Hybrid Chiller Plants Can Curb Operating Costs In A Deregulated Environment

Deregulation of the electric utility industry opens the door to a $190 billion market. Although many aspects of deregulation are still unsettled, one certainty is that it will develop a competitive environment for power generators.

By Ian McGavisk January 1, 1998

Deregulation of the electric utility industry opens the door to a $190 billion market. Although many aspects of deregulation are still unsettled, one certainty is that it will develop a competitive environment for power generators. It will separate the industry into generating, transmission, and distribution companies, a process that could take as long as 10 yr.

While the transmission of electricity will remain regulated, power generation will be governed solely by supply-and-demand economics. Currently, deregulation is expected to force the electric industry to cut costs, become more competitive, and ultimately provide lower average electric prices.

These end results will be achieved using two primary concepts: retail wheeling and real-time pricing (RTP). Retail wheeling allows low-cost producers in one area of the country to deliver electricity to customers in another area. RTP prices electricity on an hourly basis. Electricity costs ($/kWh) will reflect the real cost of producing and delivering electricity at any given point in time.

RTP is based on daily cost information and can vary hourly, depending on a multitude of conditions, including weather and demand. A predetermined rate structure and hourly rates published 24 hr in advance are likely to be the most popular RTP schemes implemented.

Peak-ing ahead

On the surface, the concept sounds great. Everyone is interested in cheaper power. However, blindly accepting the generally predicted results of lower prices may be a mistake for chiller-plant owners, system designers, and operators. Users will pay a variety of prices to operate electric chillers. Some will be lower than those paid now. But some will be higher. The overall price of electricity may decrease when total dollars spent are compared to total kWh purchased, but the cost of electricity during high-demand periods may also increase.

Such demand usually coincides with the peak electric-cooling load. Supply-and-demand economics tell us that peak prices occur during peak electric-demand periods. During critical demand periods, the marginal cost of supplying power may escalate by a factor of 20, or even 50. A customer paying $0.05/kWh during low-demand periods may pay as much as $2.50/kWh at peak times.

Could rates really go that high? They already have. In Southern California, utilities spearheading the move to RTP have issued rate structures with on-peak rates as high as $3.50/kWh. Such rates have a major impact on chiller-plant design.

In a deregulated electric environment, the unprepared will miss out on savings opportunities. Purchasing or specifying chillers has become much more complex. Selecting chillers based on lowest operating costs, simple payback, or lowest life-cycle cost is more complicated. With building loads and electric prices changing hourly, a complete operating-cost evaluation must analyze hourly chiller operating costs. (See accompanying section, “Temperatures, loads, and their impact on RTP pricing.”) In the extreme case, this task could include calculating 8760 one-hour operating costs.

Testing 1, 2, 3…

One strategy is to design chiller plants with both electric and alternative-drive (steam or gas) chillers. These flexible, hybrid systems operate with the energy source that provides the greatest operating economics. Chillers in a hybrid plant can be staged by determining the lowest cost/ton-hour of each chiller at a given utility price.

This hypothesis can be tested by analyzing a chiller-plant using a variety of electric and alternative-drive chiller combinations. (Costs and payback for 10 configurations are summarized in Table I. A few are discussed in detail in this text.) Each plant in this example serves a maximum load of 800 tons, with 2.4 gpm/ton of chilled water from 54 F to 44 F and 3 gpm/ton of condenser water from 85 F to 95 F. Operating and equipment costs are compared with data generated from actual equipment ratings.

First, an electric-only plant is compared with three different single-fuel-source plants. The base chiller plant (Table II) consists of two 500-ton electric centrifugal chillers. Equipment cost is $252,000 and annual operating costs are $95,799.

The costs were calculated for the three options: two-stage direct-fired absorption, single-stage steam absorption, and gas-engine-drive centrifugal. A gas price of $0.35/therm was assumed. The first-cost differential of the chillers was compared to the operating-cost differential to determine a simple payback when compared to the electric centrifugal base plant.

A note on equipment costs: a complete evaluation would require examining total installed costs rather than simply equipment costs. Although electric chillers require electrical service and switchgear, alternative-drive units may require exhaust systems, steam piping, or larger cooling towers. Because of these variables, equipment first cost is used for this example. However, a maintenance premium was included in the operating cost of the gas-engine-driven centrifugal units.

The cost to operate the two-stage direct-fired absorption plant is $76,956, or $18,843/yr less than the electric-only plant. The price premium for these chillers is $177,000, with a simple payback in about 9.4 yr.

With an annual operating cost of $136,666, a single-stage steam absorption plant is more expensive than the electric plant. The first cost is only slightly higher ($6000) than the electric-only plant. However, because there are no operating-cost savings (payback), this option is not viable for this application.

The annual operating cost of a gas-engine-drive chiller plant ($54,927) is lower than that of any other option. Engine-drive systems are extremely efficient. The higher first cost of this option, however, puts the simple payback at a marginal 7 yr.

In summary, the two-stage direct-fired absorption and engine-drive chiller plants offer significant savings in total operating costs over the all-electric plant, but they have payback periods of 7 to 9 yr. At first glance, there is a tendency to dismiss these options.

A practical combination

A look beyond the total operating costs to the operating cost at each temperature bin, however, creates a different picture. The electric-chiller plant is less expensive to operate below 75 F. The direct-fired absorption plant (and the other alternative-drive options) are less expensive to operate above that temperature.

The initial hypothesis appears to be correct. This finding can be quantified by comparing some hybrid plants with the electric-only plant.

Hybrid-plant operating strategy

The traditional operating strategy for hybrid plants is to avoid peak electric charges by operating alternative-drive chillers during a defined on-peak time. This period normally coincides with the cooling season. The on-peak period is defined by the electric utility, and penalties are applied to customers that operate electrics during peak periods.

RTP replaces the demand/nondemand schedule. Facilities operate alternative-drive chillers when electricity costs are high and electric chillers when costs are low. RTP provides many hours of operation with very low electric rates, typically when low entering-condenser-water temperatures (ECWT) also are available.

The hybrid-plant strategy takes advantage of the relationship between load and hourly utility rates. The operating schedule may change daily in response to the electric rates. The strategy, however, remains the same: operate the chiller with the lowest costs. An automation system that can monitor electric rates and determine the most cost-effective operating sequence will provide the lowest possible operating costs. Calculating chiller operating costs at various load-points and ECWTs is required to determine the proper sequence.

Traditional hybrid systems

A traditional hybrid plant incorporates two equally-sized chillers: an electric unit and an alternative-drive unit. The operating scheme for this plant requires the alternative-drive chiller to be base-loaded during hours of high electric costs. The electric chiller then handles the remaining load. This operating scheme is analyzed for a variety of hybrid plants. The simple payback is calculated against the base electric-only plant.

The performance of a hybrid plant that includes a two-stage direct-fired absorption chiller and an electric centrifugal chiller is profiled in Table III. The annual operating cost is $35,627 less than the all-electric plant, resulting in a simple payback of less than 2.5 yr (a dramatic improvement over using two, direct-fired absorption chillers).

In another case, a hybrid plant consists of a single-stage steam absorption chiller and an electric centrifugal chiller. Its operating cost is $7806 less than the all-electric plant, while the equipment cost premium is only $3000. The result is an almost immediate payback.

The third traditional hybrid plant consists of a gas-engine-drive centrifugal chiller and an electric centrifugal chiller. With an operating cost of $57,247, this configuration is the lowest of the three, yielding a very reasonable payback of 3.6 yr. All three hybrids fully load the alternative-drive chiller when electricity costs are high, leaving the electric chiller only partially loaded.

Nontraditional hybrid systems

Although the savings of these options offer some reasonable paybacks, can we do better? A nontraditional design is also worth considering.

A nontraditional hybrid design sizes the alternative-drive chiller to service the entire load during high-cost electric hours, while an electric chiller sized for off-design conditions operates during hours of low-cost electricity. The goal is to completely eliminate the use of an electric chiller when electricity costs are high.

The first such plant analyzed uses an 850-ton single-stage steam absorption chiller to handle the entire load above 79 F when electric costs are highest. A 650-ton electric centrifugal chiller takes over when the temperature falls below 79 F. The operating cost is $27,019 less than the all-electric plant and the payback is an attractive 1.5 yr. Another option is a plant consisting of an 850-ton two-stage direct-fired absorption chiller and a 650-ton electric unit. Its operating cost of $52,765 is the lowest thus far and yields a payback of 5.2 yr.

A final consideration is a plant using an 850-ton gas-engine-drive and a 650-ton electric centrifugal chiller. The calculation of its performance showed an operating cost of $43,297, which is 55% less than the all-electric plant and has a payback of only 4.8 yr. This option is especially worth considering given the large operating-cost savings available.

Maximizing the use of alternative-drive chillers during high-cost periods lets the nontraditional hybrid plants generate the most operating cost savings. Added equipment costs are not so large as to result in unreasonable paybacks.

One factor holding down equipment costs is ECWT. The electric centrifugal chiller can be selected for a maximum off-design ECWT of 74 F rather than the 85 F maximum required in the all-electric or traditional hybrid plants. As a result, the same size unit can handle more tons with less energy. The nontraditional hybrid, then, is cheaper to operate because of its higher installed capacity.

Making cents of it

Another significant advantage of a hybrid system is its attractiveness to the electric utility because of its lower on-peak demand and flat load profile. This benefit may well result in lower off-peak electric rates. When it comes to deregulation, combining the benefits of electric and alternative-drive chillers just makes good cents.

— Edited by Jeanine Katzel, Senior Editor, 847-390-2701, j.katzel@cahners.com

More info

The author is available to answer technical questions about this article. He may be reached at 717-771-7514. The York International website is located at www. york.com.

Key concepts

Deregulation is fostering a more competitive power generation industry.

Real-time pricing does not necessarily mean lower electricity costs.

Chiller specification under deregulation is more complex; the unprepared will miss out on savings opportunities.

Having a variety of electric and alternative-drive chillers gives users flexibility to select the most economical option.

Hybrid plant chillers can be staged by determining the lowest cost/ton-hour of each chiller at a given utility price.

Table I. Chiller plant analysis

Chiller plant configuration First cost, $ Operating cost, $ Simple payback, yr

Two, 500-ton electric centrifugal chillers 252,000 95,799 N/A (Base plant)

Two, 500-ton two-stage, direct-fired absorption chillers 429,000 76,956 9.39

Two, 500-ton single-stage steam absorption chillers 258,000 136,666 None

Two, 500-ton gas-engine-drive centrifugal chillers 530,000 54,927 6.8

Traditional hybrid(one 500-ton single-stage absorption and one 500-tonelectric centrifugal) 255,000 87,993 0.38

Traditional hybrid (one 500-ton two-stage, direct-fired absorption and one 500-ton electric centrifugal) 340,000 60,172 2.48

Traditional hybrid (One 500-ton gas-engine-drive centrifugal and one 500-ton electric eentrifugal) 391,000 57,247 3.61Nontraditional hybrid (one 850-ton single-stage absorption and one 650-ton electric centrifugal 293,000 68,780 1.52

Nontraditional hybrid (one 850-ton two-stage, direct-fired absorption and one650-ton electric centrifugal) 476,000 52,765 5.2

Nontraditional hybrid (one 850-ton gas-engine-drive centrifugal and one 650-ton electric centrifugal 502,000 43,297 4.76

Temperatures, loads, and their impact on RTP pricing

Understanding the impact of RTP on chiller plants requires an examination of building loads, electric rates, and the relationship they have to weather data from the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE). Although the straight-line relationship between building loads and weather data is not always accurate for industrial and commercial cooling applications, it is suitable for the illustrations in this article. ASHRAE has organized hours into 5-deg F temperature bins. Chiller operating costs can be analyzed by estimating the load in each of the bins and assigning a cost to the power sold during each hour in that bin from an RTP schedule. Most RTP pricing schedules are shaped like a bell curve, with a significant range between the highest and lowest-priced power. Low prices occur during off-peak demand hours; high costs are incurred during on-peak demand hours. When electric chillers are used in conjunction with a typical RTP schedule, it is vital to understand how this pricing structure affects electricity bills. A typical RTP schedule has a low electric price during low demand hours (which corresponds to low building-load hours) and a high price ($0.45/kWh) during high electric-demand (high building-load) hours. Although the vast majority of operating hours occur at lower loads when electricity costs less, a significant number of hours of operation occur when prices are high. Therefore, for facilities to benefit economically in a deregulated environment, electric chillers should run primarily during low-load, low-cost hours of operation, while alternative-drive (nonelectric) chillers should run during high-load, high- cost hours. This premise is the key to lowest life-cycle cost.

Table II. Electric centrifugal plant

Load 800 tons, two 500-ton electric centrifugal chillers

Temp bin F, Hrs, Load tons,ECWT,kw/ton,kW draw,kWh,RTP $/kWh, Cost operation $

95-99 20 800 82 0.527 422 8432 0.45 3794

90-94 84 742 81 0.517 384 32,224 0.40 12,889

85-89 216 687 79 0.504 346 74,790 0.35 26,176

80-84 393 632 76 0.487 308 120,959 0.15 18,144

75-79 585 577 74 0.479 276 161,684 0.10 16,168

70-74 775 522 72 0.476 248 192,566 0.03 5777

65-69 784 467 68 0.468 219 171,348 0.03 5140

60-64 706 412 63 0.475 196 138,164 0.03 4145

55-59 670 357 59 0.497 177 118,877 0.03 3566 $95,799

Equipment cost Operating cost

CH-1 $126,000

CH-2 $126,000

Total $252,000 $95,799

Table III. Hybrid plant: two-stage direct-fired absorption/electric centrifugal

Load 800 tons. CH-1: 500-ton two-stage direct-fired absorption chiller CH-2: 500-ton electric centrifugal chiller Cost of Cost of TotalTemp Tons Gas, MBtu/ Therms/ Gas price, gas Electric, kW/ kW RTP, electric operating bin, F Hrs load ECWT tons hr hr Therms $/therm operation, $ tons ton draw kWh $/kWh operation, $ cost, $95-99 20 800 82 500 5000 50 1000 0.35 350 300 0.560 168 3360 0.45 1512 186290-94 84 742 81 500 4800 48 4032 0.35 1411 242 0.540 131 10,977 0.40 4391 580285-89 216 687 79 500 4600 46 9936 0.35 3478 187 0.590 110 23,831 0.35 8341 11,81980-84 393 632 76 500 4400 44 17,292 0.35 6052 132 0.620 82 32,163 0.15 4824 10,87775-79 585 577 74 500 4200 42 24,570 0.35 8600 77 0.690 53 31,081 0.10 3108 11,70870-74 775 522 72 0 0 0 0 0.35 0 522 0.475 248 192,161 0.03 5765 576565-69 784 467 68 0 0 0 0 0.35 0 467 0.464 217 169,883 0.03 5097 509760-64 706 412 63 0 0 0 0 0.35 0 412 0.455 187 132,347 0.03 3970 397055-59 670 357 59 0 0 0 0 0.35 0 357 0.456 163 109,071 0.03 3272 3272 $60,172 Equipment cost Operating costCH-1 $214,500CH-2 $126,000 Total $340,500 $60,172Base plant $252,000 $95,799 Simple payback Delta $88,500 $35,627 2.48 yr