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Generation: Big or Small?

Fortnightly Magazine - September 15 1996

started up 22 projects: natural gas-fired cogen as well as wood-fired, coal-fired, and even wind plants.

One of its most recent planned projects involves Reynolds Metals, the aluminum manufacturer. The tentative order is for a 300-Mw plant that could be as large as 800 Mw, with most of the output being merchant power.

Kennel says distributed power will make inroads "when we get down to retail. I don't see it in the wholesale market."

Thomas A. Robertson, fuel cell division manager for Stewart & Stevenson Services, Inc. (S&S) says his company (em which packages turbines, fuel cells, and other equipment (em has higher hopes for distributed power.

S&S gas-turbine and cogen equipment work has been flat because customers are waiting to see how deregulation falls out. "We have more proposals out on the table and under serious consideration right now than we've ever had in the company in the history of the gas turbine division," he says. "And these are not just lightly considered proposals. These are ones where funds have been set aside and we're a

serious contender for the award. But nobody's getting the award domestically right now."

Fuel cells will fit into niche markets where gas turbines run into siting problems due to noise, emissions, or some other reason, Robertson says. ONSI Corp., a leading fuel-cell manufacturer, has effectively done away with permitting problems in the Southern California Air

Quality Management District by winning a blanket exemption for one of its products.

Robertson says utilities have been active partners in demonstration programs and want to stay involved in fuel-cell development. They have memberships on commercialization and development boards.

The current high cost of fuel cells (about $1,000/Kw installed for a gas-turbine model) hinders acceptance and development. But Robertson says the U.S. Department of Energy's fuel-cell rebate program (em which reimburses $1,000/Kw, or up to a third of total project costs on units between 100 and 3,000 Kw (em has helped considerably.

S&S was working with ONSI and the National Rural Electric Cooperative Association on a 200-Kw trailer-mounted demonstration unit.

"I guess what's going to draw people to distributed power is the opportunity to provide additional savings," Robertson says. "Cost is going to be the main issue."

Distributed power will make inroads when central systems need upgrades, says John Swanson, electric power generation marketing manager for Caterpillar, Inc.'s North American division. It will also come in handy when systems can't handle peak demands. "Maybe you put in a generator, either at a customer site or a substation to boost the grid," Swanson says. "You end up with small steps instead of one large step."

He says Caterpillar will still have its interruptible power business, because not all states are taking the same view of retail deregulation.

Regulators will make interruptible and curtailable power an opportunity in areas of some states.

Then there will be new markets.

"We've seen power marketers going after medium-size industrials or commercial users, using generator sets as a part of that cost-reduction strategy," Swanson says. "Maybe even using a gas engine chiller on peak and electric