November-December 2003

Distributed Generation Onsite Power Takes the Load Off Office Buildings

You can reduce energy costs, meet base-load power needs, and avert utility power outages with onsite generation. But the system is only as good as its design, which must be site-specific.

Chicago, IL–based Equity Office is the nation's largest owner and manager of office buildings with more than 721 properties and 124.4 million ft.2 of office space in 19 states. It therefore was no small decision when the company committed to a program of distributed generation (DG). Through its wholly owned subsidiary, On-site Energy Providers LLP, Equity Office currently has 12 buildings with onsite power plants installed or in progress and another eight buildings targeted. The company's eventual goal is as many as 100 DG systems nationwide.

"Economics is the driving force," says Frank Frankini, On-site Energy Providers senior vice president. "I've thought about this since the late 1990s when energy deregulation in the electric markets took off. With regulated monopolies, onsite generation would have been extremely difficult if not next to impossible."

Frankini says Equity Office sees DG as a way to improve business economics, make facility management more efficient, and provide better reliability to building tenants. All but two of Equity Office's systems are grid-parallel cogeneration systems. Electrical power is generated on-site using natural-gas–fired reciprocating engines connected to electrical generators. Thermal energy accumulated during power generation (waste heat) is recovered to run the building's heating and cooling systems (via a heat recovery steam generator or an absorption chiller). The Equity Office onsite plants are designed to meet a portion of the building's base load, thus reducing the amount of power purchased from a utility while at the same time reducing the thermal load. "We either buy the power for our buildings or we produce it ourselves," says Frankini. "This has allowed us to change our load profile and to purchase what power we do from the utility at a lower price."

Decision-Making Drivers
On-site Energy Providers Vice President of Energy Operations Tom Smith lists 10 criteria the company applies when evaluating potential DG projects. "Like anything else, this has got to make economic sense," says Smith. "What we're looking at is the difference between what we would displace in terms of power costs [and] what it will cost to run the system." Smith admits calculating the right mix isn't always as straightforward as it might seem. "We're dealing with commodities. Our biggest expense is the natural gas—and gas prices have been fluctuating. Our biggest income line is electricity, which is subject to regional forces. What we're looking for is a margin we feel will be there over the life of the project." So far Equity Office has identified six markets where onsite generation makes sense: Boston, Chicago, Los Angeles, San Francisco, San Diego, and New York City.

The second consideration is fuel. If natural gas isn't available at the site, this effectively nixes the project. (Barry Kreuzer, regional sales manager for Cummins Power Generation Energy Solutions Group in Minneapolis, MN, which has worked with Equity Office in Chicago, estimates that assuming a Cummins engine is running 8,000 hours a year, 65% of a project's cost will be fuel.) The third requirement is a location for the equipment, typically in a basement or on a roof or perhaps containerized in a parking garage. Next comes the challenge of removing the exhaust generated by the engines. If the local utility is cooperative, all the better since the goal in most installations is to run the DG plant in parallel with conventional utility power. Local permitting requirements regarding noise, aesthetics, and exhaust emissions must also be considered. Finally, it sweetens the pot and might even make or break the project if state or local incentives are available to help defray capital costs.

So far, says Smith, Equity Office has not developed a standard approach that can be applied across projects. It has handled some installations itself; others have been accomplished in concert with outside consultants. Frankini sums up the process: "You have to know exactly what you consume. Then you can look at the effect of the various different technologies and systems on that consumption, then do a detailed engineering and economic analysis to see what difference onsite generation can make to your bottom line."

The Big Three
Chach Curtis, vice president of onsite generation for Northern Power Systems Inc. (in Waitsfield, VT, and San Francisco, CA), which has worked with Equity Office on DG design and installation, offers a quick shorthand for assessing whether installing onsite power is likely to benefit an organization. The first question, says Curtis, is whether the system will generate enough savings for the return on investment to meet an organization's internal requirements. "Most of these companies have investment benchmarks," says Curtis. "We want to be able to clear them." The next question is how much reliability is enough. For some operations, a temporary five-minute outage can be managed; for others, seconds can be critical. Third, how important are environmental considerations? Because of the combined efficiencies of cogeneration systems in creating energy from electricity and waste heat, there's a substantial increase in efficiency and a corresponding decrease in the amount of greenhouse gas produced per unit of power, which for some companies can be an important decision driver. Curtis recommends two out of these three conditions be satisfied; otherwise a DG system might not be worth the investment.

Next Up: Project Engineering
Once the project is given the go-ahead, the engineering begins. First up is a load profile for the facility, which requires knowing the electricity demand for each 24-hour period for a timeframe of two to three years. Utilities supply this information in 15–20 minutes increments, but the data must be analyzed to determine base and peak usage, an exercise that is critical to defining the size of generators needed to power the system. "The economics of onsite generation work best when you run the generator as much as you can," says Curtis. "You don't want to size for peak periods because you'll be buying equipment you don't need. The more you keep your engines running at close to their rated capacity, the more efficiently you're going to burn fuel and the more kilowatt hours you're going to produce for the same amount of fuel burned. To the extent you size a system to meet the base load, your engines are going to run more efficiently."

At Cummins, Kruezer agrees. "My caution to the customer is to make sure whoever is doing the load analysis doesn't oversize the equipment. Not only will this increase your payback time, but you're going to increase your life cycle costs. You don't want a piece of equipment running at a 70 to 80% load. You want it to run 90 to 96%—ideally 100%."

As with most organizations using distributed generation, Smith says Equity Office has elected to stay connected and run in parallel with the existing utility's grid, which means tying the building's onsite system into the bus that receives the utility's power and routes it throughout the building. Benefits include splitting the electrical load, with the DG system picking up the more consistent base load and leaving the utility to pick up the peak, and being able to shut down for maintenance. So far Equity Office's systems have generally been designed to handle up to 35–40% of building power, which Curtis says is typical. "The base load in most office buildings is about a quarter of the peak load. If you stay connected to the grid, you can have a 1-megawatt-size generator and still be able to handle a 4-megawatt peak load. But if you fully disconnect from the utility, you'd have to resize that generator to 4 megawatts, which means you'll be running the equipment under capacity much of the time. There's the additional consideration that when you go down for maintenance, the utility is there to pick up the full load."

Since it's not meant to generate all of a building's power, the DG system is typically configured to disconnect from the grid in the event of a power failure, although with a little extra work it can be designed to sort among loads and serve only those that are critical. At one of its two Chicago office buildings, for example, Equity Office provides full backup for one tenant's data center. Because the arrangement is exclusive, the tenant picks up the full cost of the system when it's running in this mode. "This kind of system architecture, which relies on digital switches, costs more to make seamless," says Curtis, "but it's getting a lot more attention after the recent blackout on the East Coast. Running parallel with the utility is a way to provide enhanced reliability for your tenants over and above the existing grid while at the same time maximizing your operation. Another nice thing about having your onsite generator running in parallel with the grid is that it's already up and running if an outage happens."

Running in parallel requires an interconnect that, as Curtis points out, is subject to the requirements of the individual utility. In certain sections of New York, Con Edison calls for induction generators that require excitation current from the grid. This type of interconnection will make it more difficult for Equity Office to provide backup power to tenants at its Avenue of the Americas building if the grid goes out. And although it might be true that utilities might not seem supportive of onsite power and are particularly protective of their downtown grids, Curtis suggests there are reasons.

"The utilities look at onsite generation as a potential safety risk for the grid," says Curtis, "particularly in a downtown network like the one that serves Equity Office's One Market Plaza building. Most states have issued interconnection standards, but there's a lot of room for interpretation and this can cause problems. At the simplest level, the utility is trying to prevent the onsite generating unit from backfeeding into its grid, which endangers both the system itself and anyone who might be working on it when it's down.

"Fortunately the technology is such that these concerns are easily addressed if you take the time and know what you're doing. We were able, for example, to mate One Market Plaza's large-scale onsite generating system to Pacific Gas and Electric's downtown grid, when the utility had never before allowed an onsite generator to run parallel within the downtown area. The critical factor was working carefully with network-protection engineers to demonstrate that our control system was robust enough to prevent any of the possible scenarios that could create safety or reliability issues."

Capturing What Would Otherwise Be Lost
A sound economic and engineering plan should also include how facility managers can take advantage of the cogenerational capacity of DG systems. "Most people think electricity," says Kreuzer, "but you can receive two forms of energy from that generator set. At one of the Equity Office buildings in Chicago, we fed the waste heat into a steam boiler and reduced the demand on those gas-fired units."

Curtis thinks taking advantage of waste heat is critical for the economics of a project. "You increase the efficiency of the system dramatically and make it pay for itself that much quicker. In fact, utilizing waste heat can often make the difference between whether a project is economically viable or not. In a project like Equity Office's buildings in La Jolla, California, where there's a large air-conditioning demand, you can use most or all of your waste heat to drive absorption chillers that create chilled water for your air-conditioning system. At the Avenue of Americas building in New York, you can use the waste heat to heat the building in winter and cool it in the summer."

But at One Market Plaza in San Francisco, where it is neither as hot as La Jolla nor as cold as New York, the situation is not as clear-cut. Fortunately California (through the Self-Generating Incentive Program of the California Public Utility Commission) is one of a number of states—including New York (through the New York State Energy Research and Development Authority), New Jersey, Connecticut, Massachusetts, and Rhode Island—that offer incentives for DG installations. At One Market Plaza, Curtis explains that incentives pay 30% of the capital costs if the system meets a combined electrical and thermal efficiency of 62% (meaning the system converts 62% of the fuel consumed into usable electricity or thermal energy).

The Northern Power Systems engineering that brought One Market Plaza to the required benchmark operates as follows: "The engine itself [runs] at approximately 32% efficiency," explains Curtis, "but making up the other 30% through recovering the heat of the exhaust and converting it into usable thermal energy was going to be difficult. We knew, however, that One Market Plaza project costs were high, and if we demonstrated that we could get an incentive, it would go a long way toward convincing Equity Office's investment committee that they should invest in this kind of project. So we designed a system that took heat from both the exhaust and the engine itself through a cooling water loop that circulated around the engine block. Then we ran the heat from both these sources through a heat recovery steam generator and then ran the resulting steam into a steam loop that runs through the building. One of the keys was being able to tie into the steam loop at a key connection point—the more connection points and the farther you have to run the recovered heat, the more it gets dissipated, which lowers your efficiency."

Location, Location, Location
"One of the factors that make this work interesting," says Curtis, "is that no two buildings are the same." This means where to locate an onsite power system varies from one location to another. Some of the units go on the roof, if the roof is designed to hold 200,000 lb. or more—and isn't already full of other equipment. Putting a system on a roof might also be prohibitive, given costs associated with getting equipment to the site, which in a place like San Francisco's financial district can be considerable. There is also the option of taking two or three spaces in a parking garage and installing a container with sound attenuators or generator mufflers and exhaust and otherwise baffling the equipment. Curtis recommends the basement as the best option, but this requires the installation of dampening equipment so the generators don't vibrate the building. At One Market Plaza the generator sets were installed in a vacant part of the basement that formerly housed backup generators.

As Curtis points out, some of these logistics challenges will be resolved as more buildings are constructed with DG systems in mind, which will eliminate the need for retrofitting. Until then, both locating the onsite plant and routing the exhaust out of the building are factors that have to be addressed when planning for onsite power. "These large, reciprocating-based power plants in the size range that Equity Office needs are engineering-intensive," says Kreuzer, "and we have to deal with the building's existing infrastructure and physical operating scheme. The generator set we installed in one of Equity Office's Chicago buildings, for example, is in the second or third subbasement of a skyscraper. There's a lot of design work that went into that."

Other engineering challenges include meeting local emissions standards—largely a measure of seeing that catalytic converters are sized properly to meet local standards—and securing the necessary permits, which means making sure the unit meets local noise and environmental requirements. Smith says typical time to get a system up and running from conceptual design to operation is from eight to 12 months. He estimates that by the time all installations are complete, the cost of DG in 12 buildings Equity Office originally targeted will run $15 million with incentives.

Responsibility for Equity Office's onsite facilities falls with current building management. Major maintenance typically is contracted out to local vendors. "We use our own existing engineering staff within the buildings to operate the units," says Smith. "For the engine generator sets we contract with the manufacturer. The rest of the equipment we maintain either with our engineers or through third-party contracts. We're tapping into our building-management experience. We've put in chillers and boilers and other electrical equipment and have good relationships with suppliers." Kreuzer paints a picture of what maintenance on a typical Cummins generator set is likely to look like. "In California, for example, most of our applications are running 8,000 hours a year as opposed to 3,400 hours in Chicago. That means that after seven and a half years we would have to do a major rebuild. Typically we're looking at doing at least two rebuilds, which takes us to 180,000 hours, which is a pretty good life cycle on a generator set that gives above 38% electrical efficiency."

Regarding what they would do differently, now that they have some DG experience under their belts, both Smith and Frankini say there have been few surprises. "The technology has been around for a long time," Smith points out, "and both Frank and I come out of the power industry. You have to remember the entire system is designed for economics, and for this you have to look at the big picture. Since 1970, the electrical load in downtown Chicago has doubled. The more buildings that install distributed energy in these constrained downtown areas the easier it's going to be on utilities—and for managers and tenants who occupy these buildings."