Economic Potential of CHP in Detroit Edison Service Area: the Customer Perspective

Abstract

DOE's mission under the Distributed Energy and Electricity Reliability (DEER) Program is to strengthen America's electric energy infrastructure and provide utilities and consumers with a greater array of energy-efficient technology choices for generating, transmitting, distributing, storing, and managing demand for electric power and thermal energy. DOE recognizes that distributed energy technologies can help accomplish this mission. Distributed energy (DE) technologies have received much attention for the potential energy savings and electric power reliability assurances that may be achieved by their widespread adoption. Fueling the attention has been the desire to reduce greenhouse gas emissions and concern about easing power transmission and distribution system capacity limitations and congestion. However, these benefits may come at a cost to the electric utility companies in terms of lost revenue and other potential impacts on the distribution system. It is important to assess the costs and benefits of DE to consumers and distribution system companies. DOE commissioned this study to assess the costs and benefits of DE technologies to consumers and to better understand the effect of DE on the grid. Current central power generation units vent more waste heat (energy) than the entire transportation sector consumes and this wasted thermal energy is projected to grow by 45% within the next 20 years. Consumer investment in technologies that increase power generation efficiency is a key element of the DOE Energy Efficiency program. The program aims to increase overall cycle efficiency from 30% to 70% within 20 years as well. DOE wants to determine the impact of DE in several small areas within cities across the U.S. Ann Arbor, Michigan, was chosen as the city for this case study. Ann Arbor has electric and gas rates that can substantially affect the market penetration of DE. This case study analysis was intended to: (1) Determine what DE market penetration can realistically be expected, based on consumer investment in combined heat and power systems (CHP) and the effect of utility applied demand response (DR). (2) Evaluate and quantify the impact on the distribution utility feeder from the perspective of customer ownership of the DE equipment. (3) Determine the distribution feeder limits and the impact DE may have on future growth. For the case study, the Gas Technology Institute analyzed a single 16-megawatt grid feeder circuit in Ann Arbor, Michigan to determine whether there are economic incentives to use small distributed power generation systems that would offset the need to increase grid circuit capacity. Increasing circuit capacity would enable the circuit to meet consumer's energy demands at all times, but it would not improve the circuit's utilization factor. The analysis spans 12 years, to a planning horizon of 2015. By 2015, the demand for power is expected to exceed the grid circuit capacity for a significant portion of the year. The analysis was to determine whether economically acceptable implementation of customer-owned DE systems would reduce the peak power demands enough to forestall the need to upgrade the capacity of the grid circuit. The analysis was based on economics and gave no financial credit for improved power reliability or mitigation of environmental impacts. Before this study was completed, the utility expanded the capacity of the circuit to 22 MW. Although this expansion will enable the circuit to meet foreseeable increases in peak demand, it also will significantly decrease the circuit's overall utilization factor. The study revealed that DE penetration on the selected feeder is not expected to forestall the need to upgrade the grid circuit capacity unless interconnection barriers are removed. Currently, a variety of technical, business practice, and regulatory barriers discourage DE interconnection in the US market.