Distributed Energy in New York

Published at Cogeneration and Onsite Power, Oct. 31, 2014

The 2014 WADE DistribuGen Conference and NYSERDA CHP Expo

The WADE annual meeting and conference was held in Westchester, NY this year and was cosponsored by NYSERDA, the New York State Energy Research and Development Authority. The event focused on the benefits and market development of distributed energy and a New York theme was scattered throughout the presentations.

Distributed energy can (DE) be described with a variety of terms and scenarios including microgrids, combined heat and power (CHP) and cogeneration. Distributed energy provides multiple advantages to end users and the electric grid including resiliency against outages, reduced power grid congestion, improved emissions, fuel flexibility and efficiency and is a good way to introduce new technology to the overall power system. DE adoption is strong and growing but there is enormous untapped potential in the market. CHP is a mature technology, but is not well understood or discussed outside of engineering and energy professionals. Government incentives and programs have a significant role in educating the public and create significant impacts on adoption rates.

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NYSERDA is a leader among state agencies in promoting CHP and microgrids. Dr. Dana Levy spoke about how NYSERDA has put extensive efforts in technology testing, financial incentives, education and training and working with vendors to get CHP systems installed and running. New York is the leader in the Northeast with 75 microgrid deployments and 200MW of installed microgrid capacity.  NYSERDA has $100 million in its budget to promote and incentivize CHP and its complementary pair of CHP programs offer incentives for systems 50kW and larger.  In August, NY Gov. Cuomo announced a $40 million Prize Competition for the design and implementation of microgrids. At the conference NYSERDA hosted a sister event, the CHP Expo, where pre-approved vendors displayed their products and services for potential customers.

The US Department of Energy is also involved in promoting CHP through its CHP Technical Assistance Partnerships (TAPs). The President of the United States issued Executive Order 13624 that set a goal of 40GW of new CHP by 2020 in the U.S. Tom Bourgeois made a presentation about the Northeast TAP that operates in New York and New England. The CHP TAPs provide similar services to NYSERDA, but throughout the entire country, CHP experts are available to provide unbiased information about technologies, project development, financing, electric and natural gas network interfaces and best policies. The Northeast has been a ripe area for CHP as electricity prices are relatively high while gas prices are relatively low and there are cold winters, a good combination of factors for CHP.

Garry Brown, Commissioner of the New York Public Service Commission spoke about the situation in New York State. The power industry got its start in the New York, both Thomas Edison and Nikola Tesla worked there and the first power distribution system anywhere was constructed at Niagara Falls in 1900. As a result New York has one of the oldest power grids anywhere in the world, there are critical facilities that are 60 years old, and the whole system is in need of continuous upgrades and investments.

In response to the ongoing challenges the New York State Public Service Commission has begun a reform initiative called Reforming the Energy Vision. The initiative will lead to regulatory changes that promote more efficient use of energy, deeper penetration of renewable energy and wider deployment of distributed energy resources such as microgrids and energy storage. The Commission is committed to empowering customers with more choice about how they manage and consume electricity.

Superstorm Sandy provided many examples of the need for greater resiliency and robustness in the nation’s infrastructure. The storm caused losses estimated between $30 and $50 billion. The two-day shutdown of the NY Stock Exchange cost an estimated $7 billion form halted trading and Rutgers University estimated economic losses of $11.7 billion for New Jersey GDP. Much critical infrastructure was effected including hospitals and healthcare centers, wastewater and drinking water facilities, police, fire and public safety, food distribution, telecom and data centers. Resiliency has become a top priority for policy makers as the need to ensure that centers of refuge and military facilities remain viable through disasters as well as maintaining business continuity and above all public safety.

A riveting example of the value of microgrids was provided by the story of NYU (New York University) and how their campus in lower Manhattan fared during Superstorm Sandy that wreaked havoc on the region. Sections of lower Manhattan were flooded and power was knocked out for days, but much of the NYU campus with its combined heat and power system remained lit and supplying hot water throughout the crisis. NYU was able to provide charging stations, hot showers and food for students, staff and neighbors.

NYU’s cogeneration plant serves 43 buildings with hot water, 30 buildings with chilled water, and 26 buildings with power using an arrangement of turbines, generators and boilers and an interconnect to the Con Edison power grid. NYU’s system is a true microgrid that helps to provide reliable service to the campus while relieving demand from the utility power grid. When ConEdison lost power in the area the NYU cogen seamlessly switched into island mode and remained up without a glitch. When power was restored days later the system again seamlessly reconnected to the local grid.

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The benefits of the microgrid extended far beyond the NYU community throughout the duration of the storm as City agencies utilized the cogen powered buildings as command centers and community members were able to find refuge with power and hot water. Looking forward NYU plans to expand the footprint of the system by adding critical buildings and extending emergency lighting and upgrading equipment.

Thomas Kuhn, President of the Edison Electric Institute, gave a keynote speech where he discussed the evolution of the power grid from a hub-and-spoke centralized model to a two-way distributed model. There are many technical, financial and regulatory challenges to making this transition, but the industry is actively moving in that direction. Customer demands and public policy are driving this change as they want improved reliability and a cleaner environment as well as low prices.

According to Kuhn, US electricity customers pay some of the lowest rates in the world which means that new technologies and systems must be extremely competitive financially. Utilities are leading the charge in developing large renewable energy projects, though net metering rules need further updating to provide fairness and market efficiency for all participants. Smart meters are rapidly expanding, providing important data and facilitating demand response and increased efficiency. A robust grid is the platform for new technologies such as internet devices and electric vehicles.

Kuhn continued to say that electricity and a robust, reliable grid is becoming increasingly indispensable in everyone’s daily lives. As a country we should be cautious about moving too fast with change or else we risk disruptions. We can take lessons from Germany and their Energiewende policies that promoted renewable energy growth too quickly leading to rising costs for customers, reliability challenges for operators, and no decrease in emissions as coal use remains stubbornly high. In America we have had success in recent decades in using market forces and smart regulations to significantly reduce pollution from power production even as power use has gone up. It is critical to be smart about tech integration so that we continue to strengthen the grid and make it more reliable and cost effective while we simultaneously make it cleaner and more efficient.

Increasingly, state institutions are working to promote distributed energy, CHP and microgrid investments. The New Jersey Resiliency Bank and the New York Green Bank are new institutes with this mission.

The New Jersey Energy Resilience Bank was organized after Hurricane Sandy to help finance infrastructure upgrades in critical facilities to harden them against future weather events. During the storm many wastewater treatment and drinking water plants lost power as well hospitals and emergency response facilities. Using state and federal funds the bank seeks to invest in system upgrades and distributed energy to make these important facilities more robust.

The New York Green Bank is a division of NYSERDA. It is a new $1 billion dollar state-sponsored financial entity focused on partnering with the private sector to invest in clean energy projects in New York State. They seek to identify gaps in the market where conventional bank financing is too inexperienced or ill-equipped to evaluate new technology opportunities. The Green Bank will expand the frontier of clean energy markets by establishing track records for new technology projects. They are focused on resiliency and distributed energy and attractive opportunities that have not been thoroughly evaluated and modeled in the current markets.

While CHP has been around for a long time and is well established technology, it often gets lost in the shuffle in the discussions over alternative energy technologies despite its clear benefits. David March from Entropy Investment Management described some of the challenges and opportunities in financing combined heat and power systems.

According to March, energy efficiency and alternative fuel systems rarely become priorities for CFOs and other financial decision makers if it does not reflect their primary business or offer quick paybacks. Generally a CFO who is making sophisticated financial analysis on how to maximize the rate of return on investments and maximize shareholder value does not see how energy efficiency investments make the grade. A primary reason is that the payback time is often more than 24 months which most CFO’s use as a cutoff time period. Sometimes, showier projects such as solar panels or wind turbines are funded over more cost effective efficiency projects because wind and solar are much more visible and able to be used in marketing literature while CHP systems offer no particular visual impact. Energy investments need analysis that appreciates the long term return on investment even if the payback periods are not as quick as competing projects.

Entropy offers third party financing to help enable CHP projects to get built without major capital investments by the owner by leveraging the combination of increased efficiency with favorable market rates to create an arbitrage opportunity. CHP projects have consistent and high quality rates of return but it becomes a matter of crafting the appropriate financial instruments to bring the opportunity to fruition.

James Woolsey, former Director of the CIA and well known proponent of moving away from fossil fuels gave the afternoon keynote address at the conference. Speaking via videoconference link his talk focused first on the geopolitical implications of our reliance on fossil fuels provided by national adversaries such as Iran and Russia. The second part of his talk focused on distributed energy and microgrids and the importance of a hardened and resilient electrical grid in the event of an EMP attack (electromagnetic pulse). An EMP attack could be mounted with a basic nuclear weapon detonated miles up in the atmosphere on the back of a common missile. EMP’s have the capacity to knock out electrical systems for many miles and a centralized power grid is vulnerable to this type of threat. Distributed energy systems and microgrids provide resiliency and help power systems withstand this potential threat.

Richard Ottinger, former Congressmen and Dean Emeritus of the PACE Energy and Climate Center was given the WADE Lifetime Achievement Award for his long efforts at promoting distributed energy and energy security. He was one of the earliest environmentalists in Congress in the 1960’s and authored a substantial body of energy and environmental laws. Dean Ottinger was also a founding member of the Peace Corps from 1961-64. After retiring from Congress he taught at Pace Law School where he founded the Pace Energy and Climate Center that has made substantial contributions to energy efficiency and renewable energy research.

A conference field trip was made to the Whole Foods grocery store in Brooklyn, NY that is a flagship for energy efficiency. The store features combined heat and power, solar energy, and an on-site greenhouse. Whole Foods partnered with NYSERDA to clean up a brown field site in the Gowanus neighborhood and implement the latest in energy efficiency technologies. The building was constructed with reclaimed materials, it uses state of the art CO2 coolant refrigeration, and a 157kW CHP system that provides heating, chilled water and electricity even in the event of a power grid failure.

In addition to all of these informative talks and presentations, the 2014 WADE Conference featured many technology updates and reviews from leading vendors like Wartsila, Schneider Electric, OPRA Turbines, ENER-G Rudox, Martin Machinery, Vanderweil, Energy Concepts. R3 Energy and more. Legal and policy issues were discussed with speakers from FERC, Duane Morris, LLP, Environmental Defense Fund, Pew Charitable Trusts, The Brattle Group and others. The event was a great opportunity to meet industry professionals and network and learn about the latest updates in the distributed energy market.