Power plays

Two days before Halloween last year, Feroze Rasheed, chief engineer at Montefiore Medical Center in the Bronx, was dashing from building to building as superstorm Sandy barreled up the East Coast.

“I was running around all night,” Rasheed recalls, making the rounds from roof to basement, looking after the machine rooms atop the buildings, checking for leaks in the rooms and inspecting sump pumps. Storm waters rushed in to bury parts of New York City, leading to an explosion at an electrical substation in Manhattan. Millions of residents across the metropolitan area and throughout the region experienced power outages.

Hospitals weren't spared. Several medical facilities had to evacuate patients when components of backup systems didn't survive the storm and the unprecedented flooding.

Rasheed and his colleagues kept an eye on the news as they continued their building inspections. But as New Yorkers woke up to a city paralyzed by power outages, Montefiore remained operational.

“The next day for us was business as usual,” Rasheed says. The hospital ended up accepting 27 patients from other facilities, six of them from the neonatal intensive-care unit at NYU Langone Medical Center in Manhattan.

Montefiore kept the lights on thanks to its combined heat and power system, which allowed the facility to operate independently from the power grid.

In their simplest form, combined heat and power systems burn fuel to make electricity and then capture what would be a wasted byproduct—heat—and return it to the facility as a source of steam.

Commonly, a natural gas engine burns fuel to drive a turbine, which is coupled to an electricity generator. Hot exhaust from the combustion passes by tubes of water, heating the water into steam. The resulting steam can be piped to the building for heat and hot water or sent to an absorption chiller for air conditioning in the warmer months. In some cases, the steam is instead sent to a steam-driven electricity generator to produce even more power.

While combined heat and power, also called cogeneration, can offer energy assurance, as was proved during Sandy, it also lowers the carbon footprint of the facility and, by using fewer resources, can save money on power bills. But the systems also come with cost and regulatory hurdles.

“In a lot of cases, combined heat and power or cogeneration is a no-brainer for healthcare institutions,” says Paul Schwabacher, senior vice president of facilities management at NYU Langone. Yet, according to the U.S. Environmental Protection Agency, only 202 hospitals in the U.S. operate with the combined systems.

So why isn't everybody doing it?

“There are substantial challenges,” says Rick Sites, senior director of health policy at the Ohio Hospital Association. These include limited capital for investments, regulatory barriers involving utility companies and physical space requirements. But hospitals, government agencies and advocates for energy efficiency are working to find ways to make combined heat and power more available and affordable.

Hospitals are considered excellent candidates for cogeneration systems. “For combined heat and power to be economical, you need the ability to utilize on a consistent basis the electricity and thermal energy ... and we find that research universities and hospitals really represent some of the best examples of that in the marketplace today,” says R. Neal Elliott, associate director for research at the American Council for an Energy-Efficient Economy.

Hospitals have around-the-clock electricity and heating or cooling needs and they are big energy users, accounting for 8% of all energy consumed by commercial buildings in the U.S., according to the Energy Department's Hospital Energy Alliance.

“Using combined heat and power you can reduce the energy required to produce the electricity and produce the thermal energy” by 25% to 40% or more because of the superior efficiency, says Gary McNeil, communications director of the EPA's CHP Partnership. The partnership is a network of local governments, CHP developers, engineering firms, energy customers (including a few hospitals) and others involved in promoting CHP.

All of these benefits have inspired an increasing number of medical facilities, including NYU Langone, to pursue cogeneration systems.

However, superstorm Sandy came too early for the medical center to take advantage of it.

“Unfortunately, Sandy happened before this work was all completed,” Schwabacher says. Ground had already been broken on a new $250 million energy building to be completed in a few years.

Included in the facility, which will power several city blocks of the NYU Langone medical campus, is a combined heat and power gas turbine that will generate about 8 megawatts of electricity plus a 3 MW steam turbine generator.

According to the Advanced Power & Energy Program at the University of California, Irvine, a typical hospital's energy needs range up to 5 MW. For reference, 1,000 kW is equivalent to one MW, which is the amount of power needed for roughly 16,600 60-watt light bulbs.

NYU Langone's new system will offer the medical campus an extra layer of energy security. “It was already planned that way when the storm hit,” Schwabacher says.

Coupled with the turbines is a heat recovery system that will provide all of the buildings on the campus with their steam needs, replacing the steam that NYU Langone buys from a utility—and slashing its annual energy bill.

By 2018, when the medical campus's transformation is complete (it will have a new facility called the Helen L. and Martin S. Kimmel Pavilion, along with the energy building), NYU Langone estimates it will save $17 million annually on what would have been a projected $43 million energy bill.

The combined heat and power system is 83% efficient, compared with the 33% efficiency it would ordinarily achieve from conventional delivery systems for all of its thermal and electrical energy.

Schwabacher couldn't provide a figure on how much the cogeneration system will cost, but he says it will offer a “good return on investment for us.”

According to the U.S. Department of Energy, a 1 MW to 10 MW gas turbine costs about

$1 million to $1.5 million installed. Tack on to that major building renovations to swap out the old heating system and hospitals can spend several million dollars for a cogeneration project. It can also take about a year to go from a feasibility assessment to powering up, depending on the length of time required to obtain permits from the utility and local governments.

For instance, Montefiore's gas turbine system, which was installed in 2002 and generates 5 MW, cost about $10 million and saves $2 million to $3 million in energy bills each year, says Paul Jennings, senior director of the medical center's engineering and facilities department.

Elliott says most combined heat and power systems pay back the investment in about five to eight years. “You don't see a lot of hospitals going bankrupt because of those kinds of things,” he says.

The cost savings are attractive, but coming up with the money for a combined heat and power system is a significant barrier, particularly for small community hospitals.

Sites of the OHA says that even though hospitals are big energy users, energy expenses make up only about 2% of operating costs. When CEOs or chief financial officers are looking at the budget and determining where to make investments, “and they have in the room physicians and nurses who want new technology, it's pretty difficult to compete against that,” he says.

In addition, installing a combined heat and power system is not as easy as simply getting the financing. Peter Garforth, principal at the energy consultancy Garforth International, says local regulations can set up high hurdles.

Recently, one of his clients, an academic institution in Ohio, “basically had positive economics, all of the understanding … the technical assessments were correct, but the regulations” have stood in the way, he says.

Although combined heat and power systems theoretically offer hospitals a way to operate independently of the grid, ties to the utility cannot be severed. In case the cogeneration system fails, hospitals need to have a connection to a utility with standby power available.

Garforth says that in many states, the fees for these connections and backup arrangements rapidly eat away the financial benefits of generating power on site.

“Utilities want to recoup those costs so they are able to provide power, and the facility operator may feel that those charges are too high for a customer who is providing their own power and looking at the utility as a backup,” says Matthew Butler, an administrative officer with the Public Utilities Commission of Ohio.

Elliott adds that the way electric utilities earn money “actively discourages utilities from allowing combined heat and power projects to go forward.”

Utilities often earn a rate of return on their infrastructure upgrades, but facilities using cogeneration purchase less power, reducing the need for them to make capital investments that generate revenue. Resulting charges for organizations with combined heat and power customers can be prohibitively expensive, Elliott says.

Mike Hyland, senior vice president of engineering services at the American Public Power Association, which represents community-owned electric utilities, says there are legitimate reasons for the costs.

“You usually have to put in breakers and relays when you do interconnections (with combined heat and power generators), and they come with a cost,” he says.

Utilities also have to study the systemwide impact of organizations that switch to cogeneration systems.

“So you get multiple customers on your line asking for various changes. You're going to have to spend some time on a review. Who pays for that analysis?” Hyland says. “I can't tell you how many times we've had somebody see the results (of a study) ... and say, 'we're not going to do it.' ”

Still, hospitals are finding that the energy and cost savings can trump the standby fees and other utility charges, and the number of hospitals jumping on the bandwagon is increasing, says McNeil at the EPA.

He says that during the past decade, seven to 10 hospitals have installed such systems each year. Since 2003, 194 MW of energy capacity from cogeneration has been added by hospitals, nearly double the 101 MW hospitals added during the preceding 10 years, McNeil says.

The EPA has been actively encouraging the use of cogeneration at hospitals and other commercial enterprises through educational outreach, spreading the word about grants and rebates for installing the systems, presenting public recognition awards to hospitals that achieve high energy efficiency, and offering tools on its website to help facility managers determine whether such conversions are right for them.

But the EPA's hands are tied when it comes to altering utility policy. “We can't do too much about (this barrier), and this is maybe the most important one,” McNeil says.

Utilities are regulated at the state level, and the amount of ease for utility customers looking to pursue combined heat and power varies greatly.

Ohio, for instance, is trying to lighten the burden of standby fees for customers that choose cogeneration, says Butler at the PUCO. The New York State Energy Research & Development Authority offers financial incentives for facilities to install the systems.

Elliott is optimistic that the regulatory obstacles to combined heat and power will diminish in the coming years. He contends that state governments and utilities already appear to be warming to the broader advantages of combined heat and power generation. “They are picking up on this idea that this is a good thing,” he says.

Still, Garforth says that while cogeneration makes a lot of sense for medical facilities, it's not a good fit for every hospital.

It's unwise, he says, to consider adding expensive new supply equipment if the facility is wasting those gains in energy efficiency by inefficiently using the power—say, through drafty windows or poor scheduling of energy-intensive operating rooms. Garforth says U.S. hospitals can generally find between 30% and 50% reductions in energy use through basic efficiency measures, such as swapping out windows, upgrading lighting, insulating the roof and changing operating practices to optimize energy use.

“If you don't understand how to manage energy, wherever it's coming from ... it's the wrong time to be making those decisions (to install cogeneration). First, get your system under control and get your staff trained,” Garforth says.

Kerry Grens is a freelance writer based in the western suburbs of Chicago. Reach her at [email protected].