Onsite Power Generation (OPG) is
A Source of Significant Savings
1.0 Introduction
With
rising costs and increasing competition due to liberalization it is imperative to seize
any opportunity to save costs. Onsite power generation (OPG) is an often-overlooked area
for savings.
2.0 Historical Background of Onsite Power
Generation (OPG)
In
the past whenever a plant opted for Onsite Power Generation (OPG) it was usually an ad-hoc
response to lack of power. Imminent power cuts, frequent interruptions of power due to
fluctuations in voltage and frequency, inability to increase production due to lack of
power from the State Electricity Boards (SEB’s), forced management to look upon OPG
as a necessity. Due to the urgency the focus was on supply of power without much emphasis
on cost. Given this historical background existing OPG systems are a source of significant
savings due to optimization.
3.0 OPG a source of savings
3.1 Optimal OPG system
In
the case of sites that already have OPG, optimization of the existing systems usually
yield dramatic results. If there is no OPG at the site it is worthwhile to seriously
examine the scope for savings due to OPG. This is all the more true in cases where the
site requires both Thermal (Steam, Air conditioning) and Electrical Energy (See next
section).
3.2 Combined Heat & Power (CHP) a source
of savings for OPG
The
existence of heat demand on a site, which is contemplating power generation, provides the
potential for a Combined Heat & Power (CHP) system. With CHP schemes, if the heat
obtained after power generation is usefully employed a cycle efficiency of 70% to 80% can
easily be achieved. This can be compared with the 30% efficiency characteristic of a large
coal fired power station, or the 20% to 50% efficiency for on-site generation alone.
3.3 Optimization of Existing CHP Systems
The
historical background of OPG also applies to existing CHP systems, although in a slightly
different way. For example large Paper plants and Sugar plants are usually supplied with
CHP systems as an integral part of the plant & equipment. However the suppliers of
equipment are usually sugar or paper technology experts who in most cases are not
concerned with providing an optimal CHP system. In the case of CHP systems supplied for
existing plants by the Prime Mover (Diesel Generators, Gas Turbines, Steam Turbines)
Vendors, the schemes proposed are based on the vendors equipment and not on the optimal
system to the client. Therefore optimization is a source of savings.
3.4 Export to the SEB Grid
Another
source of significant savings is export to the grid. Many State Electricity Boards are
encouraging export of surplus power to grid. This means the sizing of the OPG system need
not be limited to maximum demand of the site but optimized for maximum savings due to CHP
with export of any surplus power to grid. A potential savings of Rs. 4 Crores was
identified in one plant in South India merely by optimizing the existing CHP (steam
turbine) system and exporting the surplus power to the grid.
3.5 Interruptions in Power &
Fluctuations in Voltage and Frequency
Frequently
sites are plagued with Interruptions in Power & Fluctuations in Voltage and Frequency
with loss in production due to poor quality. An OPG system can be designed to deliver
power without any interruptions or fluctuations in voltage or frequency.
3.6 Production hampered due to lack of power
In
a Ferro Alloy plant an OPG system was designed which would allow the plant to increase
production by 40% and simultaneously reduce cost of power by 38%. The strategic options
available to top management are increased due to OPG. OPG enables the plant to achieve
100% capacity utilization.
Frequently
management is unable to increase capacity due to lack of power. In such cases OPG comes to
the rescue. In case top management is considering expansion of capacity a thorough
evaluation of the energy strategy for OPG will yield rich dividends.
3.7 Base Load operation Vs. Standby
operation
Typically
existing OPG systems are standby with lower efficiency and high maintenance. A Base load
system is more efficient, can run continuously and supply power without any interruptions.
Switching over from a standby to base load system can yield significant savings due to
lower cost of operation and reliability of the system. In a rubber plant in North India
the existing stand by DG set was giving a lot of problems. When a base load DG set with
HSD as fuel was considered a savings of Rs.40 lacs was identified for OPG alone (the
process had no requirement of steam or Air conditioning so CHP is not applicable). The
Simple pay back worked out to 2.5 years with an IRR of 59%.
3.8 Sum Up
Onsite
Power Generation is a excellent avenue for achieving savings. There is no reason why you
cannot tap this source of savings. All you need is to develop an energy strategy for
Onsite Power Generation.
4.0 Energy Strategy for onsite Power
Generation
Top
Management must develop an energy strategy to use OPG to save costs. The Energy Strategy
can help top management determine an economically viable OPG System that can provide
uninterrupted power without any fluctuations in voltage and frequency to match the power
demands of the site at the lowest possible cost. This Strategy will provide top management
a firm basis upon which to make decisions as to how best to proceed.
4.1 Objective of an Energy Strategy
The
objective of an energy strategy is to:
·
Minimize
the cost of power (less than current costs).
·
Provide
uninterrupted power without any variations in voltage and frequency.
·
Minimize
the cost of capital investment taking care of future expansion plans.
The
energy strategy will involve:
·
An
integrated view of the specific requirements of the site
·
An
outline of the current and future demands with the cost of existing power.
·
An
outline of the various options available to minimize the cost of power.
·
A
cost benefit analysis with a discounted payback, IRR
·
A
feasibility study for optimizing onsite power generation (OPG).
·
A
sensitivity analysis of the costs in relation to changes in electricity and fuel prices.
4.2 A two Phased Approach
To
minimize the risk involved in implementing the strategy. It can be implemented in two
phases. In Phase 1 the short-term measures to minimize the cost of power with minimal
capital investment (if at all), can be implemented. This is usually applicable for sites,
which are already having OPG. This must be done post haste. In Phase 2 the long-term
measures to minimize the cost of power can be implemented. This phase will usually involve
capital investment, but with attractive pay back period.
In
most cases, where the site has an existing OPG, this method of approach means the company
will be able to get immediate benefits without any major capital investment.
4.3 Key Considerations
The
following issues will be addressed in order to arrive at an energy strategy with an
optimum solution for onsite power generation (OPG):
·
A
full understanding of the time scale and energy demands for the site.
·
Accurate
modeling of the current and projected energy demands.
·
Current
availability of fuels and their quality and the probability of alternative fuels in the
future. Prices for fuels and electricity to be
used in this study.
·
The
selection of an OPG system to match the agreed energy demands.
·
The
availability of relevant prime movers and the existence of maintenance facilities.
·
The
attitude of the State Government and State Electricity Board (SEB) to the operation of OPG
plant and export to the grid.
·
The
site electrical system.
·
Location
of the OPG plant and interfacing with the plant services.
·
Environmental
considerations.
·
The
pre and post OPG costs for providing the energy demands to the site and the predicted
savings.
·
The
estimated investment required based on typical plant equipment.
·
A
sensitivity analysis for the costs related to changes in electricity and fuel prices.
5.0 Strategy for OPG – Top management
considerations
There
are several considerations for top management in developing “An Energy Strategy for
OPG”. We outline them below:
5.1
Is
OPG / CHP Applicable to my Industry?
CHP
and Onsite Power Generation are applicable to any industry and any size (starting for 75
kWe) anywhere in India (see Annexure):
·
Buildings
- like Shopping Malls, Cinema Theaters, Office complexes, Residential complexes (with a
number of individual room air conditioners).
·
Hospitals
·
All
type of Industries
·
University
Complexes (with either heating or Central Air Conditioning requirements) etc.
5.2 I already have Stand by power generation
is OPG/CHP applicable to me?
It
is most attractive in such cases since the major investment is already made. All you need
is to invest in a waste heat recovery boiler (WHRB). A Vapor absorption chiller (VAC) is
needed only if the site requires air conditioning in addition to steam. In cases where
onsite generation already exists, simple payback for CHP can become as attractive as 2
years.
5.3 How is the risk involved in the study
minimized?
Typically
there is no cost involved in establishing prima-facie potential for savings using OPG. All
the company has to do is send a fill in CHP systems questionnaire (see Annexure1) for the
consultant to establish the rough estimate of savings. This is usually a no-obligation
pre-feasibility study. This estimate of savings is the basis on which the company embarks
on a depth study.
5.4 Indications of a scope for savings using
OPG
·
Losses
due to interruptions in power and fluctuations in voltage and frequency
·
Scope
to export surplus power to the SEB grid
·
Potential
to use Combined Heat and Power. That a need for both Thermal (heating, cooling or
air-conditioning) and Electrical energy at the site
·
Loss
in production due to lack of power
·
Availability
of alternative fuels like bagasse
·
Availability
of Natural gas
·
Production
Capacity Expansion Plans
·
Existing
standby OPG system
·
High
cost of generation of standby power (more than SEB cost).
5.5 External consultants
Analysis
for arriving at the best option for onsite power generation involves a number of
variables, which are interrelated in complex ways. It is here that the International /
Indian experience of external consultants who have done this many times over is
invaluable. The external consultant is able to bring an unbiased view and the latest
technology into the solution.
6.0 Sum up
·
CHP
/ OPG are applicable to any industry with any demand. In a rubber plant in North India a
savings of Rs. 40 lacs was identified for OPG alone (the site has no requirement of steam
or Air conditioning so CHP is not applicable). The Simple pay back worked out to 2.5 years
with an IRR of 59%.
·
Optimizing
existing OPG / CHP systems will increase savings - Rs 4 crores savings identified in a
paper mill in South India.
·
CHP
/ OPG are most attractive with a savings of up to 40% of the total energy costs with a
simple payback ranging from 2 to 3.5 years - A reduction in power cost of 38% with a
simultaneous increase in production of 40% identified in a Ferro Alloy Plant.
·
With
CHP schemes a cycle efficiency of 70% to 80% can easily be achieved as compared with the
30% efficiency of a large coal fired power station, or the 20% to 50% efficiency for
on-site generation alone.
