Implementing Renewable Energy at Water Utilities

Transcription

1 Bryan Lisk PE, CEM Hazen and Sawyer P.C. Linda Reekie Water Research Foundation Frederick Bloetscher, Ph.D., P.E. - Public Utility Management and Planning Services, Inc. ABSTRACT As energy costs continue to increase, reducing energy costs is rapidly becoming a major priority for water utilities. Constraints on new water supply sources, increasing regulations that require energy-intensive treatment technologies, growing populations, and climate change will combine to require that future water demands require proportionally higher energy inputs. To offset the increase in energy needs, many water utilities are evaluating the implementation of renewable energy systems to offset their purchased energy sources and reduce energy costs. The purpose of this paper is to present the findings for a research project on implementing renewable energy sources at water utilities. This research was performed by Hazen and Sawyer and funded by the Water Research Foundation. In this research project renewable energy installations at water utilities were evaluated in the United States and Australia. The product of this research are twelve case studies outlining the barriers, risks, benefits, financing, and variety of renewable energy technologies and practices that have been successfully implemented by water utilities. This knowledge will be applicable to other water utilities that are seeking to utilize renewable energy to lower their operating costs. Presentation of these case studies will highlight common project approaches and pitfalls, discuss the power industry s perspective on water utilities, and provide resources water and wastewater utilities can use to implement renewable energy systems. Specifically this paper will present the following: Typical renewable energy sources utilized in the water and wastewater industry (i.e. solar, wind, geothermal, biomass, etc..) Barriers and risks associated with renewable energy systems Ways to maximize the value from the energy generated by renewable energy systems Procurement and ownership options for renewable energy systems Available resources to evaluate the feasibility of implementing renewable energy systems Case studies on successful renewable energy installations. KEYWORDS Energy management, renewable energy, electric utility rates

2 INTRODUCTION As water utilities face growing populations, new regulations, and an increasing demand for water, meeting these challenges will increase the energy required to provide safe, reliable water to their customers. Energy conservation and utilizing renewable energy sources are both common ways water utilities are working to reduce their energy costs and associated carbon foot print. While renewable energy systems can be a very effective way to accomplish these goals, implementing renewable energy systems requires a high level of evaluations and planning in order for the owner to maximize the benefit from the renewable energy generated. A research project was performed by Hazen and Sawyer and sponsored by the Water Research Foundation was completed to illustrate the variety of renewable energy options that are available for water utilities. The goal of this research is to provide water utilities with a resource that highlights the many opportunities, barriers, risks, costs, and benefits associated with implementing renewable energy systems. This paper summarizes the major study findings, applications, and provides the basic steps water utilities should take when implementing renewable energy projects. RESULTS AND DISCUSSION Implementing and maximizing the benefit from renewable energy systems requires careful planning and extensive evaluations. Before embarking on the renewable energy path, water utilities should explore reducing their energy costs and improving energy efficiency through energy audits, energy benchmarking, and demand management. Once those options have been explored and implemented, renewable energy can then become an additional component of the energy supply portfolio, thereby maximizing efficiency while also minimizing costs and environmental impacts. The basic steps to evaluating and implementing a renewable energy project are listed in the paragraphs below. Review the available renewable energy generation technologies that are applicable to the water utility s available renewable energy resources. The renewable energy technology that will provide the water utility with the highest level of benefit will depend on many factors such as geographic location, hydraulic profile, purchased energy billing rates, treatment process, and local regulations. For example, water utilities located in the southern regions of the United States with unused real estate and relatively high electric energy process may determine that photovoltaic (solar) systems would provide the most benefit, while utilities with significant hydraulic elevation changes could utilize micro-hydro turbines to recover lost hydraulic energy. Choosing the right renewable energy option depends on the project location, comfort with the technology, and any possible financial incentives. The advantages and disadvantages of different renewable energy technologies included on Table 1 below.

3 Table -1 Renewable Energy Type Advantages Disadvantages Biomass Carbon neutral Large variety of feedstock Low capital investment Pollution when operated incorrectly Good management required Controversial NIMBY (not in my backyard) High capital investment Geothermal Micro hydroelectric (low-impact hydroelectric) Solar photovoltaic / Solar thermal Wind Tidal No fuel costs Predictable High load factor No fuel costs Low operating costs Energy storage High load factor Installation in a pipeline or outfall Declining costs No fuel costs Low maintenance costs Quick installation Low costs No fuel costs Offshore advantage Predictable No fuel costs Low maintenance costs High energy density High load factor Potential air permitting issues Limited locations Power output is dependent on elevation changes High capital investment Intermittent power generation Power output depends on solar irradiance Low efficiency Low persistent noise Aesthetic impact Intermittent nature Sufficient wind not available in many areas High capital investment Siting limited to tidal areas Effect on marine life Immature technology Difficulty in transmission Weather effects Not a mature technology Evaluate the capital investment and the potential returns from the renewable energy system to determine the economic feasibility of implementing a renewable energy system. The capital investment should include equipment costs, engineering fees, construction costs, long term O&M costs, and permitting costs. The return from the renewable energy system will depend largely on the purchased energy costs, billing structures, amount of energy generated, when the energy is generated, and how the energy is utilized (i.e. offset purchased power or sell directly to the electric utility). Many states have established requirements for electric utilities to meet Renewable Energy Generation Portfolio standards (REPS) which require the utility to generate a percentage of their power from renewable sources. Electric utility customers who have renewable energy generation systems have the option to enter into a power purchase agreement (PPA) with their electric utility where the utility will purchase the renewable energy from their customer at a favorable price or rate in exchange for the rights to claim the renewable energy generated on their renewable energy portfolio. This type of PPA can maximize the renewable energy generation benefit to water utilities, however, the state and federal renewable energy generation portfolio standards are changing along with the electric utility s need for renewable energy to meet their REPS obligations. It is important for water utilities to evaluate the benefits and risks of entering into a PPA with the utility as a part of the overall renewable energy system

4 economic feasibility analysis. Any treatment process impacts the renewable energy system will have should also be evaluated. These evaluations can be complex and are generally performed by a firm who specializes in renewable energy system evaluations and design. Evaluate financing options and funding opportunities for the renewable energy system. Financing options for renewable energy projects includes loans, rebates, and tax incentives, in addition to traditional methods of funding capital projects. Despite the influx of federal and state funds, the bulk of renewable project financing has been provided by tax equity investors (typically large investment banks and insurance companies) who partner with project developers through highly specialized financing structures. These funding tools have been designed to capitalize on federal support for renewable power technologies, which have historically come in the form of tax credits and accelerated depreciation deductions. A useful resource water utilities can use to identify financial incentives for renewable energy is the Database of State Incentives for Renewables & Efficiency (DSIRE) ( DSIRE is an ongoing project of the North Carolina Solar Center and the Interstate Renewable Energy Council (IREC). It is funded by the U.S. Department of Energy s Office of Energy Efficiency and Renewable Energy (EERE). The website provides summaries of financial incentives for clean energy by state. Many electric utilities offer renewable energy and energy efficiency funding programs to their customers where the electric utility funds a portion of a project that will reduce the demand on their transmission and distribution systems. An example of a utility funding program is Duke Energy s Smart Saver Incentive program. These utility programs along with federal, state and private renewable energy funding opportunities should be evaluated as a part of the overall renewable energy system economic feasibility analysis. Identify the barriers and risks associated with the renewable energy system. There are many barriers and risks that can have a negative impact on the benefit from renewable energy utilization. This includes, but is not limited to, compatibility with the current purchased power rate structures, public impacts, electrical infrastructure capacity, and electrical protection requirements set by the electric utility. The potential risks and barriers will be different for every water utility and must be understood to accurately evaluate the feasibility of a renewable energy project. Identify public impacts the renewable energy system will have on the community. Typically most renewable energy system have a positive public perception, however systems such as wind and solar can have negative view shed impacts. The water utility should carefully evaluate how the renewable energy system will impact the community and participate in public outreach programs if necessary. Evaluate how the energy generated from the renewable energy system will be used to provide the water utility with the highest level of benefit. As described in this report, the energy generated can be used to offset the purchased energy source(s) or it can be sold directly to the purchased energy utility if applicable. The benefit from each option will depend heavily on the purchased energy billing rates and the electric utility s renewable energy buy back rate. Since many electric utilities use billing elements such as demand ratcheting, and time of use rates, when the renewable energy is generated can have just as much impact on the overall benefit as how much energy is generated. The water utility should coordinate closely with the electric utility to determine how the billing rate structures

5 may be impacted from the implementation of a renewable energy generation system. Determine the project delivery method that will meet the water utility s needs. Renewable energy projects can be implemented using traditional design-bid-build, design-build, or design-build-operate delivery methods. These project delivery methods are common in the water industry and will result in the water utility owning the renewable system. Evaluate the potential benefits of delivering a renewable energy project through a third-party energy project developer. In contrast to direct ownership of renewable energy equipment, a renewable energy project may also be provided by a third party renewable energy developer. The primary benefit to the water utility is that they may be able to take advantage of this power source without financing the project. Typically, a renewable energy project with a third party developer would take one of the following forms: 1. The water utility could enter into a power purchase agreement (PPA) with the developer to buy energy generated by renewable energy sources located off-site. 2. The water utility could contract with the developer to co-locate the renewable energy system on the water utility s property and purchase the generated energy directly from the developer under a PPA. 3. The water utility could contract with the developer to co-locate the renewable energy system on the water utility s property with the generated energy sold directly to the electric utility. Since the water utility is not gaining energy benefits in this case, the developer would pay the water utility for the use of their resources (rent), or in some cases will agree to transfer the ownership of the renewable energy facilities to the water utility after an agreed upon time period. One disadvantage publically owned treatment works (POTWs) face with owning a renewable energy generation system is that most POTWs are not eligible for federal renewable energy tax credits. Since privately owned third party renewable energy developers can benefit from these federal tax credits, implementing a renewable project by entering into a PPA with a privately owned third party energy developer may provide a higher level of benefit to the water utility. The benefits of owning a system outright include the ability to control the power output of the system and how the power is used. However, this option also requires upfront capital, a thorough financial analysis of the proposed system to ensure that the cost of ownership will be less than the purchase price of electricity, and continued maintenance. Purchasing renewable power through a third party requires no upfront costs, and the third-party may maintain the system. However, the purchase price of electricity is generally fixed. If the price of electricity from the power company falls below the price set in the purchase power agreement, the water utility could spend more for this renewable energy. An additional caveat is that some states do not allow power purchase agreements, and water treatment facilities that were constructed with bond funding may not be allowed to enter into a PPA. The regulations for each state must be thoroughly examined. Ultimately, implementation of a renewable energy project is dependent on the unique circumstances of the water utility.

6 CASE STUDIES Twelve (12) renewable energy case studies were evaluated during the development of the Water Research Foundation funded project 4424 Implementing Renewable Energy at Water Utilities to identify the drivers, barriers, and risks of implementing renewable energy systems. Three (3) of the twelve (12) case studies are presented herein. These case studies include one (1) North Carolina project and two (2) other projects that illustrate the common renewable energy drivers and barriers. Additional renewable energy case studies are presented in the Water Research Foundation report titled. Case Study 1: E.M. Johnson WTP - City of Raleigh PUD, Raleigh, NC About the project: To promote renewable energy, the City of Raleigh worked with Carolina Solar, an energy services company, to install a solar PV system at the E.M. Johnson WTP. The system is owned, operated, and maintained by Carolina Solar, with the option for the City to purchase the system in Purchasing the system would depend on the competiveness of the price of electricity from the electric utility versus the capital cost and O&M cost of purchasing the system outright. In order to install the solar array, Carolina Solar leased the space at the treatment plant. The solar system is grid tied and does not provide any power to the treatment plant. The system, built on top of a clearwell, takes advantage of available space within a city that would otherwise not be used for beneficial use. Raw Water Source Treatment Plant Information Falls Lake Population Served 435,000 Design and Average Flow of Treatment Plant, MGD Annual Electricity Consumption, 2011, kwh Annual Energy Consumption, 2011 (non-electric sources) Utility Governance Structure Not Available Not Available Public: City Government Renewable Energy Data Technology Solar PV Year Installed 2009 Rated Power Output, kw 204 Annual Energy Generated, kwh 387,000 Capital Cost, USD None O&M Cost, USD None Simple Rate of Return Not Applicable Average Utility Energy Cost, $/kwh 0.08 Financing Third Party Energy Savings, USD None

7 Project Drivers Project Risks Project Barriers Type of Contract Special Permits Mandates or incentives for Renewable Energy Community Acceptance Project Implementation The City of Raleigh is making sustainability a priority. No risks to the City. The City does not own the solar panels. Operation and Maintenance of the panels is provided by Carolina Solar. The payback period for the city owned solar panels exceeds 20 years, but the City does not yet own the solar PV system in this project. There is an option to purchase the equipment at a later date. A third party solar energy provider installed solar PV panels on top of the existing clearwells. Carolina Solar owns, operates, and maintains the system. The term of the City s contract with Carolina Solar includes an option to purchase the solar system at the appraised value in General building permit None from the City of Raleigh High Case Study 2: Portland Water Bureau - Vernon Tank, Portland, OR About the project: Recognizing an opportunity to generate power, the Portland Water Bureau decided to install a micro-hydro turbine rather than replace a 16 pressure reducing valve. The project was designed in-house by Portland Water Bureau engineers for a flow rate cfs through the turbine. The pipeline is 24 reduced to 10 at the turbine. To construct the project, piping had to be replaced and a new vault constructed. Financing for the project came from a $55,000 grant from American Recovery and Reinvestment Act of 2009 (ARRA), and another $50,000 grant from Oregon Energy Trust upon completion of the project. In addition, Energy Trust paid consultant fees up front for Federal Energy Regulatory Commission (FERC) and Oregon Water Right permitting help. The Portland Water Bureau also had approximately $35,000 earmarked from State of Oregon Business Energy Tax Credits (BETC). The micro-hydro system is grid tied. Raw Water Source Treatment Plant Information Surface Water Population Served by the Facility 900,000 Design and Average Flow of Treatment Plant, MGD Annual Electricity Consumption, 2011, kwh 47,100 Annual Energy Consumption, 2011 (non-electric sources) None Utility Governance Structure Public: City Government

8 Renewable Energy Data Technology Mirco-hydro Year Installed 2012 Rated Power Output, kw 30 Annual Energy Generated, kwh 150,000 Capital Cost, USD 155,640 O&M Cost, USD 1500 Simple Rate of Return 15 years Average Utility Energy Cost, $/kwh 0.07 Financing Government Energy Savings, USD 10,500 Project Drivers Project Risks Project Barriers Type of Contract Special Permits Mandates or incentives for Renewable Energy Community Acceptance Project Implementation The Portland Water Bureau was seeking to meet the City s renewable energy goals. Installing a new generator on an existing 80 year old pipe and providing adequate thrust restraint for the equipment. Barriers to the project included the cost of structures to house the energy generation equipment, and the cost of upgrading the power supply to meet the generation requirements. Power Purchase Agreement (PPA) FERC in-conduit exemption, Oregon Water Resources Board Permit Renewable Energy Grant from the Energy Trust of Oregon The project is in an underground vault and not seen by the community. Case Study 3: Regional Water Recycling Plant No. 4 Inland Empire Utilities Agency (IEUA), Rancho Cucamonga, CA About the project: The Regional Water Recycling Plant No. 4 (RP-4) has been in operation and producing recycled water since RP-4 treats an average flow of 5 MGD, and operates in conjunction with other plants to provide recycled water to the surrounding community. RP-4 includes primary, secondary, and tertiary treatment processes for producing recycled water in accordance with California Title 22 regulations. To offset high-carbon emitting operations, IEUA set a goal to operate off the grid by The Agency evaluated the benefits of providing clean and renewable energy. Wind power was selected as a viable technology due to its low cost per kilowatt hour and reliability with minimal maintenance. Additional renewable energy projects by IEUA include solar systems and fuel cells. This project was implemented using a power purchase agreement (PPA) with Foundation Wing Power. The current agreement for the wind turbines is for 20 years and generates approximately 1.0 MW of power.

9 Raw Water Source Treatment Plant Information wastewater Population Served 602,000 Design and Average Flow of Treatment Plant, MGD Annual Electricity Consumption, 2011, kwh 22,284,130 Annual Energy Consumption, 2011 (non-electric sources) Utility Governance Structure Not Available Municipal Water District: Publically Elected Board of Directors/General Manager Renewable Energy Data Technology Wind Year Installed 2011 Rated Power Output, kw 1,000 Annual Energy Generated, kwh 1,500,000 Capital Cost, USD None O&M Cost, USD None Simple Rate of Return Not Available Average Utility Energy Cost, $/kwh Financing Third Party Energy Savings, USD ,800,000 (20 years) Project Drivers Project Risks Project Barriers Type of Contract Special Permits Mandates or incentives for Renewable Energy Community Acceptance Project Implementation Drivers for this project included cost containment, operational reliability, electricity rate stabilization, and carbon footprint reduction. This project was a power purchase agreement, which reduced the risks. Approval from the Federal Aviation Administration (FAA) Power Purchase Agreement Southern California Edison Interconnection Agreement Self Generation Incentive Program (SGIP) Positive

10 SUMMARY Utilizing renewable energy is possible for every water utility. The case studies of this research revealed that solar PV is the most common form of renewable energy project pursued by water utilities since most treatment plants have available land areas that may be used for solar applications. The drivers, obstacles, and barriers to implementing renewable energy systems will be unique for every water utility. The research project reveled that most renewable energy project drivers include reducing their energy and carbon footprint, hedging against fluctuations in electricity pricing and supply, and reducing long term energy costs. Obstacles and barriers to renewable energy projects include project funding, approvals from the electric utility, electrical protection requirements and possible changes to electric utility rates. There are multiple renewable energy project funding opportunities available through many state, federal, and non-governmental programs that will provide capital to promote the use of renewable energy. In addition, many electric utilities will provide funding for renewable energy projects for their customers in exchange for the rights to claim the renewable energy generated on their energy generation portfolio. Water utilities can also pursue renewable energy projects through power purchase agreements with third-party energy services companies. These agreements may mean that water utilities can benefit from renewable energy with no upfront capital costs. Additional information on funding opportunities and resources can be found on the report for this research project which is available from the Water Research Foundation Project REFERENCES Water Research Foundation. Project 4424 Prepared by Hazen and Sawyer P.C. New York, NY.