MEMORANDUM

From: Office of Air Qual ity Planning and Standards U.S. Environmental Protection Agency

To: EGU NSPS Docket (EPA-HQ-OAR-2013-0495)

Date: September, 2013

Subject: Credit for Thermal Output at Co mbined Heat and Power (CHP) Facilities

Accounting for Thermal Output from CHP Systems

When electric generator emission sta ndards are set on an output basis, it is necessary to account for the non-electric or mechanical output (e .g., useful thermal output) of comb ined heat and power (CHP) units. Two common approaches to calculate an emissions ra te that includes the prim ary and secondary output of CHP in output-based regulations are the equivalence approach a nd the avoided emissions approach. For more information on the approaches and to calculate CHP emission rate values, see the EPA CHP Partnership website ( http://www.epa.gov/chp/ ). These approaches have b een used in both State and Federal rules on CHP. The appropria te choice could involve either a pproach and would be governed by the overall regulatory structure and objectives.

In the equivalence approach, the output-based limit is calculated by directly adding the thermal output to the electric output when determining the emission rate of a CHP facility. Different approaches have been

taken to determine the amount of thermal credit based on the CHP source, its efficiency and fuel type. In the avoided emissions approach, the output-based limit is calculat ed by giving credit for avoided emissions from the displaced thermal emissions (e.g., the boiler that the CHP system replaces). The avoided emissions approach potentially gives a more accurate comparison of the emissions of a CHP facility to equivalent useful output from separa tely generated electricit y and thermal output. For example, in the avoided emissions approach, CHP units that primarily produce el ectricity would have to operate at an emission rate that is close to what utility electric only units must achieve, and CHP units producing primarily thermal output would be able to ope rate at an emission rate that is close to what

industrial boilers achieve. In contrast, in the equivalence a pproach, a CHP unit that primarily produces electricity would have to operate at an emission rate th at is close to what utility electric onl y units must achieve, and CHP units producing primarily thermal out put would not necessarily be required to operate

at an emission rate that is close to what industrial boilers achieve.

The avoided emissions approach requires two more data points than the e quivalence approach: an emission factor and boiler efficiency. For CO 2 , the emission factor can be determined based on the fuel type. One approach would be to assume that any ne w or replaced industrial boi ler would be natural gasfired. An alternate approach would be to assume that the displaced boiler would have used the same fuel as the CHP facility. A final approach for retrofit applications is to use the actual fuel that was used in the boiler prior to the installation of the CHP facility. It is conceptually possible to arrive at a negative emission factor using the avoided em issions approach under a scenario where either a natural gas-fired CHP with a high thermal output replaces steam from a coal-fired boiler or a CHP facility uses carbon capture technology. This result could be prevented by a limitation that the "avoi ded" boiler cannot have a higher emission rate th an the CHP system.

The utility NSPS (Subpart Da) for criteria polluta nts and the combustion tu rbine NSPS (Subpart KKKK) use the equivalence approach. The utility NSPS (subpart Da) for criter ia pollutants uses a 75% thermal credit, and the combustion turbine NSPS (subpart KKKK) for criteria pollutants uses 100% thermalcredit. State regulations have used both approaches to account for the thermal output from CHP systems. Examples of State regulations us ing either approach can be found in EPA resources on output-based regulations. 1

Once an emission factor and boiler efficiency are es tablished, the avoided emissions approach is not significantly more difficult to apply than the equiva lence approach. The EPA has concluded that both approaches would be suitable. Th e avoided emissions approach woul d be more accurate but would require defined parameters to be included in the rule as described above. The equivalence approach is sufficient and adequate and has past preced ent of use in previous EPA rules.

Procedure for the Amended NSPS

In evaluating the appropriate cred it for CHP facilities with respect to GHG emissions, we evaluated natural gas-fired combustion turbines , since that technology is expected to represent the majority of new

CHP facilities. As descri bed earlier, the avoided emissions approach requires an assumption of what supplied the electric and thermal out put if separate electric and th ermal generating technologies were used. The following equation would be used in th e evaluation for comparing the avoided emissions approach to the direct ther mal crediting approach.

Output Electric CHP Emissions Thermal Displaced Emissions CHP Total Standard Equivalent 



The equivalent emission standard varies depending on the ratio of electric to thermal output (also known as “power to heat ratios”). For this example, we assumed the displaced electric output is from a 50% efficient natural gas combined cycle facility with an average emission rate of 800 lb CO 2 /MWh of gross electric output. The assumed displaced boiler is an 80% efficient natural gas–fire d boiler, resulting in a displaced boiler stan dard of 500 lb CO 2 /MWh of thermal output.

Using several model CHP plants at different relative ratios of el ectric to thermal output, we can determine the percent credit for thermal output that w ould approximate the same overall emission rate as separate heat and power (SHP). Figures 1 and 2 s how the calculated emission rate at differing amounts of credit for thermal output for several CHP plants w ith varying ratios of elect ric to thermal output and compares those to the overall emission rate of SHP. The figures show that the 50 percent credit results in a higher emission rate than the ove rall emission rate. Increasing the thermal credit to 2/3 reduces the disparity, but, in this example, still tends to resu lt in CHP facilities having a higher emission rate. In contrast, the 100 percent thermal credit approach resu lts in a lower emission rate for CHP compared to the equivalent overall separate electric and therma l emission rate. The best approximation to get an equivalent emission rate, in this example, is to give 75 percent cr edit for recovered thermal energy. Using the assumptions in this analysis, the 75 per cent credit approach results in a slightly lower emission rate in cases with lower power to heat ratio s and in a slightly higher emission rate at high power to heat ratios. However, ove r the range of designs it is the closest approximation of the overall emission rate for SHP. Therefore, from a greenhous e gas emission standpoint, giving 75 percent credit for recovered thermal energy is the approxima tion of an equivalent emission rate.

An alternate way to establish the value of thermal output for CHP facilities is to compare the overall emissions, as opposed to an emission rate, of the CHP facility to the emissions of an equivalent amount of generation from SHP (along the lin es of the “avoided emissions appr oach”). Using this approach, and

1 Accounting for CHP in Output-Based Regulations, February 2013. Accessed at http://epa.gov/ chp/documents/accounting.pdf.assuming no use of carbon capture technology and th e same fuel source for the CHP and SHP, would result in giving 100 percent credit to the thermal output from CHP facili ties. The emission rate approach inherently accounts for the increased efficiency from CHP and does not give credit for the fuel savings.

In contrast, the overall emissions a pproach does not require a CHP facil ity to be more efficient than SHP. If thermal energy is credited at 100%, then, in this example, a CHP facility that has the same efficiency as the overall efficiency of SHP woul d have the same overall numerical emission rate. Multiple State-based distributed generation rules give 100% credit for thermal output when determining

CHP emission rate values.

Impact for coal-fired CHP

We also evaluated the impact of the thermal crediti ng approaches on the complia nce options available to potential new coal-fired CHP EGUs. Coal-fired CHP faciliti es typically operate at low power to heat ratios and Figure 3a shows that crediting thermal output at 75% would enable only the most efficient

facilities to construct without the requirement to install some type of additional GHG control technology. Crediting thermal output at 100% would allow more options for coal-fired CHP to be

installed without the use of additional GHG control technologies . The comparisons to SHP were done assuming an 83% efficient bituminous coal-fired boiler (displaced thermal emission rate of 840 lb/MWh) and a 38% efficient bituminous coal-fir ed EGU with 40% carbon capture and storage (displaced electric emission rate of 1,100 lb/MWh ). Figures 3b shows the overall relative CO 2 emissions from a coal-fired CHP facility relative to SHP assu ming the displaced thermal emissions are from an 80% efficient natural gas-fired boiler. Figures 3a a nd 3b show that coal-fired CHP would require the use of carbon capture technology in th e majority of cases to emit CO 2 at an equivalent emission rate relative to a new coal-fired boiler subjec t the proposed NSPS requirements.Figure 1: Comparison of Calculated CHP Emission Rate toOverall Separate Heatand Power Emission Ratefor Natural Gas-Fired Combustion TurbinesCHP Emission Rate (lb CO2/MWh) % Difference with SHPPowerto HeatRatioOverall SeparateHeat and Power(SHP) EmissionRate (lbCO2/MWh)SHPEfficiencyCHPEfficiencyCHPFuelSavingsCHPEfficiency forEquivalentCO2Emissions50%ThermalCredit67%ThermalCredit75%ThermalCredit100%ThermalCredit50%ThermalCredit67%ThermalCredit75%ThermalCredit100%ThermalCredit0.7 623 64.0% 79.9% 19.8% 64.0% 707 620 586 500 13% -1% -6% -20%0.9 642 62.2% 73.8% 15.7% 62.2% 734 654 623 541 14% 2% -3% -16%1.2 663 60.2% 67.8% 11.2% 60.2% 762 693 665 589 15% 4% 0% -11%1.7 689 57.9% 61.7% 6.1% 57.9% 793 736 713 647 15% 7% 3% -6%2.8 721 55.4% 55.6% 0.5% 55.4% 826 786 768 718 15% 9% 7% 0%Figure 2: Emission Rate at variousPower to Heat Ratios for Natural Gas-Fired Combustion TurbinesFigure 3a: Comparison of Calculated CHP Emission Rate toOverall Separate Heatand Power Emission Ratefor Coal-Fired CHP Systems, Displacing Coal-Fired BoilerCHP Emission Rate (lb CO2/MWh) % Difference with SHPPowertoHeatRatioOverall SeparateHeat and Power(SHP) EmissionRate (lb CO2/MWh)SHPEfficiencyCHPEfficiencyCHPFuelSavingsCHP CO2Reduction(%)Required CCSfor EquivalentCO2Emissions67%ThermalCredit75%ThermalCredit100%ThermalCredit67%ThermalCredit75%ThermalCredit100%ThermalCredit0.06 858 77.5% 82.1% 5.6% 1%NA 1,234 1,113 852 44% 30% -1%0.15 877 71.9% 75.6% 4.9% -5% 5% 1,296 1,181 925 48% 35% 5%0.28 899 66.2% 69.1% 4.2% -13%11% 1,364 1,258 1,012 52% 40% 13%0.47 925 60.5% 62.7% 3.5% -21%17% 1,440 1,345 1,116 56% 45% 21%0.80 957 54.6% 56.2% 2.7% -30%23% 1,524 1,446 1,245 59% 51% 30%Figure 3b: Comparison of Calculated CHP Emission Rate toOverall Separate Heatand Power Emission Ratefor Coal-Fired CHP Systems, Displacing Natural Gas-Fired BoilerCHP Emission Rate (lb CO2/MWh) % Difference with SHPPowertoHeatRatioOverall SeparateHeat and Power(SHP) EmissionRate (lb CO2/MWh)SHPEfficiencyCHPEfficiencyCHPFuelSavingsCHP CO2Reduction(%)Required CCSfor EquivalentCO2Emissions67%ThermalCredit75%ThermalCredit100%ThermalCredit67%ThermalCredit75%ThermalCredit100%ThermalCredit0.06 536 75.0% 82.1% 8.6% -59% 37% 1,234 1,113 852 130% 108% 59%0.15 579 69.9% 75.6% 7.5% -60% 37% 1,296 1,181 925 124% 104% 60%0.28 629 64.7% 69.1% 6.4% -61%38% 1,364 1,258 1,012 117% 100% 61%0.47 691 59.4% 62.7% 5.2% -62%38% 1,440 1,345 1,116 108% 95% 62%0.80 767 53.9% 56.2% 4.1% -62%38% 1,524 1,446 1,245 99% 89% 62%