilize energy costs

What do you need to know when considering Cogeneration / Combined Heat and Power (CHP)?

1. It’s all about the heat load. If you can’t use the waste heat – either for hot water, hot air, cold water or cold air, then you will not be financially feasible.

2. Research the grants, tax credits, and incentives for the project. Talk to the utility. Some utilities want more demand / response capability. CHP can be run as a continuous base load or as a peak-shaving engine. There may be more incentives for running the unit at a higher output, during peak energy demand hours.

3. Consider power purchase arrangements. Most manufacturers do not want to become experts in CHP. Companies such as Caterpillar, Tecogen, and Cummins (among others – not a product endorsement) offer comprehensive design / build / operate arrangements.

What to do next:

1) Compile energy bills for at least two years and build base load curves.

2) Assess heat load / cooling load demand of the plant. Knowing when, why and how much you need is critical to determining the size of the cogeneration unit.

3) Look at long-term plans – will you expand, add new product lines, merge or vertically integrate suppliers on-site?

4) Get help. It’s not rocket science, but it’s close to it – so don’t try to go it alone.

Sources: Mathilde Richter, Agence France-Presse, 5-2014

US EIA & Wikipedia

Do you have any questions about Cogeneration / Combined Heat and Power (CHP)?

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