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Cogeneration Feasibility

One of NYC’s largest and most renowned Hospitals was considering a Combined Heat & Power (CHP) plant to increase reliability and safeguard against rising electric costs. Luthin Associates was hired to conduct a feasibility study to determine the economic viability of a co-generation system for their main facility.

Luthin Associates developed a baseline of energy usage costs based on existing load profiles and historical records. We built simulation models to estimate future energy costs based on our knowledge of energy markets, regulatory issues and tariff related distribution issues. Our analysis considered aspects as diverse as market deviations and maintenance downtime; output power, parasitic load, boiler efficiency and degradation. We developed a life cycle cost analysis model to determine the Net Present Value and Internal Rate of Return for the project. Our sensitivity analysis models projected the impact on the economics of the project by varying electric and natural gas costs based on our familiarity with the markets.

All deliverables for this project were met on time and to the customer’s satisfaction. The results were presented in a clear, concise manner and the analysis was verified by an independent review. The customer’s decision to build this system will be based on our analysis and the customer’s confidence in our work.

General Feasibility Study & Rate Negotiation for a NYC Hospital

The purpose of the study was to compare the cost (and estimate the payback period) for installing a new high-pressure dual-fired steam boiler plant in lieu of purchasing steam from Con Edison's steam service. The Hospital's new boiler plant will serve four buildings totaling 1.92 million of the total campus are of .8 million square feet. All costs would be based on lifecycle savings and reflect the new energy profile for each of the energy types. Luthin Associates' efforts included, e developing the financial and operating alternatives of building a new dual-fired (Natural Gas/#2 Fuel Oil) steam producing boiler plant vs. utilizing Con Edison steam. Through this lifecycle analysis, it was determined that the boiler plant option would save nearly $36 million after 20 and that after approximately 5 years the options would have the same lifecycle costs. The boiler plant option has a simple payback of 4.5 years. The lifecycle cost analysis included capital, maintenance, energy and operations costs. At the conclusion of the study, Con Edison developed an incentive package to enable the Hospital to stay on as a steam customer.

Combined Heat & Power (CHP) Feasibility Study

A NYC apartment complex (the Complex) retained Luthin Associates (Luthin) and an engineering firm to develop several scenarios to address future growth and reliability opportunities for its existing combined heat and power (CHP) plant. This plant's peak power of 11 MW services nearly 6,000 apartments, a shopping center, and other facilities. The complex was fully reliant on the CHP plant as it was not connected to the electric utility grid.

Luthin developed the pro forma and financial options relevant to a variety of electric service options, which included:

  1. An energy analysis that provides estimated, future market pricing for electricity and natural gas purchases for 11 different scenarios.
  2. A report that identifies the various options open to the Complex to enable it to participate in a Con Edison and/or NYISO demand response (DR) program.
  3. A report summarizing the estimated revenue potential for a scenario in which the Complex installs additional generation that is sold back to the grid.
  4. The impact of utility and NYSERDA incentives.
  5. A report that summarizes the current status of the Public Service Commission (PSC) initiative, Reforming the Energy Vision (REV) and how that would impact future tariff changes as well as microgrid strategies.
  6. Negotiations with the utilities to determine the cost/benefit of becoming a utility customer.
  7. A report that identifies the best tariff options related to the various scenarios including offset, reliability credit and contract demand options.
  8. Negotiations with the gas utility, National Grid, to negotiate a better gas rate.

Luthin finished its report and is awaiting the Complex's analysis and review of options before moving to the next phase.

Distributed Generation Rider H Firm Gas Rate Applicability to CHP Duct Burners

One of Luthin's customers has a combined heat and power plant (CHP) plant that has a series of duct burners which supplement the unit's thermal energy output. The duct burners are billed at a lower natural gas rate designed for CHP projects. The existing metering and billing requirements were approved by the utility only a few years prior.

The utility contacted the customer and advised them that unless the duct burners were separately metered, the plant would be removed from the utility's CHP rate. The new general gas rate would have increased the customer's gas bill by almost $2 million per year. The customer also had the option to separately meter the duct burners and just bill them on the higher rate. That impact would have required about $100,000 in capital costs, plus twice that amount each year in increased energy costs.

Luthin reviewed the tariff and found no supporting language that authorized the utility to take such actions and recommended appealing this case to the Public Service Commission (PSC). We later discovered that the utility was taking this action with other customers too, as such, the PSC decided that the duct burner was part of the CHP system for gas rate determination.

The result was that the utility was told to change its tariff interpretation and these additional costs were avoided.

Office Building & Merchant Power Plant – Cogeneration Feasibility Studies

Luthin Associates was retained by a CHP developer who was involved in two projects that had completed the engineering and design of two CHP plants. They requested our help to develop a pro forma and financial analysis of the projects. The projects included a commercial office building and a manufacturing facility with total loads of about 20 MW.

Luthin Associates assisted with project development by forecasting the economic valuation of energy costs for the combined heat and power (CHP) generators. Included in these studies are physical commodity forecasts and utility rate modeling. Incentive programs, demand response (DR) contributions, and selling energy to the ISO are also explored as alternate revenue streams.

Utilizing hourly pre-CHP and post-CHP hourly, electric and gas, usage profiles, Luthin Associates developed forward price curves for the relevant commodities, and applied informed escalations based on future price expectations. Forward price curves were developed by working with wholesale providers who calculated the future cost of energy based on the load profiles and current market costs.

All applicable utility tariff rates were analyzed and accounted for any future changes that may be identified in current rate cases. Electricity Standby rates are modeled with attention paid to establishing Contract Demand, applicability of performance credits, exemption from Standby Rates, and Standby outage liability. Updates were made based on Luthin's familiarity of the potential change in Standby rates due to the Con Edison rate case Joint Agreement. Natural Gas rates for both Firm and Interruptible gas delivery options were explored. Applicable steam rates, including Standby service, are modeled including updates for Con Edison's latest tariff changes.

Energy incentive programs were explored, and an estimate of possible funding sources were provided.

We reviewed our customers' ability to participate in both Con Edison and New York Independent System Operator (NYISO) Demand Response programs. Typically, customers that can reduce loads through curtailment of building systems; emergency generators; fuel switching (i.e. electric to steam chillers); and other methods, can earn revenue by participating in DR. Past participation in these programs is evaluated, and the new energy operation post-CHP installation are analyzed.

Additional revenue streams, such as selling excess generation through a utility buyback program, were assessed. Luthin Associates forecasted future location based marginal pricing (LBMP) in order to determine the potential to supply surplus power to the NYISO.