Advantages and challenges of cogeneration

Cogeneration, also known as combined heat and power (CHP), is the simultaneous production of electricity, heat and/or cooling using a single fuel such as natural gas at or near the point of consumption. The heat produced from the electricity generating process (from the exhaust system of a gas turbine, for example) is captured and utilized to produce high and low stream. The steam can be used as a heat source for both industrial and domestic purposes and can be used in steam turbines to...

By Jorge De Rosa and Matheus Salvadori

Introduction
Cogeneration, also known as combined heat and power (CHP), is the simultaneous production of electricity, heat and/or cooling using a single fuel such as natural gas at or near the point of consumption. The heat produced from the electricity generating process (from the exhaust system of a gas turbine, for example) is captured and utilized to produce high and low stream. The steam can be used as a heat source for both industrial and domestic purposes and can be used in steam turbines to generate additional electricity (combined cycle power).

Technically, it means that part of the heat (steam, hot air) for the production of electricity in steam or gas turbines, or residual heat from combustion engines or fuel cells is used for room heating or as process heat in industry or commerce. Basically, the cogeneration principle could be used in any generation facility. It makes only sense, however, when there is a demand for heat. This demand should be expressive and continuous over the year.

Frost & Sullivan has observed that there has been an increasingly renewed interest in cogeneration in recent years. It is estimated that cogeneration accounts for as much as 10 percent of the United States' electricity capacity, 7 per cent of the United Kingdom's electricity capacity and approximately 12 per cent of Germany's.

Frost & Sullivan has observed that some European countries have set ambitious cogeneration targets for the coming years. The cogeneration targets (as percent over total energy supply) are represented in the following chart:

The Brazilian Reality
Growth of cogeneration in Brazil is mainly driven by the sugar and alcohol sector. The growth experienced by the sector is a result of higher demand on alcohol (especially anhydrous) for different purposes. According to Frost & Sullivan, this sector presents a potential for cogeneration of circa 20GW by 2010. Nevertheless, circa 60 per cent of the cogeneration unities in Brazil are aged, with more than 20 years in operation.

The Brazilian sugar and alcohol sector envisages to market electricity surplus to the national grid. In order to produce marketable amounts of electricity, the sector is expected to invest in new technologies, including cogeneration equipment. There is a clear trend towards implementation of boilers with higher steam production capacity. Nowadays, most of the plants utilize 20-22 bar boilers, capable to produce saturated steam at a temperature of circa 300oC. It is expected that companies will procure higher capacity equipment, with pressures up to 80-90 bar, generating steam at a temperature of circa 500 oC. New boilers and steam turbines with higher capacity and efficiency would substantially augment the electricity surplus the plants would be able to sell.

Other industry sectors also present a high level of cogeneration, such as metallurgy, foods and beverages, pulp and paper. The Brazilian cogeneration potential is expected to growth circa 40 percent by 2010.

Cogeneration Technology and Advantages
A broad range of technologies is available for cogeneration worldwide. These techniques embrace different energy carriers, from biomass or hydrogen in small facilities, such as mini-CHP units and fuel cells, to coal and nuclear energy in facilities of any desired size. At present, different meaningful applications can be found primarily where electricity production can be combined with a long-term stable and constant heat production. This production also contributes to the demand for electricity, which varies as well through the year, but to a lower extent than heat. Applications for cogeneration vary according to heat demand, the temperature of the heat required and its variation over time. The typical application domains for cogeneration are the combined heat and power (CHP) plant industry and the Heat and Power sector in the electricity supply.

Cogeneration potential, as well as cogeneration techniques, greatly depends on the fuel in use in the plants. Generally, there are two cogeneration cycles: 'bottoming' and 'topping'. In the 'topping' cycle, the fuel energy first generates electric power, the remaining energy is recovered in a subsequent process. Usually, there exists a dynamic equipment whose residual heat satisfies the energy need of the entire process. In the 'bottoming' cycle, the residual energy (often heat) is utilized to generate electricity. It consists of a process with higher temperatures, commonly utilized in chemical and petrochemical industries.

A possible way of enhancing cogeneration potential is utilizing gasification. This process comprehends the pyrolisis of carbonaceous materials, such as coal or biomass, into carbon monoxide and hydrogen. The reaction occurs at high temperatures, allowed by the injection of a controlled amount of oxygen. The resulting gas mixture is called synthesis gas or 'syngas' and is itself a fuel. The process augments the energy potential of the materials in use, allowing a higher level of efficiency. Gasification is specifically utilized in the Integrated Gasifier Combined Cycle (IGCC) power plants.

Throughout the last decade many opportunities in this market have materialized. Investments in research and development have paved the way for diverse applications, competitive implementation technologies and equipments. The main equipments in this market are:
• Combustion engines (Otto cycle or Diesel);
• Industrial boilers (that generate steam under pressure used in steam turbines);
• Natural gas turbines;
• Heat recovery boilers;
• Electrical generators, transformers and associated electric equipments;
• CHiller systems;
• Combined cycle systems (steam and natural gas turbines) used in the same facility;
• Gasifiers;
• Generation control equipments and generation control systems.

More than technology, what drives the cogeneration market are some appealing economic, operational and environmental advantages. Frost & Sullivan has observed that cogeneration systems offer several potential industry and user benefits. Some key financial, operational and environmental advantages and benefits of cogeneration have been identified and are summarized in the following table:

In addition, compared to traditional thermoelectric electricity generation cogeneration systems have noteworthy higher efficiency:

Cogeneration Challenges
There has been mounting renewed interest in cogeneration applications in recent years, yet Frost & Sullivan has observed that there are some entrenched deterrents to make cogeneration more widespread worldwide:
• Overall lack of tax benefits
• High internal return rates
• Implementation and equipment costs
• MRO expenses
• Unattractive prices for sales of excess power

Frost & Sullivan believes that a more clear tax policy towards cogeneration practices would serve as a driver for the implementation of such technologies. Governments might seek to provide benefits for companies with higher cogeneration potential, what would result in electricity savings at national level, more efficiency and diminishing environmental impact, especially in countries whose electricity generation depends on 'heavy' fuels. As cogeneration provides benefits in terms of plant efficiency, it is expected that companies will search for new solutions to reduce their dependence on national electricity providers.

Nevertheless, equipment and implementation costs are high, as well as further expenditures in maintenance, repair and overhaul (MRO). Sell of electricity surplus, or even plants' internal electrical supply depend on the solutions' high availability, that is minimum number of maintenance or forced stops at a maximum period of time. The aforementioned trends in the global electricity scenario are expected to drive OEMs to provide differentiated maintenance and service (after sales).

There exist a number of barriers concerning the sell of surplus power in the majority of countries. Unattractive prices drive away companies looking to dispatch their excess electricity into the national grids. As an example, Brazilian sugar and alcohol plants produce circa 95 percent of their electricity needs, purchasing the remaining 5 percent from national GT&D companies. Plants claim that prices they pay to GT&Ds for this additional power are several times higher than the prices paid by GT&Ds for the plants' electricity surplus.

Conclusion
Despite all significant challenges, cogeneration should be seen as a potential alternative to cost reduction and energy/heat diversification. Cogeneration plants usually have a number of high costs related to installed equipment, emissions control systems and plant maintenance. However, Frost & Sullivan believes that the economic and operational benefits generally overweight the cost and effort of developing and maintaining the cogeneration facility. In order to take advantage of these benefits it is extremely important to make detailed evaluation of the system's technical features and economic implications. Frost & Sullivan has identified some key steps for implementing cogeneration systems successfully:
• Ensure utility's buy-back rate offer so as to justify a slightly oversized cogeneration plant.
• Prices for selling excess power are a key element. Due to the fact that buy-back rates may be renegotiated several times during the plant's life cycle the buy-back rate may result in unfavorable operating profile. Therefore, it is extremely important to emphasize this issue before designing any cogeneration plan.
• Assess fuel availability and price -- in the short, medium and long terms.
• Establish the unit value of steam based on existing equipment operation.
• One power, fuel, and steam pricing are known, it is important to determine the breakeven point and period. Frost & Sullivan notes that successful cogeneration project typically have 3 to 6-years paybacks.
• Determine the average thermal and electrical loads.
• Perform energy analysis and make sure that power and heat loads are simultaneous.
• Calculate plant's expected heat-to-power ration.
• Frost & Sullivan has observed that this ration ideally should be about 2kw of heat for every kw of electrical power.
• Assess future energy demand over the expected life of cogeneration plant and provide for expanded capacity to meet possible future loads.
• Evaluate facility's operating profile -- including all necessary scheduled maintenance outages and possible unscheduled events.

Jorge De Rosa is an analyst with the Frost & Sullivan Energy & Environment Practices. At present, De Rosa is focused on Green Energy, Renewable Energy Sources, Energy Integration and Diversification Strategies. Jorge De Rosa holds an MBA degree since January 2006 and has outstanding international experience in Italy, Denmark, Brazil and France.

Matheus Salvadori is an analyst with the Frost & Sullivan Aerospace & Defense Practices. At present Salvadori is focused on Transportation Strategies and Technologies, Latin American Defense, and Infrastructure Development Strategies. Salvadori holds a BSc in International Relations and has remarkable international experience in Brazil, England and Russia.

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