There has never been a better time than right now for hospitals in New Jersey and New York to take a serious look at Cogeneration.
Cogeneration represents one of the most effective approaches to energy cost reduction, because it produces two types of energy at once – Electric Power and Thermal Energy. In addition to the significant benefit of reducing a hospital’s energy costs by 40-60%, it also serves as an energy backup system; it reduces the risk of power outages, and minimizes the extra cost charged by utilities for electricity during peak-use periods (demand charges). Right now in NY and NJ, government incentives can pay for up to 50% of project costs.
What is CHP?
Cogeneration, also known as Combined Heat & Power (CHP), is the simultaneous production of electricity and heat from a single fuel source – most commonly Natural Gas. When traditional utility power plants burn fuel to produce electricity, they also produce tremendous amounts of heat. This heat can represent approximately 70% of the energy content of the fuel used, and is lost as it is vented into the atmosphere.
With cogeneration, you generate the electricity on site, capture the waste heat, and utilize it for a variety of thermal applications. Cogeneration captures waste heat and then converts it into usable energy that can then be available to augment existing boilers and chillers for heating and cooling, domestic hot water or steam, and sterilization. This captured energy comes at no cost to the hospital because it is a natural bi-product of the electricity produced.
Hospitals Are Strong CHP Candidates
According to the US Dept. of Energy, “Hospitals are ideal candidates for combined heat and power (CHP) systems because hospitals function 365 days a year, 24/7, and they require round-the-clock energy. CHP systems enable hospitals to reduce energy costs, improve environmental performance, and increase energy reliability. Resources saved are often redirected to improve patient care.”
For hospitals the benefits of cogeneration are numerous:
- Reduced energy bills (40-60% on average) allowing a ROI of 5-10 years, and under a five year ROI in many cases with government incentives. Incentives often pay for up to 50% of the project.
- Redundancy – Additional Standby/backup power supply.
- Physical hedge against rising utility charges.
- Improved carbon footprint & longer life of boiler equipment.
Lower Energy Costs
In New York, New Jersey, and most of the northeast, hospitals pay an average of $0.16 per kWh. A CHP system can operate in the range of $0.04 – $0.06 cents per kWh, so the savings are significant.
With CHP, hospitals get lower, more predictable energy bills. Total system energy is improved when power is produced onsite through a CHP system. By enabling hospitals to supply their own power, CHP systems provide a hedge against the rising cost of electricity.
The following are a few case studies and examples of systems completed or in process, and demonstrate what an impact a CHP system can have on a hospital’s bottom line:
- The Methodist Hospital (Houston, TX) in 2008 built a 4.6 MW system that uses turbine technology with a heat recovery steam generator and 2800-ton, steam chiller.
- Weill Cornell Medical Center (New York, NY) installed the same year a 7.5-MW CHP system that meets all of its base electric load and nearly 70% of its peak demand thereby allowing an 80% cut in its utility electricity purchase. One third of the hospital’s steam demand is met by a heat recovery boiler.
- NYU Langone’s new CHP system will use turbines and a heat recovery system to meet the steam needs of all of the buildings and taking it off ConEd’s expensive steam loop. When the system is fully operational in 2018 the hospital estimates it will save $17 million per year.
Federal, State and Utility Incentives: Under pressure from their Public Service Commissions, many utilities are changing their tariffs to promote CHP. Given that hospitals never disconnect from the grid when using Cogeneration, with a CHP system the “standby”rates utilities charge is key. States such as New York and New Jersey offer millions in grant monies to support CHP installs, and the federal government gives a 10% Investment Tax Credit and accelerated 5-year depreciation.
More Reliable Emergency Power
Hospitals must perform critical, life-saving functions even when a widespread disaster interupts their supply of electricity from the grid. CHP can be designed to maintain crucial life-support systems, operate independently of the grid during emergencies, and is capable of black start (which is the ability to come online without relying on external energy sources). Because they are already up and running, CHP systems can offer a more seamless, reliable power alternative than traditional emergency generators.
CHP’s Role in Superstorm Sandy
There are numerous stories of how CHP systems proved reliable during Superstorm Sandy for hospitals and other facilities. According to an article written by the Association to Save Energy, “The immense benefit of CHP was wonderfully demonstrated during Hurricane Sandy where many facilities with CHP kept the lights and heat on during and after the storm,” Houston Advanced Research Center’s Gavin Dillingham said in a recent newsletter. Such facilities included housing complexes, as well as university and hospital campuses.
CHP systems enabled buildings, hospitals, and entire campuses to retain full heat and power –even after losing grid-supplied electricity. This not only enabled these facilities to maintain critical operations during and after the storm, but also relieved the storm-stressed grid as electric utilities struggled to restore services.
Along with other hospitals in the tri-state region, South Oaks Hospital on Long Island drew full power from its CHP plant during Hurricane Sandy. Seeing the impending emergency, South Oaks engineers proactively isolated the 350,000 square foot facility, which includes an acute psychiatric hospital, nursing home, and an assisted living center, in the early evening on Oct. 28. The hospital’s 1.3 megawatt CHP plant provided full power until the electric grid stabilized.
Think You Can’t Afford CHP?
Many hospitals are faced with financial challenges or the fact that they are a not-for-profit organization and cannot take advantage of the tax incentives that increase CHP affordability. Some may also have a more pressing need or priority for their capital.
A Power Purchase Agreement (PPA) can provide hospitals all the benefits of CHP with ZERO CAPITAL ($0) required, and ZERO ($0) operating and maintenance costs.
A PPA provides an investment into a hospital by installing, owning, & operating a CHP system at no cost in exchange for an agreement by the hospital to purchase all the energy the system produces at an agreed upon discount off the lowest secured utility rate. The hospital in turn gets an on-site power source and improves its bottom line by reducing the cost of electricity, heat, hot water, and cooling.
The hospital only pays for the energy they need and would otherwise purchase from the grid at a discounted rate that is GUARANTEED. Savings and terms typically vary from 5 to 15% and from 5 to 15 years.
In addition to monetary gains, CHP enables you to position your hospital as a green facility and environmentally responsible. Some companies who offer a PPA may also include any additional equipment that will benefit the cogeneration system; i.e., absorption chillers, boiler, cooling tower, etc.
About the Author
Paul Errigo is a Partner and the Director of Business Development at GREENCROWN Energy (GCE), a turnkey developer of Cogeneration Systems & Power Purchase Agreements. He is a member of HFMA and a frequent speaker on Cogeneration (CHP) for a variety of industries. GCE is an official partner with the US Dept. of Energy and the EPA’s Combined Heat & Power Partnership. They are members of NJ’s Clean Energy Program, The Association of Energy Engineers, and the NJ Chapter of the US Green Building Council. GCE also provides related energy conservation measures such as Energy Supply Cost Reduction, Special Case Resource (Backup Generator Revenue), & HVAC/R Efficiency Restoration.
Paul can be reached at firstname.lastname@example.org
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