DER Market Study
Analysis conducted by FEMP in fiscal year 2001 indicates there is tremendous potential for the use of distributed energy resources (DER) in the Federal sector.
DER technologies analyzed in this report include advanced industrial turbines and microturbines, fuel cells, natural gas reciprocating engines, photovoltaic and other solar systems, wind turbines, small modular biopower systems and hybrid systems.
Because DER technologies are in different stages of development, this market assessment focused on identifying Federal facilities with characteristics that are suitable for DER applications, rather than on predicting or modeling how much of each type of technology is competitive in each application. The objective was to determine the technical potential for DER and some of the conditions the technologies will have to satisfy to be competitive. Because data on energy use, loads, and costs in Federal facilities are highly aggregated, the analysis draws on the best information currently available. In addition, the following considerations were made:
- Leased space was eliminated from the inventory because it can be difficult to justify energy capital improvements on property not owned by the government.
- Only grid-connected applications were considered, and it was assumed that all facilities listed in the GSA real property database are grid-connected. Many DER systems have already been installed in off-grid applications, which are often more cost-effective than grid-connected applications.
- Information was developed on those types of facilities that have shown particular promise for DER, including hospitals and prisons; light to heavy industrial facilities; research and development facilities; housing; and schools. For example, hospitals and prisons tend to need backup power and have substantial thermal loads that can be served by combined heat and power applications.
- Facilities were identified in those areas with the highest electricity costs (defined as equal to or greater than $0.08/kWh). These are areas where new generating technologies are expected to have the best opportunities to compete economically based on electric utility rates. In many cases, these are also areas with growing reliability and reserve problems, and/or areas trying to address DER interconnection issues through statewide standards.
The end result is a prioritized list of opportunities for DER by building type and application, highest energy costs, lowest barriers to distributed energy applications, and agency building stock by state. It can be viewed as a subtractive analysis that limits the universe of potential Federal DER applications by considering which facilities have conditions most conducive to DER deployment in the near term.
Findings of the Federal DER Market Assessment
Based only on estimates of the energy requirements for the square footage of Federal buildings that usually have high power demand and thermal loads in areas with retail electricity rates of $.08/kWh and higher, there is between 300 MW and 500 MW of potential for distributed generation capacity. This estimated potential assumes distributed generation was sized to serve 50% of the electricity requirements in these facilities. For the current analysis, the building types targeted based on available data include prisons, R&D centers, schools, medical facilities, and housing. For lack of data, this study is unable to address data centers, gymnasiums, central heating plants, and locations that already have reciprocating engines for backup power, which are also likely to expand the DER potential in the Federal sector. This 300 MW to 500 MW represents just the most easily identifiable, near-term targets for further characterization and analysis. Federal DER deployment opportunities by state and by technology are described in the following sections.
DER Deployment Opportunities by State
Although there is at present no comprehensive database of Federal electricity rates, data on commercial average annual electricity rates by zip code show that California, Arizona, New Mexico, Alaska, Hawaii, and many states in the northeastern United States all have average electricity rates higher than $0.08/kWh. This electricity rate is one of the major indicators of potential for cost-effective use of DER. In many cases, these are also areas with growing reliability and reserve problems. Thus, they are the most likely regions in which to find competitive opportunities for DER technologies. Figure 1 shows where Federal facilities are located that have annual average commercial electric rates of $0.08/kWh or more.
Figure 1. Federal facilities with average commercial electric rates equal to $0.08/kWh or more.
Note that rates paid by Federal facilities often are negotiated with local utilities or competitively bid in states that have restructured. Some rates also include Federal hydropower allotments that considerably reduce the retail rate. Therefore, actual rates for Federal facilities will vary from these averages. In addition, peak electricity prices and high peak loads often suggest more strongly the places where DER technology will be cost-effective. But in the absence of peak load and cost information, a high average rate can be a good indicator of high peak rates.
Building stock data are broken down next, indicating that over 99% of the total square footage of Federal buildings is located in 18 states. Table 1 summarizes the location, number, type, and square footage of Federal buildings located in areas with average electric rates of at least $0.08/kWh.
| Table 1. State-by-state distribution of Federal buildings | |||
|---|---|---|---|
| State | Number of Buildings | Total Square Footage (million sf) |
Building Types |
| CA | 4,785 | 46.3 | Prisons, R&D facilities, Schools, Hospitals, Housing |
| NY | 764 | 14.4 | Prisons, R&D facilities, Schools, Hospitals, Housing |
| PA | 441 | 10.5 | R&D facilities, Schools, Hospitals, Housing |
| OH | 155 | 4.1 | Prisons, R&D facilities, Schools, Hospitals, Housing |
| NJ | 222 | 3.4 | R&D facilities, Schools, Hospitals, Housing |
| CT | 296 | 3.3 | Prisons, R&D facilities, Schools, Hospitals, Housing |
| HI | 439 | 1.8 | R&D facilities, Schools, Housing |
| NM | 253 | 1.5 | R&D facilities, Schools, Housing |
| MI | 20 | 1.3 | R&D facilities, Schools, Hospitals, Housing |
| AK | 379 | 1.2 | R&D facilities, Schools, Hospitals, Housing |
| FL | 35 | 1.2 | Prisons, R&D facilities |
| AZ | 240 | 1.0 | Prisons, R&D facilities, Schools, Hospitals, Housing |
| ME | 293 | 1.0 | Prisons, R&D facilities, Schools, Hospitals, Housing |
| RI | 54 | 0.9 | R&D facilities, Schools, Hospitals, Housing |
| AR | 1 | 0.8 | Hospitals |
| MA | 211 | 0.6 | R&D facilities, Schools, Hospitals, Housing |
| TX | 84 | 0.6 | Prisons, R&D facilities, Schools, Housing |
| WV | 6 | 0.4 | Hospitals |
Deployment Opportunities for Renewable DER Systems
Facilities with high electricity or natural gas rates (or both) and good renewable resources are also potential candidates for DER technology deployment. This assessment identifies Federal facilities that have high electricity rates and are in areas with good renewable resources. This assessment provides a good first estimate of the number of candidate facilities for renewable DER systems such as photovoltaics (PV), wind energy systems, and biomass energy systems. But because of resolution limits, the suitability of DER at any facility needs to be assessed on a case-by-case basis.
Photovoltaics—A first rule of thumb for PV (solar electric) applications is that a suitable site has average annual solar radiation of at least 5 kWh per square meter per day, for a south-facing solar collector tilted at latitude (Schuyler 2001). However, this is not an absolute rule. It does not take into account variables such as a facility's distance from the utility grid, which influences the economics of PV installations. Remote or off-grid applications at facilities with a low or medium solar resource but no grid power may be more cost-effective than grid-tied applications in regions with high solar radiation. Because of this limitation, facility managers should always look for remote or off-grid PV installations for the best economics. Table 2 shows a breakdown, by agency, of buildings and square footage for facilities with different solar resource characteristics.
| Table 2. Federal building stock summarized by average annual solar radiation and by agency | ||||||
|---|---|---|---|---|---|---|
| Agency | Solar radiation >= 4 and < 5 kWh/m^2-day | Solar radiation >= 5 and < 6 kWh/m^2-day | Solar radiation >= 6 kWh/m^2-day | |||
| Total # buildings | Total square feet | Total # buildings | Total square feet | Total # buildings | Total square feet | |
| USDA | 149 | 1,146,584 | 867 | 1,239,500 | 87 | 169,161 |
| Commerce | 10 | 93,911 | 8 | 28,425 | 1 | 5,710 |
| USACE | 156 | 238,810 | 77 | 53,312 | — | — |
| DOE | 440 | 5,125,564 | 185 | 1,968,707 | 3 | 1,266 |
| EPA | 47 | 1,518,147 | — | — | — | — |
| GSA | 48 | 7,749,395 | 45 | 7,330,880 | 27 | 566,785 |
| HHS | 1 | 1,381 | 55 | 228,893 | 6 | 9,204 |
| DOI | 606 | 1,158,132 | 826 | 555,580 | 128 | 255,447 |
| Justice | 76 | 1,826,149 | 159 | 2,774,658 | 63 | 345,053 |
| Labor | 113 | 812,185 | 92 | 421,552 | 19 | 189,649 |
| NASA | 85 | 2,390,666 | 172 | 2,642,617,500 | 80 | 695,068 |
| NARA | 2 | — | — | — | — | — |
| NSF | — | — | — | — | 45 | 186,518 |
| Navy | 1,547 | 16,576,717 | 2,115 | 23,801,552 | 1,122 | 7,683,368 |
| State | — | — | — | — | 13 | 14,565 |
| Transportation | 192 | 1,418,868 | 46 | 198,520 | 1 | 5,320 |
| Treasury | 4 | 41,308 | — | — | 1 | 8,464 |
| USPS | 785 | 14,190,891 | 233 | 5,155,985 | 31 | 492,107 |
| VA | 255 | 9,268,185 | 209 | 6,575,495 | 3 | 4,938 |
| Total | 4,516 | 63,556,893 | 5,089 | 52,975,676 | 1,630 | 10,632,623 |
Wind energy—Wind resources are typically indicated by the wind power class in a particular area. But screening facilities for wind systems by wind power class alone does not necessarily identify places with high peak rates, unreliable grid power, or remoteness from the electric grid—and all of these improve the economics of wind turbine applications. Site-specific factors that also influence the siting of wind turbines include wind obstructions on the terrain, availability of land, and local variations in wind speed and direction. Therefore, this study provides only a baseline estimate of the potential for viable DER wind applications. Facility managers should conduct a site-specific pre-feasibility study before pursuing wind turbine installations. Table 3 shows a breakdown of building stock for Federal facilities that are potential candidates for wind DER applications based on wind power class data.
| Table 3. Summary of building stock, by agency, for Federal facilities with wind power class 5 or greater | |||
|---|---|---|---|
| Agency | Total Number of Buildings | Total Square Feet | |
| DOI | 2,129 | 6,201,104 | |
| USPS | 43 | 549,894 | |
| USDA | 247 | 313,447 | |
| HHS | 125 | 268,867 | |
| Navy | 46 | 206,249 | |
| GSA | 9 | 201,129 | |
| NSF | 69 | 135,024 | |
| Labor | 16 | 103,296 | |
| Transportation | 10 | 19,844 | |
| Army Corps of Engineers | 8 | 17,542 | |
| Commerce | 2 | 1,698 | |
| DOE | 2 | 530 | |
| VA | 0 | 28 | |
| Total | 2,706 | 8,018,682 | |
Biomass heat and power—Biomass includes residues of the forestry, forest products, agricultural, and food processing industries as well as untreated urban wood waste, landfill methane, and methane from anaerobic digestion systems. Other biomass resources may also be appropriate for heat and power production, and they can be addressed in site-specific studies. The generation of energy from these biomass resources is referred to as biopower. A preliminary list of technologies to be considered includes biomass co-firing, small modular biopower technologies, biodiesel power generation, anaerobic digestion coupled with heat recovery or power production (or both), and modular gasification and on-site cogeneration or heat production.
Biomass availability and delivered cost are very important factors in determining the viability of biomass heat and power technologies. Figure 2 shows estimates of state-level biomass availability at a price of $20 per dry ton.
Figure 2. Estimated biomass availability (annually, in dry tons, at 20 per dry ton). (Source: Walsh 2000).
Conclusions and Recommendations
The economics of DER are site- and technology-specific and thus must be evaluated on a case-by-case basis. In the immediate future, deployment of many of these technologies within the Federal sector is likely to occur on a demonstration or pilot project basis.
Barriers
Market barriers and fluctuations in fossil fuel prices are factors that influence DER market potential, but are difficult to analyze on a macro level. Distributed generation projects in both the private and public sector have encountered significant technical, business practice, and regulatory barriers. These barriers result largely from safety concerns and revenue and cost issues in the traditional regulated utility system, and generally translate into additional time and money required to implement the DER. Larger DER projects may not be affected by these costs, however smaller systems can be significantly impacted.
Strategically placed distributed generation can sometimes enhance or avoid upgrades to the transmission and distribution system, but identifying these situations requires careful analysis and planning by a utility. If a particular customer's decision to install DER does enhance the distribution system, it is more likely to be a coincidence than the result of careful analysis.
For regions with inadequate generating capacity, distributed generation can be valuable in quickly adding capacity to meet system demands. But not all regions, and not all utilities within regions, are in this position. If a utility has adequate reserves, distributed generation cuts into the amount of power they can sell—which impacts return on investment for investor owned systems, or the ability to cover costs and service debt for public systems.
In contrast, there are utilities that are actively investing in DER technology and developing projects because they have been able to work out a business approach that serves both their interests and the customers'. Unfortunately at this time there is little consistency from one state or utility to the next as far as their policies and business practices concerning distributed generation.
Fossil fuel price fluctuations and supply constraints, particularly in natural gas, can also dramatically affect the viability of distributed generation. If natural gas continues to experience supply and cost fluctuations, renewable technologies and fuels may have more opportunities for DER development, particularly if current and planned incentives for renewable energy are considered.
All facilities in the Federal sector face the issue of how to budget and finance energy investments. Although costs are declining, DER technologies still represent significant capital investments that agencies find difficulty pursuing when overall agency budgets are being held to zero growth or are declining. To address this, FEMP offers their agency clients facilitation services for energy savings performance contracts and utility energy service contracts to make procurement of energy technology easier. There is potential to apply these mechanisms to DER development, but little experience to date as the market for DER is just beginning.
A related problem is the increasing privatization of Federal distribution and related energy systems in DoD. With a private entity owning and operating the distribution grid for larger facilities, there may be issues involved in their accommodating DER.
Next Steps
Improved data and data access—Federal agencies may want to consider tracking new information, or simply tracking it differently, to better evaluate the opportunities for DER projects at their facilities. Improved information on Federal energy use and building characteristics would be useful both for Federal energy managers and DER project developers alike. Electricity, natural gas and other fuel prices and consumption levels linked to the type and location of facilities would help target technical assistance. It would also reduce the amount of time spent by both Federal energy managers and those interested in developing projects searching for data and analyzing it to determine if there is a potential economic application. Wider availability of information would also encourage stronger competition for projects.
Key items would include:
- Average electricity rates paid, as well as any time of use or demand charges.
- Electricity peak demand and annual electricity consumption.
- Thermal loads and profiles.
- Accessibility to natural gas, as well as prices and consumption levels.
- Major equipment, including backup generator characteristics and operations, central heating plants, existing DER applications, absorption chillers or other equipment that could use waste heat from DER technologies.
- Building power quality and reliability requirements.
Continued technical and analytical assistance—Because many DER technologies are still in the early stages of commercialization, there are still questions about how they operate and how to analyze their potential. DER projects are inherently more complex than conservation measures because they do interact with the utility system and involve coordination with heating and cooling loads when CHP is involved. FEMP can provide the necessary assistance when an agency is designing, justifying, and financing DER and CHP projects.