offices and businesses. Although CHP has been around for a while, it provides its beneficiaries with two needed services at low cost, and also results in higher energy efficiency. The US boasts approximately 50 GW of CHP installed capacity, depending on measurement. Governments in Europe, North America, and Asia are all hoping to boost energy efficiency and reduce emissions by promoting CHP. Various US observers see the potential for between 50 and 100GW of new CHP by 2010. Europe plans to use CHP to address 20% of its carbon dioxide emissions reduction target under the Kyoto Protocol. A European Commission communication has established a target of doubling European Commission communication has established a target of doubling CHP capacity by 201 O from its present capacity of 4.5 GW, accounting for half of greenhouse gas emissions reductions. Alternative power buffs hope to build upon these figures with the deploymnet fuel cells and microturbines. lnstead of CHP as a benefit of fuel cells and microturbines that centralized power generation can't provide, the relevant comparison is between these alternative technologies and conventional CHP devices such as diesel and natura! gas engines, steam turbines and gas turbines. Fortunately, microturbines and fuel cells have one thing going for them: low emissions of pollutants such as Nox. Gas turbines can also offer low emissions, and they boast higher efficiencies as well, but their large size leaves a substantial niche at the bottom end of the range for alternative technologies. Relatively dirty diesel engines, natura! gas engines and steam turbines dominate today's small-sized CHP market. These technolgies are proven, but they are also expected to improve in both cost and efficiency. On- site energy projections foresee comparable cost and performance improvements for small engines as for microturbines. Today's CHP is dominated by large industrial and commercial applications. in particular, the pulp and the paper, refining and chemicals account for 85% of US CHP generation, and there is room for further growth in this area. Biomass gasification could make inroads into this market. in contrast, small industrial and commercial applications offer sizes more appropriate to fuel cells and microturbines. in commercial sector, CHP is most commonly used for urban district heating (often by utilities), universities, hospitals and sports/health centers and government facilities. in the US, these general categories account for 90% of commercial CHP installations. As with industry, most commercial CHP is provided by larger units. in the US, 75% of commercial CHP is from units above 20 MW account for 80% of CHP capacity. The small end market, currently dominated by reciprocating engines, is seen as ripe for growth. in continental Europe, district heating for residential and commercial users is a prominent part of the CHP picture. Half the residential heating loads of Finland, lceland, Poland and Denmark are supplied by district heat. C SIGNPOSTS AND SCENARIOS: ) Signposts can help analysts and observes gauge the importance of company claims regarding cost reductions, market 4 6 ı ECOGENERATION WORLO penetration, and performance improvements. They can also be used to generate any number of scenarios of technological progress. These scenarios do not represent forecasts or projections. They are hypotheses that help us think about what level of cost reduction could be achieved if targets are reached, but they do not gauge whether thosetargets are technically possible. Biomass is excluded because of its reliance on opportunity fuels, which are particular to regional circumstances. Microturbines: As noted above, microturbines are in their earlier stages, and hence assumptions about future capital costs, O&M costs, and performance are speculative. The medium progress case assumes capital costs of $ 450/kw, efficiencies of 30%, O&M costs of $ 7.36/MWh, and an 85% capacity factor. The rapid progress case assumes capital costs of $400/ kw and efficiencies of 35%. The resulting power costs for the medium and rapid progress cases are $52/MWh and $42/MWh respectively. Wind power: The cost of wind power hinges on capital and O&M costs, both of which continue to decline as turbines grow in size and market experience increases. Capacity factors have also increased and especially high capacity factors are reported in lreland and Scothland. The medium progress case assumes capital costs of $850/kw, O&M costs at 1.5% of capital cost annually, and a 35% capacity factor. The rapid progress case assumes capital cost of $750/kw, O&M costs of 1 % capital cost annually and a 38% capacity factor. These assumptions essentially represent extrapolations of past progress. Wind capacity is rising so rapidly that observers will want to closely monitor new installation costs. We believe lower costs will be realized first by large developers in the US and Spain. Fue/ Ce/1s: Fuel cells are barely commercial and their capital costs are not yet near common benchmarks for competitiveness. However, makers of stationary fuel cells have set $1000/kw as an eventual target, with $2000/kw as a mid-term benchmark. These figures are used as the rapid and medium progress cases. Efficiency improvements are also expected. The medium progress case assumes 60% efficiency, in line with EIA forecasts and the rapid progress case assumes 64% effieciency, a figure mentioned by Fuel Celi Energy. With these inputs, the medium and rapid progress scenerios show power costs of $53/MWh and $35/MWh respectively. Since the focus here is on molten carbonate fuel cells, we do not address the issue of rising plantium prices associated with PEM fuel cells. Solar PV: Solar PV is commercial, but capital costs are stili an order of magnitude too high. Again, $1000/kw is a common benchmark for long-term capital costs, and according to one analysis such a target may be achived when thin- film silicon reaches mass production. The medium progress case assumes a capital cost of $2000/kw, while the rapid progress case assumes $1000/kw. Significantly, the cases do not rly on conversion effieciency as a separate input, which is an obstacle for thin-film PV. The cases
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