Power trip: The case for cogeneration

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Cogeneration can also act as a source of conditioned, uninterruptible power. Depending on prevailing rates for power and the specific fuel source, a CHP system can decrease life cycle costs. Each situation is different because there are significant differences in the cost of power and natural gas in different areas of the country.

Reuse of waste heat is the biggest factor in making cogeneration economically viable for data centers, Kosik says. The most common use of wasted heat is to heat buildings in a campus environment. NetApp's use of cogeneration with adsorption chillers, while uncommon, makes sense, says Gross.

"You save energy because the byproduct of generating electricity is heat, and you can use that to generate cold air. Because of that, the efficiency of the whole system increases substantially," he says.

NetApp's Hoffman says his cogeneration system is 75% to 80% efficient, versus about 35% for a natural gas utility that doesn't make use of waste heat.

Those numbers are about right, according to Bramfitt at PG&E.

Since using a CHP system is more energy efficient than using utility-generated power, it reduces overall greenhouse gas emissions. The U.S. Environmental Protection Agency's Combined Heat and Power Partnership Web site includes a calculator for figuring out just how much a CHP project will cut emissions.

Show me the money

But efficiency is not why NetApp chose CHP. "To be honest, it's a matter of economics," says Hoffman. NetApp's cost of power from PG&E is typically in the range of 14 cents per kilowatt-hour, but it can hit 24 cents on warm summer days. "Because power in the summer is high and gas rates are low, we run it during summer peak hours," Hoffman says.

The success of the project was tied not just to electricity rates, which were predictable, but also to natural gas prices, which were not. While the numbers added up initially, a dramatic rise in gas prices significantly affected the project's payback.

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"For a project to make sense financially, the cost of energy for a cogeneration project needs to be at least 1.5 cents per kilowatt-hour lower than what the electric utility charges."

Peter Gross, CEO,
EYP Mission Critical Facilities Inc.
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"At the time, natural gas prices were much lower, which was a big cost driver for producing energy using cogeneration. Some of the economics and, consequently, rationale for the system have changed since then," says Robbins.

NetApp's original plan called for the CHP system to provide both normal operating power and backup power. However, increased natural gas costs not only limited the system's use to peak summer hours, when rates are highest, but also resulted in NetApp looking elsewhere for backup power. NetApp decided a "more traditional" diesel generator would better serve that purpose, says Robbins.

CHP chillers like this one provide cold water through adsorption cooling -- a process that uses a silica-based gel to evaporate water, which serves as the refrigerant.

CHP chillers like this one provide cold water through adsorption cooling -- a process that uses a silica-based gel to evaporate water, which serves as the refrigerant.
Source: HIJC USA Inc., Houston

Rebates from PG&E were key to making the $2.5 million project's numbers work. That covered one-third of NetApp's cost, Hoffman says. When the system was first installed four years ago, NetApp expected it to pay for itself in reduced energy costs within three years. Since then, however, the price of natural gas has doubled, and expected savings of $600,000 per year dropped by about half. "That doubled our payback period," Hoffman says, adding that it's now only cost effective to run the system when summer rates are at their highest levels.

CHP systems won't pay off for everyone -- especially users in areas where electricity costs are lower, warns John Smith, vice president at Michaud Cooley Erickson, a consulting engineering firm in Minneapolis. For most organizations, he says, "it's very difficult to produce electricity cheaper than the utility company."

A good rule of thumb is that for a project to make sense financially, the cost of energy for a cogeneration project needs to be at least 1.5 cents per kilowatt-hour lower than what the electric utility charges, says Gross.

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