HomeMy WebLinkAboutHeat Recovery Best Practices Guide Renewable Energy Fund Application 07-17-2020-HEAT
813 West Northern Lights Boulevard, Anchorage, Alaska 99503 T 907.771.3000 Toll Free 888.300.8534 F 907.771.3044
REDUCING THE COST OF ENERGY IN ALASKA AKENERGYAUTHORITY.ORG
RGYAUTHORITY.ORG
Heat Recovery Best Practices Guide
Renewable Energy Fund Application
Introduction
The following guide contains items that are critical to the success of a Renewable Energy Fund
(REF) application and project. The intent of the guide is to aid particularly rural applicants in the
submission of a comprehensive project proposal, and is meant to add additional details specific
to heat recovery projects. Smaller and simpler projects may not have to address all of the items
below. Larger and more complex, systems will be expected to have a more thorough analysis of
the system.
Since the inception of REF, the Alaska Energy Authority (AEA) has managed dozens of grants
for heat recovery projects across the state. Over time, a number of common planning issues
have been identified. Recognizing that each project is unique, this best practice guide does not
prescribe a one-size-fits-all approach for project development. Instead the guide poses a series
of questions and prompts to help an applicant and project developer work through the process
of developing a successful application and project. A well planned project is more likely to be a
strong proposal which should positive an economic benefit to the community.
The guide does not follow the REF application precisely, but the application provides references
to this document. The guide is organized to address these factors:
(1) Site selection,
(2) Understanding the existing system,
(3) Proposed system design and any integration consideration of any the existing primary and
ancillary systems,
(4) Economic analysis & optimization,
(5) Financing and operations planning, and
(6) Common planning risks.
Project design and optimization is not generally a straight line, but an iterative process where
new information will require that concepts be reevaluated. An applicant is expected to have
performed data collection, engineered validation, and analysis appropriate for all phase(s) that
precede the proposed phase. The applicant should likewise use this guide to help develop the
scope of work for each proposed phase(s).
Each phase of project development investigates two main questions: “Can the project be built?”
and “Should the project be built?” Answering these questions requires an investigation of the
technical, economic, environmental, and business aspects of the project. Every project has
inherent development risks; a thorough plan will identify these risks as early as possible,
investigate possible ways to mitigate the risks, and ultimately determine if the expected benefits
outweigh the risks. Where possible, the guide provides information on the detail and content for
each phase (reconnaissance to construction).
1. Reconnaissance studies are a “desktop” study and the analysis should use resource,
economic, and operational data that is readily and/or publicly available. The study should be
sufficient to identify high-level flaws in the use and integration of the resource.
Heat Recovery Best Practices Guide Page 2 of 12
2. Feasibility and Conceptual Design studies should include site specific data collection and
analysis. The conceptual design (also called a 35% design) will not be sufficient to give to a
construction company, but will be of sufficient detail that a thorough economic and feasibility
analysis can be accomplished. Planning for the business and financial aspects of operating
the project will be started.
3. Final Design and Permitting will make the project “shovel-ready”. The conceptual design
will be refined and improved. The specific operational conditions and parameters will be
finalized. All business, operational, and financial plans will be finalized.
4. Construction and commissioning activities are not specifically addressed in this
document.
Heat Recovery Best Practices Guide Page 3 of 12
Contents
INTRODUCTION ....................................................................................................................... 1
1 SITE SELECTION & ASSESSMENT .................................................................................. 4
1.1 RESOURCE ASSESSMENT ............................................................................................... 4
1.2 SITE CONTROL ............................................................................................................... 4
1.3 ENVIRONMENTAL AND PERMITTING RISKS ....................................................................... 5
2 UNDERSTANDING THE EXISTING SYSTEM ................................................................... 5
2.1 CONFIGURATION OF EXISTING SYSTEM ............................................................................ 5
2.2 OPERATIONS OF EXISTING SYSTEM ................................................................................. 6
3 PROPOSED SYSTEM DESIGN ......................................................................................... 6
3.1 PROPOSED W IND SYSTEM ............................................................................................. 6
3.2 PROPOSED OPERATIONS ............................................................................................... 8
4 PERFORM ECONOMIC ANALYSIS & OPTIMIZATION .................................................... 9
4.1 COSTS FOR THE EXISTING SYSTEM .................................................................................. 9
4.2 ECONOMIC OPTIMIZATION ..............................................................................................10
4.3 BENEFIT-COST ANALYSIS ..............................................................................................10
5 FINANCIAL AND OPERAT IONAL PLANNING ................................................................................. 11
5.1 FINANCIAL MANAGEMENT ............................................................................................................... 11
5.2 OPERATIONAL MANAGEMENT ......................................................................................................... 12
6 COMMON PLANNING RISKS ............................................................................................................ 12
Heat Recovery Best Practices Guide Page 4 of 12
1 Site Selection & Assessment
A heat recovery project begins with selecting and understanding a site: the available resource,
the potential restrictions in accessing and controlling the site, and any environmental constraints
or other permits that may be needed for project activities.
1.1 Resource assessment
1.1.1 Data to collect
Current configuration and condition of power generation system
o What is the make, model, nameplate kW rating and hours of each diesel genset?
o Supply and return temperatures required for diesel engines
o What are the fuel curves for each unit?
o What is the heat output for each unit?
o Do the engines have marine jackets?
o What are the actual reported kWhs per gallon of fuel for this facility?
o Are upgrades or replacements planned for any key system components?
Load analysis and growth projections
o Load profile by month (peak, minimum, average) and/or 15-minute interval load
profile for one year
o What generation is used by the community to meet the current load?
o Is there sufficient existing generation to meet the future needs of the community? Or
if the load is declining, can the existing generation run efficiently at lower loads?
o Are there additional potential electrical loads in the community that are not currently
being met? Are any new electrical loads being planned?
1.2 Site control
The applicant must be able to have legal right to use and access the site(s) for the heat
recovery, distribution piping, heat exchangers, etc. Applicants should identify potential issues as
soon as possible. Legal and/or financial agreements may be required to resolve site control
issues. Site control must be finalized before construction funds are committed. Do not
underestimate the complexity of land ownership in Alaska.
The grantee shall be responsible for resolving any land ownership disputes between state
and/or federal entities, local landowners, native corporations, municipalities, boroughs and
community organizations, or other entities.
Proof of valid title to the land and/or written documentation of any private agreements is
required.
The landowner must guarantee that there are no liens or encumbrances on the property.
Final proof of ownership shall be the certificate to plat.
Site control for transmission or distribution power lines may be established using easements
or utility right-of-ways so long as the period of the agreement meets or exceeds the intended
life of the project.
If the project expects secondary loads to be placed in non-utility facilities, ownership and
access of infrastructure must be agreed to by all parties.
If the project site is adjacent to or near an airport or runway, the grantee must research FAA
permit requirements, existing or pending leases and easements, and DOT expansion or
relocation plans
Land transfers required for project development shall be recorded with the
appropriate District Recording office and a copy of the recordation provided to
the AEA grant manager
Heat Recovery Best Practices Guide Page 5 of 12
1.3 Environmental and Permitting Risks
Permitting, environmental or otherwise, may stop projects or require change in size, location, or
operations. It important that any potential permitting issues are identified early so that the scope
of the project can be changed, mitigation measures are taken, or the project can be ended
before significant funds have been spent.
In addition to understanding which permits are required, and the studies and/or modifications
(either in infrastructure or operations) required for the permits, the amount of time required to do
the necessary work must be included in the project plan.
Document communications and approval from US Fish & Wildlife Service, FAA, Army Corp of
Engineers, DNR, local government and any other appropriate agencies.
o Contaminated sites database
o Threatened or endangered species
o Habitat issues
o Wetlands and other protected areas
o Archaeological and historical
resources
o Land development constraints
o Telecommunications interference
o Aviation considerations
o Visual, aesthetics impacts
o Identify and describe other potential
barriers
2 Understanding the existing system
Having a detailed understanding of the existing system (also called the base case) is key to
knowing if the proposed system will be beneficial. The base case will be used both to
understand the economics and the feasibility of integrating the heat recovery system.
The level and type of detail required will be based on the proposed phase and the proposed
system’s complexity.
This section is also a good time for the applicant to see if fixing or upgrading the current
infrastructure is the best option for the community. This is not required for the REF process, but
is a good idea nonetheless.
The following sections are divided into configuration and operation. The configuration is the
infrastructure that is currently in place. The operation is how that infrastructure is used.
2.1 Configuration of existing system
2.1.1 Heat—Info & data
Where are the major heat loads located in the community? Which could connect to an
existing or planned heat recovery loop?
Are there additional potential heat loads in the community that are not currently being met?
Are any new heat loads being planned?
The type, design and components of the existing heating system(s) is clearly described
including the operating temperature range in every proposed building/system.
What is the design load (the maximum Btu/hr of heat needed) of building(s)
and/or facility?
Confirm the existing heating system(s) be maintained for backup and peaking?
Describe the existing control system(s) and if it will be useful for the proposed
system
Heat Recovery Best Practices Guide Page 6 of 12
Is the existing heating system at or near the end of its design life?
2.2 Operations of existing system
2.2.1 Heat—Data
Monthly heating data is available for each proposed building (Indicate if these are
actual or modeled data)
o Pull heating fuel consumption/purchase records (minimum one year) for the buildings
being considered and provide annual estimates (high/low) for each.
What is the operational thermal efficiency of the existing system? Note if this
information is based on tested, manufacturer, or estimate.
Supply and return temperatures needed in existing systems
Design of the existing system is clearly described including the operating temperature range
Describe how the heating control system(s) is used for the existing system
Energy Efficiency improvements have been completed on the proposed
buildings.
o Air infiltration: Caulk doors & windows, rim joist, weatherstrip doors &
windows, use foam gaskets on outlets and switches.
o Insulation: Attic, floor, basement, walls
o Upgrade windows
3 Proposed System Design
Designs should take into account the site-specific requirements of the energy resource, the
physical environment, and the system into which it will be integrated. The design should aim to
reduce costs to customers, while maintaining or improving service to customers. Care should be
taken that the heat recovery project does not adversely impact the operations of the utility or
customer service.
The proposed system design should include a description of any civil infrastructure (buildings,
roads, etc.) that will be built or changed for the heating system as appropriate for the
application. In all cases, designs should meet or exceed state and federal standards and
regulations and be performed by people with proper credentials (such as a licensed
Professional Engineer) for the design.
All appropriate building permits must be received prior to construction. What follows are a
selection of common considerations that will need to be incorporated into the final design of the
project prior to construction.
3.1 Proposed Heat Recovery System
The proposed heating system must be described in sufficient detail consistent with the phase of
development. The configuration of the proposed system are the specific components that will be
built or installed for the project; the operations will explain how all of the components will be
designed to work together in the system.
Some of the important questions and ideas to consider while evaluating and designing the heat
recovery system include:
What is the optimally sized heat recovery system needed to meet the design load of the
system most economically?
Heat Recovery Best Practices Guide Page 7 of 12
o Heat exchanger sizes
o How is the system sized relative to average and peak loads? Would a hybrid system
improve the project economics?
The mechanical room has ample room to access the boiler components for operations and
maintenance.
Are changes to diesel engines’ cooling system needed?
Piping— what type, size, where will it be routed? What is the plan for leak detection, how will
it be protected? Will heat trace be used?
Will infrastructure upgrades be required due to psi increase, temp (gasket changes), bolt/ fit
up requirements, and/or support structures?
What types (VSD) and size(s) of pumps will be needed within the system? How much power
will these pumps require? How will that use of energy impact the end user?
Priority of loads considered
The integration of the heat recovery system into the existing heating system(s) is
discussed
Number of buildings connected, will more or fewer would improve the economics?
Fire suppression (if needed)
BTU meters are required for heat sales agreements and for performance reporting of total
heat produced by the system.
3.1.1 Proposed Civil Infrastructure
The applicant should include a description of the civil infrastructure that will be built in support of
the project. The infrastructure must be built to perform as expected for the life of the project in
the particular environment of the preferred site. If the application is for a construction project, the
applicant’s schedule should reflect the seasonal and logistical constraints.
3.1.1.1 Designs for new or changes to existing buildings, towers, etc.
Design best practices include preparing logical, readable, and professional drawings and
specifications and other documents for construction and operation and maintenance phases of
the project. General goals of the design are as follows.
That the project is designed and constructed in a safe manner that minimizes the danger to
human life and harm to the environment.
The design results in a low project cost while serving the project purpose and need for its
useful life.
The design is sufficiently detailed and adequate to minimize change orders, cost deviation,
and reasonably minimizes risk of major repairs or modifications following construction.
The design appropriately balances cost of construction with lowered operation and
maintenance costs and the potential for expansion is considered.
The design incorporates energy efficiency and arctic design best practices.
At a minimum, prior to construction the applicant should expect to have the following things:
Project overview map(s) and general information
o At least one map showing full project extents and a vicinity map
o A sheet index for all drawings
Design Criteria and information
o Design codes and standards used along with a code analysis
o Design loadings
Structural loads
Heat Recovery Best Practices Guide Page 8 of 12
Foundation(s)
o Geotechnical investigations and reports to design for:
Permafrost and other geotechnical concerns
Earthquake Zone/Category Designation
o Design analysis, calculations/report
o Future maintenance and expansion
Drawings showing horizontal and vertical design sufficient for layout and construction of
infrastructure. Typical methods include plan and profile drawings with stationing for
alignments, standard road cross sections, limits of grading, grades or slopes, and general
topography, drawing scale bars and north arrows, point or dimensional data, structural
sections showing embedment’s, equipment layout drawings, electrical and mechanical
schematics, and equipment lists, size, and locations
Submittal requirements including drawings and basic design data for contractor design build
items, fabrications, and procured equipment with requirement for submittal and review of the
electrical switchgear engineered and shop drawings.
Technical specifications for materials and methods
Engineers cost estimate, updated feasibility report, owner’s business development and
operational plan, and schedule.
3.1.1.2 Construction requirements
Applicants should start planning for construction in the Feasibility phase—only by understanding
and preparing for site specific risks and logistics can accurate costs be determined. Final
Design and Permitting will end with all of the following logistics and plans must be worked out to
make sure the construction is safe, cost effective, and done properly. Earlier stages of
development can address the points below generally—that is identifying that a road may need
to be designed to handle the load of a crane, but not specifically how the road will be built.
Safety plan for construction activities
Logistics for getting materials, supplies, machinery, etc. on-site
Are there seasonal limitations on when materials can be delivered to the community and/or
delivered to the site?
General specifications governing execution of work
When is labor available? Are there sufficient trained workers in the community, or will there
need to be contractors brought in from other places?
Are there DOL Rate requirements? Use most recent rate publications.
3.2 Proposed Operations
Planning for operations and understanding the expected outcomes should start early.
3.2.1 Operations of Proposed Heat Recovery System
Model proposed system with local resource, load, and control strategy
o Does the system model verify that the heat exchangers are not oversized?
o Can the backup boiler system handle peaking requirements?
o Will the the boiler size elevate the inspection requirements if state DOL registered?
o Parasitic power (pumps, etc.)
o Expected thermal efficiency in the operating environment
o Continued fuel consumption in existing generation infrastructure
Heat Recovery Best Practices Guide Page 9 of 12
Are there conditions—either economic, environmental, or technical—where the project will
not be feasible to operate?
4 Perform Economic Analysis & Optimization
Planning and designing a heat recovery project should be an iterative process, as new
information is learned the design is refined and improved, progressively more tailored to the site
and system. A project that receives REF funding must be both technically possible and
economically viable. A proposed system may be technically possible, but cost prohibitive—it will
increase costs to customers or the costs outweigh the benefits.
AEA will perform an economic analysis for all applications. In all cases, AEA compares the
proposed system against the base case (the current system configuration). The proposed costs
must be outweighed by the expected savings. For heat recovery projects, most of the economic
savings is in displaced fossil fuels. Communities may have additional values that are
important—increased local employment, decreased imported diesel, or reduced greenhouse
gases.
Ideally an applicant will investigate multiple options, including improving the base case.
The economic evaluation assesses the economic viability of a project. The entire project
proposal is assessed, not each individual component. If the costs for the project are greater
than the expected benefits, then the project would not be economically viable. If the total
benefits to all parties outweigh the costs incurred by all parties, then the project is considered to
be economically viable. The economic analysis is indifferent to who receives benefits and who
pays costs.
Benefits: Savings to utility customers, non-utility customers, Power Cost Equalization,
and others
Costs: Expenses paid for by utility customers, grants from state, federal, and regional
governments; non-profits, non-utility
AEA uses an Excel-based economic model to provide the underlying assumptions (such as
expected fuel costs), calculations and analysis. The model is available to all applicants. While
AEA encourages applicants to perform and submit an economic analysis, AEA’s analysis is used in the
scoring process. Ideally, applicants would use the model to maximize the project’s benefits and minimize
the costs.
4.1 Costs for the existing system
Before analyzing the benefits of the proposed project, it is important to understand the existing
system (the base case). Any savings that can be realized by the project will come from
displacing costs from the base case. Keep in mind, there may be a number of costs that will not
be displaced, even with the best heat recovery project.
4.1.1 Heat
Capital costs (current depreciation/loans?)
Operational costs
o Efficiencies of the existing heating systems
o Cost of heating oil at the proposed customers
o Operations and Maintenance (O&M)
Heat Recovery Best Practices Guide Page 10 of 12
o Repair and Replacement (R&R)
4.2 Economic optimization
Even if an applicant expects to receive grant funds for their project, the proposed project should
be designed to get the best economic return on the investment. By maximizing the savings from
the projects and keeping the cost as low as practical, the applicant will be more likely to get an
REF grant. This may mean that a proposed project may not end up displacing the maximum
amount of heating oil, because the extra cost might not be worth it.
4.2.1 Develop options based on generic systems
It is encouraged that applicants use industry-standard modeling programs. Just note that AEA’s
economic assumption may be different from the models, and the economic results may be
different. AEA does not require applicants to provide an analysis of all options that were
analyzed, but the applicant will need to be able to justify why the preferred alternative was
chosen.
Using generic systems and high-level modeling programs are sufficient for early phase
development, but it is likely that more robust modeling with be needed for Final Design.
Annual modeling including variables of demand and fuel price, financing and O&M
projections, and climate assumptions for both the existing/alternate and proposed
generation system. Note that these assumptions may differ from AEA’s assumptions. Please
check AEA’s economic model for additional guidance.
4.2.2 Costs for the preferred alternative
Any savings that can be realized by the project will come from displacing costs from the base
case. Savings are expected to be found in displacing fuel and the potential of reduced O&M for
boilers. Expect that the heat recovery project will increase some costs.
Capital costs (current depreciation/loans?)
o Estimates based on phase-appropriate cost estimates for heat exchangers, piping,
pumps, heating control systems, new metering, etc.
Operational costs
o Annual O&M
o New account management and billing
o Expected R&R and/or amortized R&R
o Include positive or negative impacts, if any, on an existing heat recovery system
o Electricity for pumps
o Operator salaries and training
4.3 Benefit-Cost Analysis
The Renewable Energy Fund evaluation process uses the benefit-cost ratio as its primary
metric for economic viability. The benefit-cost ratio (B/C ratio) summarizes the all of the
project’s benefits and costs into a single number.
The total benefits of the project are found by taking the present value of all of the annual cost
savings. The cost is the present value of the project’s capital costs.
B/C ratio=Project Benefits
Capital Costs
Heat Recovery Best Practices Guide Page 11 of 12
Understanding the B/C ratio
B/C ratios communicate the economic viability of a project as a single number making it ideal for
communicating the benefits and costs concisely.
A B/C ratio greater than 1 means that the benefits are greater than the capital costs.
Even without grant funds, the project should be cost effective and save the utility and
customers money.
A B/C ratio of 1 means that the benefits equal the Capital costs—the project just breaks
even.
A B/C ratio less than 1 means that the costs are greater than the benefits—economically
things would be worse than before the project was built. Without grant funds, the project
would not be cost effective and the utility and/or customers would lose money.
Since many projects will lead to savings for utilities and customers, even projects with B/C ratios
below 1, it can be confusing why AEA would use the benefit-cost ratio to rate projects. The state
wants to maximize its return on investment, its “bang for the buck”, and wants to promote cost
effective designs.
5 Financial and Operational Planning
Planning for the eventual operation of the heat recovery project is too frequently overlooked.
The training and skills needed to successfully operate and maintain a heat recovery project are
different than what is needed for a diesel boiler. The additional need to track and pay for the
parts, maintenance, and other necessary things can stress an owner if adequate preparation is
not made. With proper planning, training, and management, a heat recovery project can be a
long-term benefit to a community.
Below are selected aspects of a business plan that should be included in the REF application.
Please see the phase appropriate business plan template for a complete version of what should
be included.
5.1 Financial Management
Since grant funds cannot be used to operate the heat recovery project, an applicant must know
how the maintenance and operations of the infrastructure is going to be paid for over its useful
life. Heat recovery projects face failure without a plan for paying for needed training, personnel,
contractors, materials, and supplies.
What follows is a short list of aspects that the applicant should address.
How will the applicant pay costs including expected capital costs and operations
and maintenance. What are the expected rates ($/MMBtu or $/gallon equivalent)
for customers?
Explain how O&M activities will be tracked for required performance reporting to
AEA
Heat sales agreement(s), if applicable – required for construction
Accounting system to track revenue and expenses
Heat Recovery Best Practices Guide Page 12 of 12
5.2 Operational Management
The business plan should identify who will have overall responsibility for all
components from the powerhouse to heat delivery.
Inspections & Maintenance—include checklists for responsible personnel,
estimated time to completion, parts and supplies to keep in inventory, etc.
Employees—including a back-up operator, training
6 Common Planning Risks
Planned changes to the electrical generation systems will result in reduction of available
heat for recovery. Change out of genets can also change you powerhouse heat recovery
mechanical layout profile (structural changes, change out of hanger locations, fire protection
profile, equipment access
There is no method to monitor the amount of heat recovered/consumed in the new system
Mismatch between assumed heat loads and what fuel records indicate
Mismatch sizing of heat exchanger(s) to loads
The proposed heat supply is not matched to current building design (supply is
either too hot or too cold for current heating system)
Not including all infrastructure required during economic analysis
Ignoring the O&M challenges of a heat recovery system – Communities who have personnel
that are trained on heat recovery systems to perform maintenance have a better chance at
meeting the output projections of your design.
Not having a plan should costs exceed estimates
Not engaging agency stakeholders early-on and throughout project development
Not agreeing to a heat sales agreement
Making major changes without consulting agency stakeholders
Not receiving support and authorization from land owners prior to project development
Not including all infrastructure required during economic analysis