Co-generation Operating Costs

The generator in the basement provides for a good deal of local flexibility, at least in principle, with respect to our energy choices. In the present setup, the generator runs when heat is needed, either space heat or water or both. The plan or goal is to optimize this with our geothermal units, but that is a big project, and it will take a while. For the rest of this year's heating season, we will be running only the generator when we need heat--unless we get some anomalous cold wave, but given the lateness of the season, that is rather unlikely.

The question I've been thinking about is how to best reduce operating costs, and this is a first look at those issues. First up is the question of what are the co-generation operating costs? One would think this would be an easy question. For now, I will try to make it easy, but it could be complicated.

The State Legislature in Connecticut has been fairly progressive with respect to energy issues. In the recent past, they have opened up the electric grid to competitive pricing where companies can compete for customers, so some competition has come in. The Legislature has also required net metering, so any kilowatt hours sent back from solar or generators etc., will net against those that are pulled from the grid. One of the recent mandates coming from Hartford is that residential customers must have a variable pricing option. This is to encourage consumers to reduce demand during the peak hours. We haven't explored this option too far. An initial inquiry with our supplier, Connecticut Light & Power, was discouraging, for they didn't believe people with generation capabilities were allowed to use variable pricing. I've just looked at the CL&P website, and it appears that we are. This is definitely something to look into.

For now, let's use the KISS principle and keep it simple. Our current rate is the standard single rate residential rate that is a constant charge per kilowatt hour (KWH) used (plus a monthly fee that seems to ever be creeping up in price and is currently $16/month). This power rate has also been going up and is currently $.18/KWH. The propane costs are currently around $2/gallon. This has come way down from last summer, but it is still historically high.

So what does it cost? Per gallon of propane, the Ecopower makes 5.82 KWH/gallon. That number is derived from the data on the Ecopower spec sheet, and I'm suspicious of the accuracy of that last decimal place, but okay. At $2/gal, the price then is $.34/KWH, or almost twice the amount we are paying. Hmm....what's wrong? That's easy! We are also using the heat. If we were using the generator to make electricity only, the cost would be too high. So let's look at it from a heating perspective.

We (currently) use the Ecopower only when heat is needed, and because we are also generating electricity, we have to use more fuel than we would if we were only heating. The question is how much more? A typical new boiler is about 85% efficient. Some of the older ones are a lot worse, but let's compare to new equipment. The Ecopower, from a heating perspective, is 65% efficient (and 27% efficient for power generation). Let's assume then we use one gallon in a standard boiler. In the Ecopower, we need to use 1.3 gallons for the same heating needs. The advantage is that we'd also generate 7.56 KWH of electricity along with that heat. Let's compare costs.

In a standard residential setting here in CT, the heating and power costs would be $2 for the propane plus (7.56 KWH * $.18/KWH = ) $1.36 for the power costs or $3.36. With the Ecopower, we are charged the cost of 1.3 gallons of propane which in this example would be $2.60, and the power generated comes as a free by-product. Per the heating requirements for a traditional boiler using a gallon of propane, we are saving $0.76 or 23% in combined heat and power operation costs.

For this comparison to work, there are a few assumptions, namely that one also uses power, that the power can be sold back at the same rate it is generated (net-metering laws), that the amount of power used is more than what is produced with the co-generation. There are also issues with the relative pricing of power versus heating. For instance, in New England, our power prices are driven mainly by natural gas prices, so co-generation works well here. In the Midwest, power is driven mainly by coal prices, so one would have to compare local power prices with heating fuel prices.

These assumptions are important and drive the applicability of co-generation. For instance, it only makes sense to keep part of the local needs as co-generation. You don't want more power generation capacity than you use, and one must have good heating requirements to even consider the idea (so it may not be a good fit in the Southern USA unless it can be sized primarily for hot water needs, and even that may not make sense, because solar heating would be much better in the South).

For our needs here in CT, the 5 KW Ecopower is a good sizing fit, but we could have settled for something a little smaller if one had been available. For smaller houses with smaller demands, a smaller unit (1-2 KW in size) would be preferable. For larger demands, say small businesses, etc., a larger unit would be better.

In this simple comparison, it is clear the co-generation has lower operation costs. There is the question of whether or not it is worth the machine cost, and I defer that question to another post. It is also important to know that there are other advantages coming from the co-generation. Less energy is lost in the generation and transmission of the power with the typical energy losses as high as 70% in standard power generation. The vast majority of those losses are saved with co-generation. Further, the co-generation requires less transmission grid capacity which will be a big deal going forward. Getting more power lines up in the current environment will neither be easy nor cheap. Needless to say, I'm a big fan of co-generation. It has just come 20 years too late.