District Energy - 2011 2nd Quarter

variable O&M cost, financing cost, and an assumed utilization rate for each plant type.”)

Nuclear and Fossil Plants

Concerns about the availability and costs of renewable power resources have led to proposals for a broader clean energy standard that incorporates nuclear and fossil-fueled plants with CCS. While the technical performance and costs of CCS are unproven, advocates have succeeded in having CCS incorporated into CES proposals.

President Obama has taken this one step further by including efficient natural gas in his CES initiative. The administration has not yet clarified how they would define “efficient natural gas.” However, it appears that it would give credit to gas-fired power to the extent that it reduces GHG emissions compared with coal. This is consistent with administration statements that we are already half-way to the president’s stated goal of 80 percent ‘clean’ electricity.

Figure 2 shows the levelized costs per kilowatt-hour of power generation for a range of nonrenewable power-only technologies, including fossil plants as well as nuclear. The EIA’s assumptions

Figure 2. Levelized Cost of New Nonrenewable Power-Only Generation Resources On Line in 2016.

35

Levelized Cost (Cents/k Wh)

30

25

20

15

10

5

0

Average 9. 8 Cents

n Fuel, O&M

n Capital

Coal
Gas Combustion Turbine
Advanced NGCC With CCS
NGCC
Advanced Coal With CCS

Source: U.S. Energy Information Administration, Levelized Cost of New Generation Resources in the Annual Energy Outlook 2011, December 2010, DOE- IEA-0383 (2010).

for the fuel components of levelized costs are summarized in table 1.

These nonrenewable power-only technologies have an average levelized cost of 9. 8 cents/k Wh, significantly lower than the renewable power-only technologies. However, nuclear plants will be extremely difficult to site and carry with them safety concerns and the unresolved problem of nuclear waste disposal. Carbon capture and sequestration is an unproven technology. What’s left? Natural gas combined-cycle (NGCC), which is considered highly efficient, still throws away half of the fuel input through waste heat. Further, given the historic volatility of natural gas prices, the costs of gas-fired generation could be significantly higher than illustrated in figure 2.

Combined Heat and Power

Broadening the standard to credit nonrenewable resources to the extent that they deliver GHG reduction is a step toward providing flexibility and reducing costs. But what the president has proposed is not a technology-neutral approach and misses an important set of opportunities that can further reduce costs and are applicable in every state: combined heat and power.

The waste heat resulting from electricity generation accounts for a huge portion ( 27 percent) of total U.S. primary energy consumption, as illustrated in figure 3. There is a range of CHP technologies, including natural gas reciprocating engines, natural gas combustion turbines and steam turbine CHP using biomass. The common characteristic is that the heat that is normally exhausted from the power generation process is recovered.

Recovering power generation waste
heat through CHP eliminates the fuel
consumption that would otherwise be
required to produce thermal energy. The
U.S. Department of Energy (DOE) has
estimated that increasing CHP from its
current 9 percent share of U.S. electric
power to 20 percent by 2030 would
• avoid 60 percent of the projected
increase in U.S. carbon dioxide emis-
sions (equivalent to taking half of all
U.S. passenger vehicles off the road);

• create more than 1 million new, highly
skilled jobs here in the U.S.; and
• generate $234 billion in new invest-
ments.

There is another technology that uses relatively low-temperature waste heat, such as exhaust gases from an industrial process, to generate electricity using a process called organic rankine cycle (ORC). Sometimes called waste heat to power (WHP), this technology generates electricity without burning additional fuel. Although different from the CHP technologies described above, this technology does combine heat and power production. For convenience in the following presentation it will be grouped with CHP.

The levelized costs per kilowatt-hour of representative CHP power generation in a range of sizes and types is profiled in figure 4, using the same methodology used by the U.S. EIA for figures 1 and 2. These CHP technologies have an average levelized cost of 8. 3 cents/k Wh.

CHP provides more cost-effective power because the byproduct heat is not wasted. However, CHP faces a range of barriers, including onerous electric utility interconnection requirements and costs,

Table 1. Levelized Cost of Fuels for Generation Resources On Line in 2016.

Natural Gas Coal Nuclear Biomass

Levelized Fuel Cost ($/MMBtu) $6.00 $2.30 $0.93 $2.62

Source: U.S. Energy Information Administration, Levelized Cost of New Generation Resources in the Annual Energy Outlook 2011, December 2010, DOE-IEA-0383 (2010).