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By Peter Garforth
Integrating renewable and other non-traditional electricity sources on industrial or commercial sites is a topic that should be regularly revisited. The costs of these alternatives are steadily decreasing, while the efficiencies and reliability continue to increase. This picture is constantly changing the attractiveness of solar photovoltaic, wind, and combined heat and power, among others, as sources of electricity.
Before beginning to evaluate alternative electricity supplies, the reasons why they are even being considered should be clearly understood, agreed upon, and prioritized. This crucial step is all too often skimmed over resulting in inappropriate investments or missed opportunities. It is worthwhile to take a look at a few possible reasons and explore how they may affect the decision parameters.
“Dynamic back-up strategies using on-site CHP running on gas or bio-gas can add value even when there are no outages.”
Companies with strong energy or climate management programs may simply want to have renewable installations as a visible signal of their overall commitment to the rational use of energy. This is a fairly common motivation but rarely explicitly stated. Evaluation teams jump through hoops trying to find objective financial or technical justifications, when they should be looking at the promotional aspects, including target audiences, visual attractiveness and audiences, and the supporting promotional and outreach programs. Importantly, a promotional project should be paid for as such and not inflicted on the operational budgets.
Another common reason is to reduce the burden of summer electrical peaks, increasingly accompanied by higher power tariffs. Solar PV tends to make the most electricity when air-conditioning demands are high, so this becomes a clear candidate, with the obvious challenge of day-to-day variability.
I was recently working with a university where summer peak reduction was a key driver. As a result, we focused on the size and timing of summer peaks, the amount of peak-relevant PV needed, and available roof or ground real estate. A statistical approach to peak reduction was acceptable, so the somewhat unpredictable nature of PV was fine. If this is not acceptable, then on-site CHP offers another alternative, recognizing the challenge to sensibly use the heat. In either case, the economics should be assessed at the peak margins, not in terms of average costs.
The accelerating number of weather-related outages is refocusing attention on power supply reliability. With this as a driver, the essential areas needing secure supply must be agreed upon in order to select an appropriate size and technology. In the past, diesel generators were the knee-jerk choice only adding value when an outage occurred. These days, dynamic back-up strategies using on-site CHP running on gas or bio-gas can add value even when there are no outages. In some cases, a mix of solar PV or wind, combined with battery storage, may even be sufficient. Where reliability drives the decisions, the economics must include the avoided costs of poor reliability, which will generally overwhelm the basic energy cost calculations.
|Peter Garforth heads a specialist consultancy based in Toledo, Ohio and Brussels, Belgium. He advises major companies, cities, communities, property developers and policy makers on developing competitive approaches that reduce the economic and environmental impact of energy use. Peter has long been interested in energy productivity as a profitable business opportunity and has a considerable track record establishing successful businesses and programs in the US, Canada, Western and Eastern Europe, Indonesia, India, Brazil and China. Peter is a published author, has been a traveling professor at the University of Indiana at Purdue, and is well connected in the energy productivity business sector and regulatory community around the world. He can be reached at email@example.com.
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Clean and renewable electricity supplies are a common consideration when looking to reduce an operation’s carbon footprint. If this is the driver, the overall emissions target must be specific and fully supported by leadership since there is limited immediate financial value. Large-scale renewables or well-thought-out CHP are valuable tools to take big chunks out of the carbon footprint. The economics must be based on avoided risk from future costs of carbon and possible customer backlash.
Last, and by no means least, on-site renewable and clean generation may be a means to reduce the overall energy cost over the long haul. In the not too distant past, this would rarely have been possible without some form of subsidy. Times are changing. Alternatives are getting cheaper, and the gap between gas and electricity pricing could stay wide for years to come. However, memory of the historical costs often kill clean or renewable power project assessments before they even begin. Where cost is the driver, clear short-, medium-, and long-term cost and risk targets must all be clear to ensure economic evaluations of the choices are rational.
In the real world, more than one of these objectives will be in play. The basic need to clearly state and quantify the desired outcome prior to evaluating the renewable or clean energy power choice remains a given. Without this, the value of alternatives can never be rationally estimated. A clear and current understanding of the cost and capability of renewable and clean sources is essential. As an example, the cost of PV has moved from more than $8/W installed to less than $2 in some parts of the world in less than a decade. CHP has become much more efficient, easy to install, and easy to operate. The current state of play and also some estimate of how it may evolve in the future must also factor on the assessments.
It is likely time to revisit clean and renewable electricity alternatives on your sites.