What is Cogeneration?
Hospitals, schools, food processors, manufacturers and many other industrial facilities require steam, heat or hot water as an essential part of their processes. Additionally, these facilities need electricity to run machinery and to support general power requirements.
In the absence of cogeneration--or combined heat and power ("CHP")--the facilities would need to burn natural gas (or other fuel) to generate steam/heat from boilers. Separately, the local utility would need to burn natural gas (or other fuel) to produce electricity to sell to the facility.
Cogeneration is the production of both electricity and heat from a single fuel source, thus conserving fossil fuel.
How Does It Work?
In a typical cogeneration plant, natural gas is burned first in a gas turbine (i.e. a jet engine), which turns a generator to produce electricity. The hot exhaust gases from the turbine are routed to a heat recovery boiler where the "waste heat is captured to produce steam. Combining these processes yields a much higher efficiency than if each product were produced separately in stand-alone turbine and boiler facilities.
How is Cogeneration Efficient?
Cogeneration is an efficient way of generating energy, both thermal and electric, from a given amount of fuel (e.g. natural gas). It saves between 15-40% when compared with the separate production of electricity and heat. Since a large portion of California's electricity portfolio is, and will continue to be, natural gas-fired, cogeneration is a significant way to use natural gas efficiently.
What are the Benefits?
Gas-fired cogeneration has contributed to California's development of an electric supply portfolio that is reliable, efficient, diverse, and environmentally sound. In particular,
Today, power from gas-fired cogeneration QFs serves about 17% of the IOUs' load, representing almost 6,357 MW. By 2005, the number of QFs under contract to the IOUs will begin to drop sharply, as their original contracts expire. Most of California's cogeneration projects were developed and built between 1982 and 1990, under long-term (15-30 year) contracts to sell excess power to the local utility. That is, cogeneration units are usually sized to meet the thermal needs of the host facility. A certain specific amount of electricity is associated with that thermal requirement. After the plant consumes all of the electricity it needs, the "excess energy generated by the turbine is sold to the local utility under long-term contracts. The sale price is regulated by the CPUC.
Due solely to the expiration of QF contracts (both gas-fired and renewable), the IOUs' committed resources will drop by roughly 3% per year from 2005 to 2012. The reality is, however, that these power plants and their host facilities are still viable, useful cogeneration units and renewing their contracts eliminates a significant portion of the post-2006 resource concerns. Cogeneration represents a highly efficient use of natural gas that directly supports California industry and jobs. California needs to retain the benefits of the clean, efficient indigenous generation that cogeneration QFs provide. State policy should focus on providing contract extensions for cogeneration QFs, in order to ensure that utility ratepayers will continue to receive the benefits of these reliable and economical generation resources.
Is Cogeneration Still Good Policy for California?
California has long been the nation’s leader in recognizing the benefits from and encouraging cogeneration. Sections 2801 through 2804 of the Public Utilities Code (1976-1980) established a comprehensive scheme "to encourage private energy producers to competitively develop independent sources of natural gas and electric energy. More recently, Section 372 of the State Public Utilities Code (1997) states:
"It is the policy of the state to encourage and support the development of cogeneration as an efficient, environmentally beneficial, competitive energy resource that will enhance the reliability of local generation supply, and promote local business growth."
In November 2003, the California Energy Commission issued the final Integrated Energy Policy Report (IEPR). The report includes a strong endorsement for the continued development of cogeneration in California. The IEPR states:
"Distributed generation, including cogeneration and self-generation, has tremendous potential to help meet California's growing energy needs as an additional generation source and an essential element of customer choice (IEPR, page 15).
"Cogeneration offers another low cost, low emission option for the efficient use of natural gas. By creating both electric and thermal energy, cogeneration plants can achieve heat rates that match or exceed the heat rates of new gas-fired combined cycle power plants (IEPR, page 24).
During December 2003 and January 2004 the California Public Utilities Commission issued procurement decisions that reinforced the value of cogeneration. Following is an excerpt from those decisions:
"As we discussed in D.02-08-071 (p. 31), QF power provides many benefits to California: ""As a general proposition, we find that QF power provides significant benefits to the state, in the form of more efficient industrial processes, as well as electric power. QFs have continued to provide power to the state during difficult circumstances during the past several years. A consequence of not making provisions for continuing QF contracts would be more QF power going off-line, creating additional net short that the utilities would need to procure during the interim period" (R.01-10-024 (p. 135)."
"In particular, we wish to encourage existing QFs to continue providing power over the longer term to the utilities. We also wish to encourage efficiency upgrades to existing facilities. Neither of these objectives will be met if we continue to offer only stopgap solutions in the form of one-year SO1 contracts. Therefore, we will require the utilities to sign SO1 contracts of five years in duration with QFs wishing to provide power at SRAC prices (R.01-10-024 (p. 160)."
It is CCC's view that California policy makers are as committed to cogeneration today as they were 25 years ago. Current concerns about natural gas supply, price and availability reinforce the benefits of using cogeneration to efficiently use our gas resources and support business and industrial enterprises in the State. We encourage State regulators and policy makers to focus on providing contract extensions for cogeneration QFs, in order to ensure that utility ratepayers will continue to receive the benefits of these reliable and economical generation resources.
Hospitals, schools, food processors, manufacturers and many other industrial facilities require steam, heat or hot water as an essential part of their processes. Additionally, these facilities need electricity to run machinery and to support general power requirements.
In the absence of cogeneration--or combined heat and power ("CHP")--the facilities would need to burn natural gas (or other fuel) to generate steam/heat from boilers. Separately, the local utility would need to burn natural gas (or other fuel) to produce electricity to sell to the facility.
Cogeneration is the production of both electricity and heat from a single fuel source, thus conserving fossil fuel.
How Does It Work?
In a typical cogeneration plant, natural gas is burned first in a gas turbine (i.e. a jet engine), which turns a generator to produce electricity. The hot exhaust gases from the turbine are routed to a heat recovery boiler where the "waste heat is captured to produce steam. Combining these processes yields a much higher efficiency than if each product were produced separately in stand-alone turbine and boiler facilities.
How is Cogeneration Efficient?
Cogeneration is an efficient way of generating energy, both thermal and electric, from a given amount of fuel (e.g. natural gas). It saves between 15-40% when compared with the separate production of electricity and heat. Since a large portion of California's electricity portfolio is, and will continue to be, natural gas-fired, cogeneration is a significant way to use natural gas efficiently.
What are the Benefits?
Gas-fired cogeneration has contributed to California's development of an electric supply portfolio that is reliable, efficient, diverse, and environmentally sound. In particular,
- Cogeneration uses each Btu of natural gas twice, once to generate power, and again to produce useful thermal energy. Even using technology from the 1980s, this dual use of natural gas results in overall efficiencies that are comparable to the best stand-alone gas-fired electric generators today.
- The efficient use of natural gas in cogeneration projects provides societal benefits from the conservation of fossil fuel and reduces the state's overall reliance on natural gas.
- Cogeneration QFs have provided significant air quality benefits by replacing much dirtier steam-producing boilers and by pioneering the use of new emissions control technology such as selective catalytic reduction.
- Cogeneration QFs have operated reliably for many years and are geographically distributed. As a result, they increase the reliability of the state’s electric grid. As an example, cogeneration QFs provided valuable support to PG&E's grid in the aftermath of the 1989 Loma Prieta earthquake. Cogeneration QFs in California provide as much power as six large nuclear power plants, without the security, safety, and waste disposal concerns of nuclear plants, and without exposing the ratepayers to historical construction cost overruns.
- Many cogeneration projects are located in or near electric load centers, and thus avoid the cost and environmental impacts of new transmission lines.
Today, power from gas-fired cogeneration QFs serves about 17% of the IOUs' load, representing almost 6,357 MW. By 2005, the number of QFs under contract to the IOUs will begin to drop sharply, as their original contracts expire. Most of California's cogeneration projects were developed and built between 1982 and 1990, under long-term (15-30 year) contracts to sell excess power to the local utility. That is, cogeneration units are usually sized to meet the thermal needs of the host facility. A certain specific amount of electricity is associated with that thermal requirement. After the plant consumes all of the electricity it needs, the "excess energy generated by the turbine is sold to the local utility under long-term contracts. The sale price is regulated by the CPUC.
Due solely to the expiration of QF contracts (both gas-fired and renewable), the IOUs' committed resources will drop by roughly 3% per year from 2005 to 2012. The reality is, however, that these power plants and their host facilities are still viable, useful cogeneration units and renewing their contracts eliminates a significant portion of the post-2006 resource concerns. Cogeneration represents a highly efficient use of natural gas that directly supports California industry and jobs. California needs to retain the benefits of the clean, efficient indigenous generation that cogeneration QFs provide. State policy should focus on providing contract extensions for cogeneration QFs, in order to ensure that utility ratepayers will continue to receive the benefits of these reliable and economical generation resources.
Is Cogeneration Still Good Policy for California?
California has long been the nation’s leader in recognizing the benefits from and encouraging cogeneration. Sections 2801 through 2804 of the Public Utilities Code (1976-1980) established a comprehensive scheme "to encourage private energy producers to competitively develop independent sources of natural gas and electric energy. More recently, Section 372 of the State Public Utilities Code (1997) states:
"It is the policy of the state to encourage and support the development of cogeneration as an efficient, environmentally beneficial, competitive energy resource that will enhance the reliability of local generation supply, and promote local business growth."
In November 2003, the California Energy Commission issued the final Integrated Energy Policy Report (IEPR). The report includes a strong endorsement for the continued development of cogeneration in California. The IEPR states:
"Distributed generation, including cogeneration and self-generation, has tremendous potential to help meet California's growing energy needs as an additional generation source and an essential element of customer choice (IEPR, page 15).
"Cogeneration offers another low cost, low emission option for the efficient use of natural gas. By creating both electric and thermal energy, cogeneration plants can achieve heat rates that match or exceed the heat rates of new gas-fired combined cycle power plants (IEPR, page 24).
During December 2003 and January 2004 the California Public Utilities Commission issued procurement decisions that reinforced the value of cogeneration. Following is an excerpt from those decisions:
"As we discussed in D.02-08-071 (p. 31), QF power provides many benefits to California: ""As a general proposition, we find that QF power provides significant benefits to the state, in the form of more efficient industrial processes, as well as electric power. QFs have continued to provide power to the state during difficult circumstances during the past several years. A consequence of not making provisions for continuing QF contracts would be more QF power going off-line, creating additional net short that the utilities would need to procure during the interim period" (R.01-10-024 (p. 135)."
"In particular, we wish to encourage existing QFs to continue providing power over the longer term to the utilities. We also wish to encourage efficiency upgrades to existing facilities. Neither of these objectives will be met if we continue to offer only stopgap solutions in the form of one-year SO1 contracts. Therefore, we will require the utilities to sign SO1 contracts of five years in duration with QFs wishing to provide power at SRAC prices (R.01-10-024 (p. 160)."
It is CCC's view that California policy makers are as committed to cogeneration today as they were 25 years ago. Current concerns about natural gas supply, price and availability reinforce the benefits of using cogeneration to efficiently use our gas resources and support business and industrial enterprises in the State. We encourage State regulators and policy makers to focus on providing contract extensions for cogeneration QFs, in order to ensure that utility ratepayers will continue to receive the benefits of these reliable and economical generation resources.
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