This is what distributed energy is all about. If the recent blackout stretching from Detroit to New York to Toronto taught us anything, it was the importance of distributed energy power systems and their proper integration into the general power grid.

The role of distributed energy is to augment and complement centralized power sources by providing auxiliary energy to local users or by selling energy capacity back to the utility grid. Flexibility is obtained by installing distributed energy systems to individual users or locations. Collocating distributed energy systems with their primary users reduces the cost of transmission and often makes distribution system improvements unnecessary.

The benefits for consumers are as extensive as those for suppliers. These benefits include lower service costs, greater ease of maintenance and repair (less potential downtime due to interruptions in service), and increased overall system efficiency. The efficiency derives mainly from "load leveling," the ability of a distributed energy system to ease the burden of the power grid during periods of peak loads. Distributed energy systems based on renewable resources (solar, wind, and biomass) offer the consumer the possibility of complete independence from the grid while making non–fossil fuel energy sources practical. Indeed, distributed energy is the only practical means of integrating renewable energy sources (solar, wind, geothermal, mini-hydroelectric, photovoltaic, and so on) into our energy mix.

According to the US Distributed Energy Resources Office, some of the primary applications for distributed energy include the following:

• Premium power: reduced frequency variations, voltage transients, surges, dips, or other disruptions
• Standby power: used in the event of an outage as a backup to the electric grid
• Peak shaving: the use of distributed energy during times when electric use and demand charges are high
• Low-cost energy: the use of distributed energy as base load or primary power that is less expensive to produce locally than it is to purchase from the electric utility
• Combined heat and power (CHP, also referred to as cogeneration): increases the efficiency of onsite power generation by using the waste heat for existing thermal process

Reciprocating Engines
Caterpillar's Electric Power Group, with its line of reciprocating engines and its wholly owned subsidiary, Solar Turbines Inc. that provides gas turbine solutions, is a leader in the distributed energy field.

The reciprocating (internal combustion) engine is an established technology. Two basic types of fuels are used, depending on how the engine ignition operates. Spark-ignited engines, typically found in automobiles, utilize gasoline or natural gas (in the case of engines used to generate power). Compression-ignited engines (used in both trucks and power generators) use diesel fuel. Commercial power-generation reciprocating engines can provide from 0.5 kW to 14 MW of power. Their advantages include small size, low unit costs, and excess thermal output. This excess thermal output allows for potential cogeneration heat recovery. Currently this accounts for 7% of the electricity produced in the US.

The Caterpillar Electric Power Group has been in the business of providing distributed energy since 1939. The Cat engines used in their generator sets are designed for use in rugged field environments, such as remote construction and logging sites. Given the inherent difficulty in repairing generator sets in remote locations, the sets are designed for long-term reliability and simplicity of maintenance. As such, the strength characteristics of the systems (high-strength blocks; large bearing areas; steel-backed, copper-bonded, aluminum-alloy bearings; and hardened crankshafts) are reinforced to ensure long-term durability.

A Cat generator set is a turnkey package with switchgear components from a single manufacturer to ensure compatibility and ease of parts replacement. The units are modular and compact in design, providing from 8 kW to 5.9 MW. Systems with multiple units can serve a wide variety of load demands. Their generator insulation exceeds Class F requirements and has solid-state overload protection. The sets can be weatherized to operate and survive in extreme tropical, arctic, moist, dirty, or sandy environments.

Cat generator sets provide the following valuable services. They prevent disruption of critical processes. This can be very important for manufacturing operations that rely on continuous feed, suffer damage from sudden shutdowns, or create dangerous situations when interrupted. Avoiding downtime prevents costly loss of production or valuable data. Critical communications are preserved during blackouts.

Compared to expanding service lines from the grid, Cat generator sets provide new opportunities for cost savings, overall reliability, greater energy efficiencies, flexibility in fuel needs, and the potential for heat recovery. An investment in a Cat generator set results in savings by avoiding the need for costly new central power plants and transmission lines. Under a typical peak-shaving arrangement with a local power utility, the operators of Cat generator sets are effectively paid to operate them during peak demand periods by means of monthly credits, grants, or reduced pricing. Payback on investment in a Cat generator set often is less than three years. In short, a Cat generator set is to a central power plant what a personal computer is to a mainframe computer. It is a means of distributing power in a flexible, efficient manner.

Given their inherent flexibility, low startup costs, and ease of maintenance, Cat generator sets can replace the power grid entirely, serving as the prime power source for customers located where utility service is unavailable or costly (isolated locations), utility rates are very expensive (areas with high energy demands), frequent power outages occur (or as relatively cheap insurance against such an occurrence), or complete power control is essential for the operation of a facility (complicated manufacturing processes, managers of extensive communication and data systems, hospitals, and so on).

Cat generator sets run on almost any standard fuel (natural gas, propane, landfill gas, diesel, crude oil, or heavy fuel oil). Besides the operational flexibility this entails, operators also can take advantage of price fluctuations in the fossil fuel market. They can purchase those fuels that are currently the cheapest without being dedicated to a fuel source whose price is increasing. The generators also, in effect, produce their own "fuel" when integrated into a

CHP system. Heat that is normally wasted is utilized to provide space heating, water heating, or heat for industrial processes. A system of this type can achieve 90% total efficiency.

Solar Turbines
Solar’s generator sets are used for industrial power generation applications, such as cogeneration, base-load electricity or emergency power for a wide variety of facilities including industrial/processing facilities, buildings and institutions, and distributed power plants. Solar’s generator packages are also used in a variety of oil and gas applications such as providing power for offshore production platforms.

Rated from 1185-14,540 kW (1590-19,500 hp), Solar's rugged, reliable industrial gas turbines can operate on a wide variety of fuels including natural gas, distillates, NGL, LNG, landfill and sewage gases, coal-seam methane, hydrogen, and others. In addition, these versatile gas turbines are available with dual-fuel and triple-fuel systems allowing them to operate interchangeably on multiple fuels for even greater operating flexibility. Solar gas turbines for stationary applications above 4000 hp (3000 kW) can be equipped with our advanced technology, dry, lean-premixed SoLoNOx combustion systems for pollution-prevention to meet stringent emissions standards.

A City's Needs
Caterpillar's recent delivery of five reciprocating engines to the city of Geneva, IL, illustrates the potential for distributed energy. In the spring of 2000, Geneva adopted a long-range Electric Utility Business Plan. The plan examined the energy future of the city and its relationship with its primary power suppliers, Commonwealth Edison and Wisconsin Electric. The four main points of the plan concerned the following:

• Use of a 2,000-kV generator that had been modified to allow parallel operations
• Use of fiber-optics technology for telecommunications
• Obtaining 138-kV delivery voltage from Commonwealth Edison in cooperation with nearby towns
• Utilizing self-generation to reduce expected major increase in wholesale costs of electric power after its current contract expires

The desire to avoid forthcoming energy cost increases drove the decision to utilize some form of distributed energy that would be owned and operated by the city itself. Of the distributed energy options studied, it was determined that natural-gas–fired reciprocating engines were more suitable for Geneva than microturbines for several reasons. Natural-gas–fired reciprocating engines are a clean technology and environmentally friendly. They were available in the right size and power output for the city's projected needs. These units were scaled for the most efficient management of projected wholesale energy costs. The units could be sited next to an existing substation in the city's business district, away from residential areas.

By January 2002, the city had issued a request for proposal (RFP) for the construction and installation of the reciprocating-engine generator facility. The RFPs were received by March 2002. Of the 11 RFPs received, the two best "least cost" proposals were given further consideration. This additional analysis was completed in May 2002. Of the two finalists, HWS Energy Partners LLC of Champaign, IL, was found to have more efficient equipment than its competitor. In addition, the Cat equipment proposed by HWS was found to perform better in economic analyses of the project. Though its competitor revised its cost figure several times over the next four months, HWS and its Cat generator sets were found to be the most cost-effective choice. To ensure an apples-to-apples comparison, the same cost numbers were used for catalyst converter (environmental control) and owner's risk insurance. Other costs included a five-year warranty, utility interconnects, and permits. An analysis of the annual operating costs (based on an assumed operating time of 4,000 hours and an annual power output of approximately 115,000 MWh per year) included estimates for fuel costs, lube and oil, parts, labor, and other overhead. The 4,000 annual operating hours represent a 45.7% load factor. During the peak hours, the units were assumed to operate at about a 70% annual load factor and at about 33% during the off-peak hours.

The 20-year study (extending from 2002 to 2021) projects that Geneva's energy needs will increase from approximately 357,000 MWh to almost 634,000 MWh (an increase of 77%). Without the distributed energy system controlled and operated by the city, Geneva's annual power costs are projected to increase from the current (in 2002) cost of $12,316,000 (or $34.49/MWh) to $42,454,000 (or $66.99/MWh). With a distributed power system from Caterpillar, the projected annual costs are estimated to be $38,474,000 in 2021 (or $60.71/MWh). The total cost savings over the 20-year period comes to $44,368,000 ($477,108,000 versus $521,476,000 without the distributed energy system). This is approximately an 8.5% reduction in total costs over the next 20 years, a considerable savings.

Estimates were also made of Geneva's power costs and revenues for the subsequent 20-year period (2022 through 2042). The results of that analysis show that Geneva would save an additional $136 million with the distributed energy system. The 40-year time frame represents the projected operational lifetime of the generator units. The total projected cost savings for the operational lifetime of the distributed energy system is about $180 million. Further cost efficiencies result from avoiding power losses (voltage drops) over extended transmission lines required by an expanding power grid. Total cost savings to the City of Geneva over the next 40 years could be as high as $200 million (all amounts are in nominal dollars).

In terms of net present value (NPV) 2002 dollars, the total savings to the city for the first 20 years of generator operation is approximately $24 million, representing a cost savings of 8.1% compared with being without the distributed energy system. The NPV analysis assumes the cost per megawatt-hour of both options will decrease over time. There are several reasons for this assumption. Savings projections from 2005 to 2015 are very conservatively based on the recent lowest market prices for energy. This is conservative since this assumption does not exaggerate any projected cost savings from utilizing a distributed energy system. Projected costs after 2015 are assumed to increase at a rate of 3% per year until 2021, when costs are assumed to increase by no more than 2% per year. A discount rate of about 5.5% annually was used to deflate the costs.

A Company's Response
An offer from Caterpillar Financial clinched the proposal. Given the analyses performed by the electric utility, it was recommended that the contract for installing the reciprocating-engine generator sets be awarded to HWS for the bid amount of approximately $15,600,000. The award was for a turnkey operation that included all permits, environmental safeguards, interconnects to the substation, owner's risk insurance, and utility interconnects.

The city entered into a 20-year lease purchase agreement to provide financing for the project from Caterpillar Financial. The amount financed from Caterpillar came to approximately $880,000, bringing the total project cost up to almost $16,480,000. The additional $880,000 was necessary to finance upgrades needed in the Geneva Business Park substation for operation with the proposed distributed energy system and/or the 138-kV delivery upgrade from the existing power grid (the third item on the city's long-term energy plan). Caterpillar agreed to include these unrelated monies in the project's financial package. Maintenance agreements, operating contracts and project revisions resulted in a project cost of approximately $18 million. Given an approximately $24 million NPV of the projected cost savings to the city incurred for the first 20 years from the use of the Cat generators, this agreement grants the city a real net on investment of at least $6 million.

In accordance with the agreement, Caterpillar has sold five of the company's largest gas-fired engines to Geneva to supply energy for a new electrical power plant owned and operated by the city. The five units will be capable of delivering 29 MW of critical peak power for up to 40,000 homes. The plant is scheduled to begin operations in January 2004. With its current contract with its primary electrical utilities expiring at the end of 2005, Geneva is now in a position to mitigate postcontract price increases.

A recent press release from Caterpillar makes clear the positive benefits of this agreement: "'We are pleased to have won this competitive contract, the first of its kind in a growing market opportunity for Caterpillar,' said Glen Barton, Caterpillar Chairman and CEO. 'As North America's energy needs increase, many cities face critical power shortages and unpredictable pricing during peak periods of electrical usage. Caterpillar products offer better fuel efficiency, lower operating costs and are backed by an unparalleled dealer network.' 'This new power plant will offer residents and businesses of our city a higher quality of life by providing reliable and more affordable power during extreme weather conditions,' said Kevin Burns, Mayor of Geneva, Illinois. 'We examined several suppliers and were most impressed with the operating cost and reliability of Caterpillar products as well as the support of the company's dealer network.'"

Once operations begin in January 2004, the City of Geneva will own and operate the turnkey natural-gas–powered plant. As it augments the power received from the primary power grid, the proposed facility will create minimal pollution due to the clean-burning nature of natural gas. Power distribution efficiencies will be increased since the power source is much closer to potential customers and less prone to power losses through extended transmission lines. Though its function is to provide energy to a growing city, its real purpose is to protect the city from volatile price fluctuations.

The recent press release provides the specifications for the 29-MW facility: "The new plant will be powered by five Caterpillar G16CM34 gas-fired reciprocating engines, manufactured by Caterpillar Motoren in Kiel, Germany. Each engine weighs more than 300,000 pounds, and measures 40 feet long, 15 feet tall and 10 feet wide. Stacked together, the five engines would stand nearly eight stories tall. The engines have arrived in Geneva and will be installed as part of the current construction phase."

This will be the first installation of the Cat G16CM34 engine in the US, a unique opportunity both for Caterpillar and the city of Geneva. Each G16CM34 engine provides 5.9 MW of electricity at greater than 45% efficiency. As part of the overall turnkey package, Caterpillar also will provide Cat generator set paralleling switchgear, power distribution switchgear, and engine and total power-plant control systems. An electrical generation management system using Power-Lynx technology will allow the city to monitor, control, and manage the plant on-site or remotely from the offices of the Geneva Electric Utility.

The Cat G16CM34 is a V16, four-stroke-cycle gas engine that operates at a long stroke up to 750 rpm. It delivers a brake horsepower (depending on ambient air temperature and altitude) up to 8,180 bhp. It typically uses natural gas, but the CM family can burn a wide variety of fuels. With the same cylinder block and running gear as the standard CM32 diesel engine, it has an operating weight (with flywheel attached) of 179,080 lb. Its engine block is a one-piece, nodular cast-iron unit with an underslung crankshaft designed for extended high-peak pressures. Standard features include flywheel and ring gear, high-efficiency turbochargers, turbocharger aftercooler, pneumatic engine barring device, gear-driven lube oil pump, electric motor-driven cooling pumps (off-engine-mounted), electric motor-driven pre-/post-lube oil pump (off-engine-mounted), oil-filled drive coupling with oil feed-through hole in crankshaft, crankcase explosion doors, Cat ADEM III control system, and dual air/gas turbine motor starters.

Where From Here?
A lot can change over the next 40 years. It should never be forgotten that cost projections are just that: projections. The analysts, however, did all they could to make reasonably conservative assumptions. If anything, actual cost savings will probably exceed projections. The City of Geneva showed superior foresight and planning ability in getting a new system on-line a full two years prior to expiration of its current contract. Caterpillar showed superior project management skills, equipment design, and financial acumen in landing this project.

DANIEL P. DUFFY, P.E., is a professional environmental engineer in Cincinnati, OH.

DE - Nov/Dec 2003