Cogeneration Base Loading has long been the model for campus-based Combined Heating and Power (CHP) Plants. Most engineering analyses utilizing this data conclude that the best scenario is a base-loaded unit providing a major portion of the campus heat and electric utility requirement. When analyzing the local energy markets, this generally results in an effective CHP generation rate of $50 to $70 per MW-Hour (5-7 cents per kW-hour). A problem still remains – the Owner must continue to purchase a significant portion of its energy needs at retail rates, generally varying from $70-$90 per MW-Hour. The Return on Investment (ROI) realized varies from 8-12% with a simple payback of 8-12 years. This payback is too long because of the difficulty in predicting the energy market that far in advance.
Z&F Consulting has stepped outside this thought box and leads the energy marketplace again by providing market-based wholesale solutions for institutions utilizing CHP. The energy rate chart shown above provides a 1-year glimpse into the wholesale price of electricity for one of our clients. The real price of electricity actually varies routinely from $30-$150 per MW-Hour (ignoring the rare peaks and dips). Our designs incorporate the purchase and sale of electricity at wholesale rates, bypassing the distribution rate of electricity by selling and buying directly from the regional transmission authority. Why should the owner generate at an effective rate of $50 per MW-Hour when the wholesale price is $30 per MW-Hour? At the opposite end of the spectrum, the Owner should certainly generate at $50 when he can sell for $150 per MW-Hour.
The wholesale market adds other options for the CHP Owner to generate revenue in Capacity Credits, Spinning Reserve, and ILR. This method of CHP Plant operation has changed the entire CHP paradigm and has resulted in a real ROI for our clients of 25-50% at our various cogeneration plants, or basically a 2 to 4 year simple payback on invested capital.