Earlier we talked about the economics of solar power compared with purchasing electricity from the power grid. On today’s show we’re talking about another form of power co-generation. 

Many larger commercial facilities are turning to co-generation as a way of reducing high electricity costs. This only makes sense in areas where the cost of natural gas is considerably cheaper than the comparable cost of electricity. 

Where these systems really shine is in the harnessing of the waste heat to heat water. The use of energy for producing hot water means that the savings can be substantial. If you’re familiar with the internal combustion engine, or the diesel engine, you are already aware that most of the energy is wasted in the form of excess heat. The diesel cycle generates much more mechanical work and relatively much less wasted heat than other systems. It’s about 44% efficient, which means 56% of the energy is wasted as heat. But if you can harness that heat and put it to good use, the savings can be substantial. The are particularly true in areas where the cost of electricity is high. 

The latest example is a new hotel that just opened at JFK airport in NYC on the site of the old TWA flight center. The original structure was built in 1962 and was updated to create a 512 room hotel. The hotel incorporates some of the most innovative power generation technology. It stands apart because their system is so good that the hotel has fully disconnected from the utility’s power grid. 

The system has four main features. The roof mounted generators are powered by low cost natural gas. Second, the hotel has a sizeable battery bank which allows the power plant to store excess energy during periods of lower demand. This means that a smaller power plant is needed to handle peak demand and the plant can operate with less fuel on average. 

Third, they use the cooling system for the power plant to produce the hotel’s hot water rather than allow the excess heat to go to waste. Finally, the hotel also uses absorption chillers to create cold water from the hot water. 

The hotel calculated their power consumption based on other hotel metrics and determined that their annual electricity bill with the utility would be about $5M. The payback on their entire installation is estimated at 3 years. Now that number definitely makes sense. But it makes sense partly because NY power rates are $0.21 per Kwh, the highest in the country. If the same hotel were located in Texas where electricity costs $0.11 per kWh, the payback period would double to 6 years, which frankly is still pretty good. 

To date, about 600 buildings in NY state have installed systems like this. But most of them still connect to the power grid. The TWA hotel is one of the rare buildings that has gone fully off-grid. 

There are an increasing number of systems like the one at the TWA hotel where the connection to the power grid is used to sell excess power back to the utility. Many health care facilities are required to have backup power generation systems under the building code. Rather than have these systems which have a high capital cost sit idle, many facilities choose to operate the systems to produce their critical power needs on a regular basis. They may draw peak power demand from the utility and sell the excess power back to the utility. 

The final piece of the puzzle is the financing of these systems. An entirely new group of company s have surface which are willing to install the systems for a low monthly lease cost where the lease cost is offset by the power sales to the utility. The operation of power plant is maintained by the supplier, and the lower electricity bill can often result in operational savings in addition to the up front capital savings. 

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