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Cutting Electricity Costs for Industrial Plants in a Real-Time World

Fortnightly Magazine - December 1997

ore into end products.

The plant-specific chemical conversion is an exothermic (heat producing) reaction. The heat from this reaction is used to create steam in a boiler. Whatever steam is not needed for other chemical processes is run through a turbine-generator set to produce electricity. Priority in steam use is given to the industrial processes themselves. This particular chemical process currently operates at essentially one speed and therefore produces steam at a near-constant rate. There is little strategic management of the timing and amount of the cogeneration facility's electricity production.

Overall, this cogeneration facility produces more than 40 percent of the plant's electricity consumption. The plant buys electricity from its local utility under a tariff that offers substantial pricing differences between peak and offpeak periods. In particular, the demand charge is 14 times higher during peak (12 hours each weekday) than offpeak hours. The plant shuts down some of its equipment during peak hours to reduce its electric bill, but it does not modify the electrical output of its cogenerator for this purpose.

Figure 1 shows 15-minute data on total electricity consumption, cogenerator electricity output and purchased power for this facility for a full week in April 1997. The mean values of electricity consumption, cogenerator output and purchased power were 80, 34 and 46 MW, respectively. The maximum values were 95, 40 and 74 MW. This graph shows considerable volatility in purchased power, a consequence of the way that the cogeneration facility is operated.

Optimizing Cogenerator Use

We analyzed alternative uses of the cogenerator if this plant faced hourly spot prices. We obtained spot prices for the Pennsylvania-New Jersey-Maryland Interconnection. The PJM spot prices on Aug. 3, 1997 ranged from $10/MWh to $51/MWh, with an average of $27/MWh (see Figure 2).

Faced with electricity prices that varied from hour to hour (rather than prices that were invariant throughout the day), the firm might operate its cogeneration facility differently. We optimized the operation of the cogeneration facility to minimize its daily electric bill. We constrained the optimization by the assumed need to maintain the same 24-hour output from the cogenerator for process purposes. We also imposed different minimum and maximum constraints on the cogenerator's hourly output.

The results show that, depending on the range of output possible from this cogenerator, the facility can cut electricity costs by 12 to 25 percent (see Table 1). As shown in Figure 3, the optimized cogenerator output peaks - and, correspondingly, purchases - are at their lowest level in the late morning and afternoon. Prices are at the highest (above $30/MWh) between 11 a.m. and 6 p.m. that day.

We ran the same cases shown in Table 1 against the PJM prices for Aug. 1 (see Table 2).

Because prices were much less volatile on the 1st than on the 3rd, the relative benefits of optimizing cogenerator production were correspondingly reduced by 25 percent to 35 percent from the values shown in Table 1.

Selling Ancillary Services

In principle, the cogenerator could be run to offset the need to buy certain ancillary services, including regulation, load following