to this panel assessment.2 The technologies and applications supported within this program area are predominately CHP projects. The DER program has the mission of improving the prime movers (microturbines, for instance) and their related technology development, while the CHP component of the DER program is focused on demonstrating system integration and application while reducing costs. DOE works with component equipment and technology manufacturers to develop and demonstrate CHP systems, that provide both electrical power and heating or cooling at customer sites with minimal site-specific engineering. The program strives to standardize the technical and engineering analysis required to install and operate CHP systems, making them applications-ready.

The stated goal of the CHP program is to demonstrate four integrated CHP applications, each having >70 percent combined electric and thermal efficiency, that could be manufactured and installed (assuming commercial-scale production) cheaply enough to give customers a 4-year payback by 2008.3 The program is targeting four integrated systems applications—one each in an office building, a hospital, a college building, and a supermarket. On the one hand, the panel believes that the 70 percent efficiency goal is not difficult to achieve, as CHP systems are available today that meet or exceed the 70 percent efficiency goal. The attainment of the 70 percent efficiency goal, however, is highly dependent on the characteristics of the CHP system’s application, including the electrical load and thermal load it is serving and the profiles of both. On the other hand, it believes that the 4-year payback criterion presents a significant challenge owing to the high capital costs of CHP systems and the need for sufficient thermal heating or cooling load. Moreover, the price differential between the CHP host facility’s electricity prices and CHP fuel prices can dramatically affect the economics of CHP projects and, as a result, the payback. The panel applauds DOE’s program focus on demonstrating CHP applications in the broader, more challenging markets targeted and, in particular, on demonstrating applications that the panel believes are unlikely to be developed without government support. If successful, the CHP program should result in more systems being designed and installed that meet the efficiency and payback goals, which would lead to more rapid deployment and greater customer confidence in system performance.

The panel heard presentations from DOE and its contractors and had the opportunity to ask questions and speak informally with program representatives at each of its meetings. DOE provided information and data about specific CHP system applications funded through the program, and it shared freely with the panel problems and difficulties with the technology and component integration as well as program successes. For this the panel is grateful. DOE and its contractors were also very responsive to the data requests of the panel.

BENEFITS ANALYSIS OF THE CHP PROGRAM

DOE Estimate

DOE estimates the benefits of the entire DER program using the U.S. Energy Information Administration’s National Energy Modeling System (NEMS) and the MARKet ALlocation model (MARKAL). DOE estimated the contributions from its DER program through 2025, in terms of gigawatts (GW) generated, natural gas savings, oil savings, consumer energy savings, carbon emission reductions, and nonrenewable energy savings. The benefits estimates provided by DOE are generally consistent with its Government Performance Results Act (GPRA) reporting.4 Estimates were provided for 2010, 2015, 2020, ending in 2025 (from NEMS) and for 2020, 2030, 2040, and 2050 (from MARKAL). By providing data for overlapping years, 2020 and 2025, the panel was able to consider the differences in estimates from the two models. The panel decided to base its probabilities and benefits estimate on the NEMS model, because panel members were more familiar with it and its horizon was shorter.

Since the NEMS analysis was conducted for the DER program as a whole, the panel requested that DOE and its contractors develop a simplified approach for parsing out the benefits that would likely be attributable to the CHP program component. DOE complied with this request by first scaling the total benefits of the DER program by the CHP proportion of the total DER budget. Following this, benefits were further adjusted to reflect CHP penetration in the commercial sector only and to account for the CHP program focus in office buildings, hospitals, college buildings, and supermarkets. Industrial and utility sector CHP applications are not included in this scaling. DOE estimated that the 2.2 GW of CHP capacity added through 2025 is attributed to the CHP program (of the total 64 GW of DER added nationally by 2025, as used in the GPRA analysis).5 The panel accepted this as a reasonable first-order approximation for CHP penetration in the marketplace attributable to the DOE R&D program.6

DOE’s estimates of the quantity of CHP added as a re-

2

The remaining activities supported by the DER program and not considered by the panel in its review include development of industrial gas turbines, microturbines, advanced reciprocation engines, and related materials and sensors.

3

For the payback goal to be met, CHP installations by 2008 will provide customers with a four-year simple return of the original investment (defined as revenue realized, in the form of savings, divided by total system first-cost).

4

See Table 4.6 of DOE (2005b).

5

Frances Wood, OnLocation, Inc.; Chip Friley, Brookhaven National Laboratory; and Chris Marnay and Kristina Hamachi LaCommare, Lawrence Berkeley National Laboratory, “Estimating benefits of EERE combined heat and power R&D,” Presentation to the panel on October 24, 2005.

6

The panel agreed with the simplified approach, viewing it as a reasonable approximation of the benefits likely to result from the CHP program component.



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