Direct Generation/Combined Heat & Power Systems
Let me explain the differences and similarities between the two. A generator is just a straight up generator and a Combined Heat & Power System (CH & P) is a generator with a heat and exhaust engine jacket attached to it. Thus, there is one price for a straight up generator and another for the heat/engine exhaust jacket package. The generator provides the electrical output and the heat/engine jacket provides for the thermal load.
For Ontario
Due to the Federal Carbon Tax, I no longer offer generators/CH & Power systems for Class “B” end users. A generator can be used by Class “A” end users to reduce their Peak Load Factor (PLF) to reduce your Global Adjustment (GA) charges under the 5CP and provide for back up.
Rest of Canada
Due to the Federal Carbon Tax, I no longer offer generators/CH & P for any prime power applications. I still offer back up generators for hospitals, nursing homes or other required to have back up by law.
The Spark Spread
The spark spread is the difference between the cost purchasing hydro from the grid vs the cost of producing the hydro on-site with a natural gas generator. (Or gas plant on a utility scale level). A cubic meter of Natural gas has 10.7 kWh ‘s of potential energy. From that you have to factor in the efficiency of a natural gas generator or gas plant. With a natural gas generator, you’re looking at a 35% efficiency. So, at 35% efficiency you are now down to 3.745 kWh’s of potential energy. (With a gas plant you are looking at the same relative efficiency but with higher transmission losses due to the fact that a gas plant is transferring the energy along long transmission lines). Now, a Combined Heat and Power System (CH & P) system is simply a generator with a heat jacket. These systems boast of a combined electrical and thermal capacity of 85% to 90%. This is true; however, the value of the thermal load is that best $0.02 per kWh. All the above calculations and efficiencies are at sea level. Calgary for example, is 3300 feet above sea level you would not have the same efficiencies. The proof of that is if you look at your gas bill you notice a gas correction factor of around 6% which is higher than the 4%, you’d get at sea level. A small point but when you have to take into consideration.
Here is the math. One (1) cubic meter of natural gas =.0379 GJ. 3.745 kWh’s at 11 cents per kWh = .45 cents=value of hydro produced by direct generation. (11 cents per kWh is the variable cost you can avoid using a generator). Cost of .0379 GJ @ 50$ per tonne Carbon tax -.2083 or approx. 21 cents. For a difference of 24 cents. (This is at $ 5.5424, per GJ which was on a long-term contract-the current rate is closer to $6 per GJ). This represents a positive spread of 24 cents per kWh is the value of the commodity produced vs cost of consumption. Now, it costs approx. $1.75 per Watt to buy the generator (500k+) not including the O & M charges. Now, it is true a generator can work 24/7, however, in practice a cold storage facility would operate a generator perhaps 16 hours a day. Even in most manufacturing applications you are generally looking at 15-18 hours a day depending on the application.
Now if I keep everything constant except for the carbon tax .0379GJ@170 per tonne=you are looking at a commodity cost of .714 cents vs .45 cents for a negative spread of 26.4 cents per kWh. Now add the $1.75 per watt (capital) + O&M charges etc.
Now also, in addition to the O& M you have to set aside a capital reserve for replacing and fixing the generator. You have to take into account minor overhauls to major overalls. In fact, for these reasons I do not even offer generators for sale since the economics just don’t work. This discussion are about prime generators and not stand by generator. Stand by generators are much cheaper. They are air cooled vs water cooled for prime generator etc.
If there were no carbon taxes (now or projected)-it’s a different story. In that case, you could be completely off the grid with a generator/ battery-based system.
I am working on a proposal for a CH & P system for a company which operates ice hockey rinks/sport entertainment complexes across Canada. I am working with Toromont Industries who are a large dealer for Caterpillar (CAT). I have expressed my concerns with them that at $65 a tonne, the project is viable, but, at $110 a tonne (2027) the numbers just don’t add up. At this price ($110 per tonne) you will break even on the cash costs (on the “spark spread” but not cover any of your O & M expenses or depreciation (or asset replacement) considerations.
Toromont is considering offering Renewable Natural Gas (RNG) to client’s who use their generators (as RNG will not be charged the carbon tax). While this is a smart move, I just do not see how they provide their existing customers with RNG, yet alone new clients’ with the volume of NRG they would require.