Self-Generation May Be Beneficial Use For Waste Gas

(Tech Connections Column, January 2006, American Oil and Gas Reporter)

A PTTC West Coast workshop focused on self-generation. Estimates are there is enough stranded gas in California to generate between 40 megawatts and 2,000 mW of electricity.

Regulatory authorities favor power generation over flaring for emission reasons. An adequate long-term gas supply is critical. If there is more gas than electrical demand, one must recognize that small amounts of excess power are difficult and uneconomic to export, though California regulations do allow export to adjacent properties under certain conditions.

Design must plan for removing free liquids and other treatments depending on the impurities present. Permitting will be more involved, especially if interconnects are required. Economic drivers are electrical demand, site, fuel, equipment, and locationspecific permitting requirements.

With all this said, self-generation can make good economic sense, particularly if there is a use for recovered heat. With heat recovery, overall energy efficiency in larger units can be 65-80 percent. In smaller distributed generation applications, efficiencies in the 40 percent range are more typical. These compare with 25-35 percent if electricity only is generated. Most of the newer self-generating systems meet environmental standards and claim to provide exhaust gases that meet the California Air Board’s 2007 standards if gas is treated appropriately prior to combustion.

Choices for equipment are internal combustion (IC) units and microturbines. Microturbines cost a little more, but they should require less maintenance, although the cost for maintenance that is required may be higher. Microturbines are affected less by burning lower-quality gas, and some designs can handle gas containing up to 7 percent hydrogen sulfide, but that doesn’t mean sulfur-oxide emission standards won’t require gas treating prior to combustion. There are many choices for IC units, whereas there are fewer microturbine suppliers.

A good rule of thumb is that the cost of microturbines with capacities of 30 kilowatts-250 kW ranges from $1,500 a kW upward. Costs for IC units, where sizes are generally in the 100 kW-250 kW range, are $850-$950 a kW. Installed cost may be 50 percent or more of the generator itself. Downtime caused by parts can significantly affect economics. Overall operator experience is that operations and maintenance cost for IC units is lower than for microturbine units, conservatively $0.01 a kW-hour versus $0.015 a kWh. Service and outside maintenance contracts are important.

Pacific Energy Solutions Inc. specializes in providing cogeneration units. It shared the economics for a 300 kW unit with a post-rebate installed cost of $574,000. While equipment was being paid over five years, “electric only” and “electric and heat” savings were $87,000 and $214,000 a year, respectively. After equipment is paid out, the savings rise to $200,000 and $328,000, respectively.

How long one needs power and heat is a key consideration. When evaluating economics, producers should be aware that self-generation may trigger departing load charges for power not used and/or standby charges three times the normal rate for power used when the generator is down (thus 66 percent run time would realize no savings).

There are California and federal incentives to encourage waste gas-powered microturbines. Systems that truly use waste gas, include heat recovery, and achieve overall efficiency of 60 percent may receive an $800 a kW incentive from California’s Self Generation Incentive Program. On the federal level, the Energy Policy Act of 2005 establishes a 10 percent tax credit for microturbine power plants installed between Jan. 1, 2006, and Dec. 31, 2007. With these incentives, microturbine initial costs are on par with IC units.

Capstone Turbine Corp. and Ingersoll Rand both supply microturbine units. Capstone supplies 30/60 kW units, while IR provides 70 kW and 250 kW units. There are 200 Capstone units in oil and gas settings. IR reported operating units totaling 2,970 kW with another 1,050 kW of units on order.

Unico Inc. provides a gas-powered artificial lift drive system for individual well applications. With a continuous duty AC induction generator driven by a GM Vortex industrial engine, and AL monitoring and control systems, it makes a handy packaged unit. Unico’s value proposition is packaging the total artificial lift monitoring/control system.

Oxy installed eight 70-kW IR microturbines burning 850- Btu stranded gas in 2004 at Kern River. The system cost $1.1 million for the eight units plus $80,000 for the heat exchanger to qualify as cogen to receive a $380,000 rebate. Plant payout is estimated at three-plus years. Turbine online time averaged 59 percent over the first year.

The Termo Company highlighted performance in four projects. Some applications worked, others didn’t. Its conclusions are that both microturbines and IC engines have applications. Reiterating a key criteria–Is and will enough natural gas be available? –Termo’s perspective is that systems were overpromised and underdelivered. Support is essential. Termo suggests performance metrics/incentives be incorporated in service contracts.