The staggering economics of RNG CHP Microgrid for HOSPITALS with The Inflation Reduction Act benefits

Hospitals require continuous power for their operations and have significant thermal demands for heating, hot water, steam for sterilization, cooling, dehumidification, and laundry services. These coincident thermal and electric loads make CHP a good fit to provide year-round critical power and thermal energy.”

(Source: US DOE CHP Fact sheets)

 

 

 

With that said, this feasibility study only examines the Thermal Demand from Space Heating and Cooling as depicted in the Typical Profiles and Duration Curves on the right. This means that the potential for CHP feasibility could be even higher than the results from this study.

 

 

 

 

 

 

 

RNG projects capture and recover methane produced at a landfill or anaerobic digestion (AD) facility. Methane has a global warming potential more than 25 times greater than CO2 and a relatively short (12-year) atmospheric life, so reducing these emissions can achieve near-term beneficial impacts in mitigating global climate change.”

(Source: EPA.gov)

 

 

RNG can be purchased in the form of:

 

1. Carbon Reduction Credits or Certificates for scope 1 emissions (i.e. onsite direct emitting stationary energy generation equipment) separate from actual natural gas purchases (unbundled). Examples of organizations providing RNG certificates are:
   1. Green-e®.
   2. M-RETS.
2. Utility bundled Natural Gas and RNG Tariffs such as:
   1. SoCalGas in California.
   2. VGS in Vermont.
   3. A number of Pennsylvania Gas utilities.

 

Investing in RNG Certificates and tariffs supports the development of more RNG projects, and in turn decarbonizes the gas pipeline infrastructure, increases and diversifies domestic energy production, and benefits the local economy.

 

 

To begin assessing the feasibility of the CHP – PV system, we would need to make a series of simplified assumptions related to the building space, shape, equipment, utility providers, outages, and the Hospital owner’s financial considerations.

 

These assumptions are generalized for all locations, under the categorization listed in the Appendix section of this study, to help ease the feasibility process. However, only a few location-related critical assumptions are made, at the end of the assumptions, that can have a significant impact on the project feasibility.

 

Hospital Assumed Roof Equipment

 

 

There are far too many factors to consider when properly evaluating CHP systems feasibility; Cooling, Heating and Power systems efficiency, part-load performance, multi-unit operation,  ambient temperature performance effects, optimization, dispatch control, degradation, complex utility tariffs for with and without the CHP Microgrid, financial modeling … just to name a few.

 

CogenS™ modeling process is highly sophisticated and detailed in that sense, making it a perfect techno-economic modeling tool for CHP projects requiring such complex capabilities for investment grade feasibility studies.

 

In this case study, we used CogenS™ to run an investment grade model for the Hospital system described above for each of the target states aforementioned; California, Texas, Pennsylvania, and Minnesota.

 

The resulting environmental and economic benefits of the model proved more than feasible when it comes to any organization measure of success:

 

1. A staggering 23% Internal Rate of Return.
2. A remarkable 4 years discounted payback period.
3. An outstanding 48% CO₂e emission reduction (equivalent to 1698 Tonnes/year).

 

 

Note: These numbers are the average results of all 4 states studied.

 

 

Hospitals around the US should be seriously considering CHP systems for their scope 1 emissions reduction, power resiliency enhancement, and energy efficiency improvement plans for the next 20 years:

 

1. CO2e emissions can be reduced by up to 50%, 2219 Tonnes/year, by investing in RNG certificates or tariffs from the local providers.
2. Energy bill savings can reach upwards of 35%, or $450,000 annually.
3. The project can pay for itself in as little as 3 years.

 

 

“Acting now, by investing in a CHP Microgrid feasibility study, is crucial in order to take advantage of the Inflation Reduction Act before the end of 2024.”

 

 

CASE STUDY ASSUMPTIONS

 

 

Space Assumptions:

1. The roof space was calculated as the total Hospital area of 241,351 sq.ft, divided by 5 floors, equating to 48,270 sq.ft. of roof space.
2. Only half of the roof area is available for a roof mounted Solar PV array, equating to 24,135 sq.ft.
3. Space is available for CHP system installation, and Hot/Chilled water piping modifications.

 

Microgrid sizing Assumptions:

1. A 21 Watt/sq.ft. Solar PV Array production rate, which equates to approximately 500 kW DC of roof-mounted Solar PV with 12% losses.
2. The CHP system is sized for baseload operation at 450 kW.
3. The absorption chiller is sized at 100 tons to serve 50% of the cooling load, with the electric chillers, throughout the year.

 

Grid Assumptions:

1. Grid outages occur according to the below schedule:

• 25-Oct at 08:00 AM for 2 hours
• 27-Nov at 14:00 PM for 10 hours

2. A Critical Electric Load factor of 0.5 during outages.
3. A 51 $/Tonne cost of Carbon Dioxide equivalent emissions (CO₂e).
4. A 150 $/Tonne cost of reduction in CO₂e using Renewable Natural Gas (RNG).

 

Equipment Efficiency Assumptions:

1. Existing Electric Chiller system for space cooling rated at 12 EER efficiency.
2. Existing Hot Water Gas Boilers for space heating rated at 80% efficiency.
3. New Reciprocating Engine CHP unit rated at 40.6% Electric Efficiency, and 45.2% Thermal Efficiency.
4. New Water-Cooled Single-Stage Absorption Chiller rated at 0.7 COP.
5. 96% PV-Inverter efficiency.

 

Fuel and Emissions Assumptions:

1. A 117 lb/MMBtu CO₂e Factor for Natural Gas (NG) fueled Boilers.
2. A 20 lb/MMBtu CO₂e Factor for RNG fueled CHP.
3. A zero CO₂e Factor for Solar Production.

 

Financial Assumptions:

1. Study period: 20 years.
2. Capital and Operating expenses:

	CHP	PV	Absorption Chiller
Installed Capital Cost	1700 $/kWe	1720 $/kWDC	6,000 $/ton
O&M Cost	0.017 $/kWh	18.55 $/kWDC/year	0.006 $/ton-hr

 

3. Loan:

Amount	Interest Rate	Term
$1,000,000	6%	20 years

 

4. Depreciation and Incentives:

	CHP	PV	Absorption Chiller
Depreciation	5 years – MACRS	5 years – MACRS	5 years – MACRS
Tax Credit Incentive	30% of installed cost	30% of installed cost	30% of installed cost

 

5. Effective Tax Rate: 22%
6. Nominal Discounting Rate: 6%.
7. Inflation Rates:

 

	Electric charges	NG charges	O&M charges
Annual Inflation rate	1.5%	1.5%	2%

 

 

Location specific assumptions:

 

	CA	TX	PA	MN
Grid Emissions
eGrid 2020 CO2e Factor (lb/MWh)	515.5	822.04	655.4	986.63
Energy charges
TOU Energy and Demand Electric Charges	yes	yes	no	no
Seasonal Energy and Demand NG Charges	yes	no	no	yes
Average Electric Energy Charge ($/kWh)	0.11735	0.0892	0.0686	0.11
Average Electric Demand Charge ($/kW)	21.03	11.0971	10.575	4.75
Average NG Energy Charge ($/Therm US)	1.436	0.6032	0.86	0.5892
Average NG Demand Charge ($/Daily Max Therm US)	0	0	0	1.5272
Electric Load
Peak Demand (kW)	1,519	1,704	1,672	1,643
Annual Energy (MWh)	8,498	9,011	8,567	8,425
Heating Load
Peak Demand (MMBTU/h)	3.186	3.193	4.353	4.410
Annual Energy (MMBTU)	8,779	7,719	10,270	10,861
Cooling Load
Peak Demand (Ton)	200	227.5	150	160
Annual Energy (MWh)	4,258	4,361	2,142	2,106

 

Location Energy and Emissions Assumptions at a Glance

 

BASE CASE MODELING RESULTS USING COGENS

 

	CA	TX	PA	MN
Annual Energy Consumption
Electric Peak Demand (kW)	1,519	1,704	1,672	1,643
Electric Annual Energy (MWh/year)	8,498	9,011	8,567	8,425
Heating Peak Demand (MBTU/h)	3,186	3,193	4,353	4,410
Heating Annual Energy (MMBTU/year)	8,779	7,719	10,270	10,861
Boiler system consumption (Therms US/year)	109,480	96,509	13,070	138,250
Chiller system consumption (MWh/year)	602	862	517	497
Annual CO2e Emissions
Base Case Heating CO2e (Tonne/year)	581	512	694	734
Base Case Grid CO2e (Tonne/year)	1,984	3,354	2,543	3,764
Base Case Total CO2e (Tonne/year)	2,567	3,869	3,239	4,500
Annual Energy Cost
Base Case Cost of CO2e ($/year)	$ 130,921	$ 197,304	$ 165,185	$ 229,533
Base Case Cost of Electricity ($/year)	$ 1,553,600	$ 943,455	$ 866,639	$ 1,008,000
Base Case Cost of Gas ($/year)	$ 156,148	$ 58,653	$ 152,951	$ 105,809
Base Case Cost of Outages ($/year)	$ 2,224	$ 2,398	$ 2,223	$ 2,177
Base Case Total Cost of Energy ($/year)	$ 1,842,800	$ 1,201,800	$ 1,187,000	$ 1,345,500

 

Base Case Results at a glance

 

CHP MICROGRID SYSTEMS MODELING RESULTS USING COGENS^TM

 

	CA	TX	PA	MN
Annual Peak Demand
New Electric Peak Demand (kW)	1,520	1,636	1,606	1,610
New Grid supplied Peak Demand (kW)	1,057	1,116	1,233	1,245
New Heating Peak Demand (MBTU/h)	3,970	3,955	4,353	4,410
Annual Energy Consumption
New Total Electric Energy (MWh/year)	8,470	8,804	8,396	8,456
New Heating Annual Energy (MMBTU/year)	17,946	17,692	15,307	15,731
Boiler system Consumption (Therms US/year)	40,861	43,913	15,131	22,034
Existing Chiller system consumption (MWh/year)	474	549	258	249
New Cooling Tower Consumption (MWh/year)	102	109	92	285
CHP consumption (Therms US/year)	326,830	317,860	329,700	332,200
CHP Electric Production (MWh/year)	3,897	3,717	3,584	3,587
CHP Heat Production (MMBTU/year)	14,739	14,383	14,028	14,025
CHP Waste Heat (MMBTU/year)	0	0	0	0
Solar PV Electricity Production (MWh/year)	882	821	645	704
Excess Electricity sent to Grid (MWh/year)	-0.50	-0.07	-0.20	-0.62
Consumed Electricity from Grid (MWh/year)	3,688	4,262	4,164	4,163
Gas consumed from Grid (Therms US/year)	367,690	361,780	344,830	354,240
Annual CO2e Emissions
CHP Microgrid Heating CO2e (Tonne/year)	217	233	80	119
CHP Microgrid Grid CO2e (Tonne/year)	862	1,589	1,238	1,862
CHP Microgrid Total CO2e (Tonne/year)	1,376	2,111	1,617	2,281
CHP Microgrid RNG CO2e reduced (Tonne/year)	1,434	1,398	1,450	1,400
Annual Energy Cost
Cost of CO2e ($/year)	$ 70,152	$ 107,644	$ 82,484	$ 116,000
Cost of Electricity ($/year)	$ 819,821	$ 462,560	$ 373,370	$ 520,000
Cost of Gas ($/year)	$ 475,101	$ 207,048	$ 296,512	$ 243,000
Cost of RNG Credit ($/year)	$ 215,100	$ 209,700	$ 217,500	$ 210,000
Total Cost of Energy ($/year)	$ 1,365,100	$ 777,252	$ 752,366	$ 1,089,000

 

CHP Microgrid Results at a glance

 

RNG CHP & Solar Microgrid for Hospital Technoeconomic Key Project Performance Indicators

 

RNG CHP MICROGRID FOR HOSPITAL PROJECT KPIS
CO2e Savings (Tonne/year)	1,192	1,758	1,622	2,219
CO2e Savings (%/year)	46%	45%	50%	49%
Total Energy Cost Savings ($ /year)	$ 477,700	$ 424,548	$ 434,634	$ 256,500
Total Energy Cost Savings (%/year)	26%	35%	37%	19%
Before Tax NPV	$  911,270	$ 210,210	$  357,290	$  792,970
Before Tax IRR %	11%	6%	7%	10%
Before Tax Simple Payback Period	9	13	12	9
Before Tax Discounted Payback Period	11	17	15	12
Before Tax Benefit to Cost Ratio	1.1	1.0	1.0	1.1
Before Tax Equivalent Annual Revenue	$ 66,588	$ 15,360	$ 26,108	$ 57,943
After Tax NPV	$ 1,390,500	$ 843,730	$ 907,250	$ 1,315,300
After Tax IRR %	26%	20%	20%	25%
After Tax Simple Payback Period	3	3	4	3
After Tax Discounted Payback Period	3	4	4	3
After Tax Benefit to Cost Ratio	1.2	1.1	1.1	1.2
After Tax Equivalent Annual Revenue	$ 101,610	$ 61,652	$ 66,294	$ 96,114

 

CHP Microgrid for Hospital Project Tecno-economic KPIs

 

 

RNG CHP & Solar Microgrid for Hospital Cash Flows Before and After Tax

 

CogenS RNG CHP & Solar Microgrid Energy Plot Samples for California Hospital