The Co-Generation Conversation
If there was a single message that resonated in a 2015 report entitled The 14th PwC Global Power & Utilities Survey it was this: a “clear” majority of the 70 energy companies from 52 different nations surveyed expect “significant market model change by 2030 in response to energy transformation and that current business models won’t be sustainable for long.” This has been caused, in part, from what the authors of the report described as a “considerable disruption in the power sector arising from how we think about, produce and use electricity. In some parts of the world, disruption is already taking a strong hold. In other parts of the world, it is just beginning.”
For Brian Poth, national utilities leader at PwC Canada, the reason for the transformation is a telling one and comes down to this: the way we heat and effectively light and power and provide the electricity we need for day-to-day life in our buildings is changing, which means there are fundamental impacts on the supporting value chain as well. “We look at energy in a different way today than we did 40 years ago even as individuals,” says Poths. “In the same way it is important for utilities to consider not just what capabilities do they have, but how do they make money, I also think the same would apply to the building trades and the architecture community as well. Do they understand all the various regulatory frameworks and the economics of energy options, not just today, but five, 10, 15 years from now? You have to understand the trends. It will be increasingly important moving forward.”
Canada’s utilities, he wrote late last year, have “tremendous opportunities right now to work with their customers to better understand their needs and preferences and what’s important to them.” He went on to state that four key forces are the transformation of energy markets across Canada and around the world: fast moving, disruptive technology; changing customer needs and expectations; government and regulatory policy; and innovation.
A key innovation piece, which is still somewhat in the embryonic stage in Canada, but far more popular in Europe, is a form of distributed energy called co-generation, defined as the simultaneous production of power and heat, which one estimate stated can offer “energy savings ranging between 15-40 per cent when compared against the supply of electricity and heat from conventional power stations and boilers.”
This is not hype, as there are 20 or more solid examples of it in action across the country. And there’s even an organization — Cogen Canada — with two energy experts who have been key association movers and shakers either currently or in the past: Manfred Klein, who spent 33 years with the federal government and is now an independent consultant on environment and energy issues for industries and cities; and Michael Kuriychuk, a past association chair and the president of Toronto-based Pathchoice Energy Consulting Inc.
“I believe that a lobby organization at the federal level is needed to raise awareness of the benefits of simultaneous generation of thermal and electrical energy from a common fuel source,” says Kuriychuk, whose firm specializes in business development and electricity strategy development. “Generating electricity by combustion of any fuel — whether natural gas, oil, coal, biomass, etc. — necessarily results in a large portion of the heat value of the fuel being rejected to the environment. There is no avoiding this law of physics because a heat sink is necessary to make a thermal cycle work. Co-generation is a way of using this waste heat for application such as space heating, process heating, or (through absorption cycles) to produce refrigeration.”
Dollars and Cents
Kuriychuk, points out that co-generation impacts both utilities and building professionals. In one respect, it is a dollar and cents issue. Large-scale use, he says, can reduce an electricity utility’s sales and thus revenue, leading to questions about how to manage the fixed costs of a utility’s operations across a smaller customer base. On the other hand, “building professionals will need to understand the concepts and economics of working with co-generation systems and either have the in-house expertise to manage such systems or suitable contractual arrangements with service companies to do so.
“Fortunately, the level of automation and reliability of such systems have been increasing, especially in the smaller size range suitable for commercial, institutional and small industrial applications. It is much easier to plan for co-gen at the outset rather than trying to retrofit systems after building construction has been completed. Co-gen thinking should be included early in the design cycle.”
Despite co-generation’s obvious benefits, it seemingly is not without its critics. One conference stream organized by the Canada Green Building Council last year (in an event that ultimately was cancelled due to logistics problems) even questioned its worth. Had it taken place, the subject of one seminar track was ominously titled The future (or end?) of co-gen. Authors of the session topic wrote that the “economic and technical viability of co-gen continues to be undermined by lower heating demands as building envelopes are improved and hot water demands drop as water efficiency is increased. There are growing concerns around co-gen’s impact on urban air quality, and as electricity grids decarbonize the carbon emissions reductions offered by co-gen disappear. Has co-gen had its day?”
Asked where the conference topic sentiment comes from, Klein, who spent 16 years with Environment Canada specializing in energy issues, suggests that there is a “lot of siloed thinking or cherry picking going on where organizations or people look at one issue within the context of itself without looking at several objectives at once.
“My role in government used to be looking at several issues at once. In the past, the thinking was that you have to make sure that your policy is consistent with other departments. Well, that is not happening today. Individual branches of government pretend that they are the only branch of government and therefore they make decisions based on their own objectives. Trying to get people to think about three or four things at once and come up with solutions that are consistent and cost-effective is the challenge right now.”
The Policy Hurdle
Klein, who has been involved with Cogen Canada since 1993, is no stranger to rejection at the policy level. The turning point for him came with the election of Stephen Harper in 2006 when his role at the time at Environment Canada was to establish a national co-generation program. “We had a change in government and that died immediately,” he recalls. “There was no way the Harper government was going to let a small group of people influence policy. It shut me down right away, literally within weeks of taking office. He was elected and immediately the budget was gone.
“Energy is electricity, heat, cooling and mechanical power. Those four things in a structure represent the energy needs of a building or system. Electricity is not the only element. People get really, really upset when they are too cold or too hot, whether they have power or not. This is also something that is not being considered by governments, the fact that energy is much more than just electricity.”
Despite the setback, Klein, who went on to serve as Coordinator, Energy & Environment at the Gas Turbine Labs of the National Research Council, was heartened by the fact co-generation projects were not going to vanish. Two examples are Markham District Energy (MDE), which he says had the “best co-generation system in Canada for 10 years” and the University of Ontario Institute of Technology (UOIT).
A fact sheet from MDE defines district energy as the “production and supply of thermal energy where hot water and chilled water are produced at central plants and distributed to surrounding buildings via a closed-loop underground distribution system known as a thermal grid. The thermal energy delivered in the building is used for space heating, domestic hot water heating and air conditioning.
“District energy is not a new concept. Its origins stem from the hot water-heated baths and greenhouses of ancient Rome. Today, it is an internationally accepted method of heating, cooling and powering communities. In some European countries, such as Denmark, district energy is mandated. Once a thermal grid is established, a common next step is to connect small power generation plants. The generation plants recover waste heat to be used in the thermal grid and deliver electricity to the local power grid.”
UOIT, meanwhile, is home to Canada’s largest geothermal system. Located at its Oshawa campus, the installation is made up of more than 370 bore holes (180 metres deep), which are used to heat and cool and campus buildings. Water circulates through the underground network. In the winter, the system takes heat from the earth and carries it to the buildings. In the summer, (it) removes heat from the buildings and disperses it into the ground. A ground source heat exchanger is used as the primary source for heating and cooling at the central plant. Thermal energy produced is used to heat existing and new buildings on the UOIT and Durham College joint campus, while the electricity produced is used to displace electrical load from the provincial supply grid.
Poth says the classic way of describing co-generation is the use of natural gas typically, but it really is about broadening the “footprint beyond fossil fuels into things like solar, wind and other types of renewable technologies, which really should be contemplated when considering alternative power sources for a building.
“If you broaden the conversation of the distributed generation concept where buildings and campus [officials] are thinking about effective alternative energy sources or self-provisioning, it makes them prosumers as opposed to consumers of energy. There is a whole other set of drivers here. There is sustainability [and] the community engagement, social license to operate angle, which is quite impactful. Why on Earth would Loblaws or IKEA put solar panels on their buildings? There is a whole host of reasons why they are doing that. Economics is one for sure, but there is also a branding and a whole other conversation that they want to have. That’s important for someone who is involved in that early stage of the construction process in the communities they live in to consider.”
In the end, says Kuriychuk, the decision to implement a co-generation plant could ultimately be decided by the need for an assured supply and desire to reduce energy costs. “Some customers are critically sensitive to electricity supply interruptions or to power quality issues,” he says. “In some cases such as hospitals standby generation is mandated, whereas in other cases such as drug manufacturers or petrochemical plants short interruptions can result in major financial losses due to damage to product or production processes. Self-generated electricity from a co-gen plant can supply such critical loads.
“In some jurisdictions, electricity prices have risen to a level where self-generation is becoming competitive with grid-supplied power when the benefits of also displacing heating or refrigeration costs are included. Co-gen is especially attractive where electricity costs are high and fuel costs relatively low.”