Memorandum
Vermont Department of Public Service
To:
Public Service Board
From:
Robert Ide, Director - Energy Efficiency Division
Subject:
Act 61 Implementation - CHP Responses
Date:
February 13, 2006
CC:
Email list
This memo contains responses of the Department of Public Service on comments
regarding combined heat and power (“CHP”) provided to the Public Service Board by
Burlington Electric Department (“BED”), Central Vermont Public Service Corporation
(“CVPS”), Vermont Electric Cooperative, Inc. (“VEC”), Vermont Department of Public Service
(“DPS”), and the University of Vermont (“UVM”). As per the Board’s request, particular
attention is paid to UVM’s Comments and the UVM Conceptual Proposal, and responses are
provided regarding possible impediments to CHP that result from interconnection requirements
with the local utility, such as the provision of backup power and purchases of excess power from
the CHP project.
Should a Pilot Program be Designed?
Upon review of parties’ comments, DPS reaffirms its initial response that creation of a
CHP pilot program does not appear to be necessary. Our reasoning remains consistent with our
initial response – that there are existing, successful CHP projects already underway in Vermont.
With respect to UVM, we draw particular attention to the fact that the Environmental Protection
Agency and the Department of Energy awarded Middlebury College the 2005 Energy Star CHP
Award. Since 1980, Middlebury College has owned and operated the central CHP plant that
generates electric power for its campus community at an incremental fuel-to-electric efficiency
rate of 150%, using heat that the college would have wasted otherwise. The 1.8 megawatt system
satisfies up to 20% of the college’s electricity demand, provides heat to more than 1.6 million
square feet of building space, provides air conditioning in select areas, and helps produce hot
water for the college’s 2,350 students. Middlebury’s CHP system operates at more than 81%
efficiency and requires an estimated 6% less fuel than typical purchased electricity and onsite
thermal generation.
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Opportunities and Barriers to CHP Deployment in Vermont
Similar themes regarding the determination of a CHP project’s viability and feasibility
resonate from the comments provided by BED, CVPS, and VEC, for example:
VEC: “The biggest barrier VEC has identified is the time and resources required to determine
whether a project will be viable…We need help overcoming the market barriers. That help is
largely financial.”
BED: (in their response regarding Efficiency Vermont as a provider of technical assistance to
potential CHP customers) “If Efficiency Vermont could make some initial suggestions about the
direction a customer might pursue, demonstrate some preliminary cost-effectiveness, and help
the customer compare and contrast the opportunity with potentially competitive efficiency
options, this would satisfy the top level of concern, and better prepare the customer to work with
the vendor community.”
CVPS: “The Company (CVPS) understands from the research conducted that CHP feasibility is
heavily dependent upon the price and availability of fuel supplies and the opportunities presented
by the system’s location. There are a variety of technologies that can be used as part of a CHP
system, however they require on-site development. In areas where CHP has been developed
more extensively, it is often installed by larger industrial customers with significant heat loads.
Institutions and commercial customers can also present economical host sites, but these systems
are not generally developed for residential sector applications. If this information holds true for
Vermont, any decision on CHP program design should recognize that the resource is limited and
that development efforts should be targeted toward market sectors where CHP may present
opportunities for both the customer and the host distribution utility.”
Barriers to CHP development and deployment in Vermont appear to be primarily
financial, and site/utility centric. While there is no one-size-fits-all solution to site/utility
challenges, some existing information helps to define where CHP deployment is most likely to
be advantageous.
According to CHP Market Studies provided by the United States Combined Heat and
Power Association (USCHPA), district energy systems are a growing market for CHP because
these systems significantly expand the thermal loads potentially served by CHP. District energy
systems may be installed at large, multi-building sites such as universities, hospitals,
governmental complexes. The International District Energy Association has identified the
college and university market to be the most promising, due to several factors: colleges and
universities are installing CHP in response to campus load growth, asset replacement of aging
boiler capacity, and the favorable economics from fuel efficiency improvements with CHP.
USCHPA CHP Market Studies also indicate that CHP has potential in the commercial
sector as well – including large commercial office buildings, hospitals/healthcare, supermarket,
hotel/motel, restaurant, and large retail markets. Some markets appear to have strong drivers to
adopt CHP, e.g., grocery stores have significant dehumidification loads to keep water from
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condensing on freezer displays, and hospitals and healthcare facilities have significant reliability
needs.
In a 2000 report prepared by ONSITE SYCOM Energy Corporation for the U.S. DOE’s
Energy Information Administration on The Market and Technical Potential for Combined Heat
and Power in the Commercial/Institutional Sector, Vermont-specific information reflects
outcomes in-keeping with the USCHPA market study information. According to the ONSITE
report, the commercial/industrial CHP market potential in Vermont - derived by assessing
megawatt potential by application - is as follows:
Schools
Office Buildings
Hotels/Motels (presumably includes ski resorts)
Colleges/Universities
Correctional Facilities
Nursing Homes
Hospitals
45.2
28.8
26
23.8
14.7
11.9
9
MW potential
MW potential
MW potential
MW potential
MW potential
MW potential
MW potential
This information directly addresses economic feasibility by sector. Availability of fuel is
also a key consideration. According to the Northeast Combined Heat and Power Initiative
(NECHPI), there are opportunities in CHP applications for the use of alternative fuels – referred
to as “opportunity fuels.” An opportunity fuel is defined as any fuel that has the potential to be
used for economically-viable power generation, but is not traditionally used for this purpose.
Opportunity fuels include, but are not limited to, anaerobic digester gas, biomass, landfill gas,
wood and wood waste. According to NECHPI, anaerobic digester gas, biomass gas, landfill gas
and wood waste currently have the most potential for CHP projects.
Overcoming Barriers to CHP deployment in Vermont
I. Barriers related to funding
Through Act 74, the Vermont General Assembly established the Vermont Clean Energy
Development Fund (CEDF). The funding mechanism for CEDF is linked to an up-rate at
Vermont Yankee. If the Nuclear Regulatory Commission approves an up-rate, it is estimated that
$6 million per year will be deposited into CEDF for six years by Entergy/VY.
DPS recently reported to the legislature on a proposal to implement, govern and
administer CEDF. The proposal was received favorably by the House Natural Resources and
Energy Committee. While final word on an up-rate at Vermont Yankee still awaits, DPS believes
that CEDF is an ideal potential funding source for CHP projects. In fact, DPS has stated in the
first guiding principle of CEDF that “to achieve our stated goals, the Fund’s guiding principles
will be to 1. Seek to remove unwarranted market barriers related to the development and
deployment of renewable energy and combined heat and power technologies.”
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II. Barriers related to interconnection requirements with the local utility, such as the
provision of backup power and purchases of excess power from the CHP project.
The House Natural Resources and Energy Committee is currently working on legislation
that could impact interconnection rules established by the Public Service Board. Legislation in
discussion also includes the purchase of excess power by utilities. It seems prudent to await the
result of pending legislative initiatives before providing proposals to overcome the barriers
referenced.
Having said that, DPS suggests that the newly formed E23 group is ideally situated to
address these barriers. DPS believes that E23 members are perfectly positioned to share
intelligence with each other relating to CHP initiatives. Clearly, barriers have been overcome or
Vermont would not have the successful CHP projects we have referenced in this and our earlier
response. The Middlebury College CHP project is in the CVPS service area. The Green
Mountain Coffee Roasters CHP project is in the GMP service area. The North Country Hospital
CHP project is in the VEC service area. 30 V.S.A. § 229 authorizes Vermont’s utility companies,
subject to Public Service Board approval, to make a contract for a definite term for its product or
service. DPS recommends that E23 members share with each other the data and intelligence they
have gathered regarding successful (and unsuccessful) CHP initiatives. Perhaps a barrier
regarding interconnection could be resolved simply through the installation of a second
interconnection point at a host site. DPS believes that through the creation of E23, Vermont’s
utilities are now in the ideal position to share their wealth of knowledge and creative problemsolving among their members.
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