Veolia Energy North America

An Energy Management Conglomerate Enters the U.S. District Energy Market

Veolia Energy North America (Veolia Energy) is a subsidiary of the 155-year old French company, Veolia Environnement (Paris Euronext: VIE and NYSE: VE), a large conglomerate that provides services to municipal and industrial customers in four areas: water management, waste management, energy management and public transportation systems. Veolia Environnement employs over 317,000 people in 77 countries and has annual revenues of nearly $50 billion.¹ In North America, Veolia Environnement has about 30,000 employees, around 700 of which work for Veolia Energy, which is headquartered in Boston, MA.

Veolia Energy is a leading operator and developer of efficient energy solutions, including the largest portfolio of district energy networks in the United States. District energy networks produce and distribute thermal energy (steam, hot water and/or chilled water). The energy is produced at one or more central plants and is then distributed to the community through an underground piping network. Around the world, Veolia operates 887 district energy networks, more than any other company.

District energy networks offer the potential for efficient, reliable and economical heating and cooling in urban areas as well as settings like college campuses, hospital clusters and industrial parks. Instead of each building investing in and maintaining its own equipment, larger district energy networks can convert fuels more efficiently, and the larger equipment can provide economies of scale in capital investment, operations and maintenance, and fuel procurement. In addition, district energy networks are well suited for combined heat and power (CHP). Also known as cogeneration, CHP takes advantage of the fact that power plants that burn fuel to generate electricity typically discard about two-thirds of the energy they consume. Even state-of-the-art natural gas-fired plants throw away about half the energy they consume. By recovering that waste heat and putting it to productive use, CHP plants can attain 80 to 90 percent overall efficiency (electricity plus heat).

The Challenges of Giving an Old Plant in Cambridge a New Lease on Life

In 2005, Veolia looked to enter the U.S. marketplace by applying its expertise to an aging district energy network in Cambridge, MA. The network was fed by the Kendall Station plant, which is located on the banks of the Charles River. Kendall Station, originally built in 1949, is really two plants in one - a power plant and a steam plant, which can supply thermal energy to district energy networks.

Veolia Energy acquired the district energy side of the plant (two steam boilers and the Cambridge steam distribution network) from NSTAR, the local utility. After the acquisition, it set out making upgrades with the intention of growing the district energy business in Cambridge. With an initial investment of $12 million in 2005, the company replaced the plant's two obsolete, inefficient boilers, converted from oil to natural gas, and upgraded the distribution network.

The power plant side of the Kendall Station plant was acquired by GenOn Energy in 1997 from Cambridge Electric.² In 2002, GenOn replaced that plant's three oil-fired boilers with a state-of-the-art natural-gas fired combustion turbine (CT) generator and a heat recovery steam generator (HRSG). Now, instead of the old boilers supplying steam to the plant's three steam turbine generators, the HRSG was producing the steam by recovering the heat in the exhaust gases of the CT. Moreover, the plant's electricity generating capacity increased from 65 megawatts (MW) to 265 MW. Steam from the HSRG was also being sold to the Massachusetts General Hospital (MGH) via a 14-inch pipe that runs across the Charles River under the Longfellow Bridge, effectively making the power plant at Kendall Station a CHP plant. This one customer (MGH) was larger than all of Veolia Energy's customers combined on its Cambridge district energy network.

Given the availability of additional steam from the HRSG, Veolia Energy entered into an agreement with GenOn to purchase steam for its Cambridge district energy network. Its own new boilers would serve as backup for times when the CT-HRSG was not operating. This meant that instead of burning fuel to put steam into its network, Veolia Energy began using more of the exhaust gas heat from GenOn's electricity production, making the combined operation of the two sides of the Kendall Station that much more efficient.

In a parallel development, GenOn's steam line across the Charles River was tied into the existing steam network in Boston, which at the time was owned by a company called Trigen. Veolia Energy ultimately acquired Trigen in 2007 and started developing plans to optimize the operations of the integrated systems - its district energy network in Cambridge, GenOn's upgraded Kendall Station CHP plant, and the Trigen district energy network in Boston.

While the pieces were coming together for a revamped Kendall Station plant, a stubborn problem threatened to derail the operation. The addition of the CT and HRSG to the Kendall Station plant in 2002 had triggered a mandatory review of the plant's existing air and water permits issued by the U.S. Environmental Protection Agency (EPA) and state regulatory bodies. New permits were issued, and the one governing the 70 million gallons per day of cooling water,³ which is withdrawn from and released back into the Charles River,⁴ but at a higher temperature, created a challenge.

Environmental regulators were calling for plant curtailment if water temperatures, measured at various points downstream, exceeded 81°F, regardless of whether this was the result of the plant's operation or ambient conditions. The prospect of not operating on the hottest days, when river temperatures rise naturally and grid power prices are also the highest (i.e., the most profitable time to generate electricity), threatened the economic viability of the repowered station.

Engineering a Creative Solution

One thing was clear: the heat being discharged from GenOn's Kendall Station into the Charles River needed somewhere else to go or the power plant might need to be shut down. Veolia Energy began working with GenOn, the EPA and state regulators to turn this liability into an economic opportunity. "This project had to work economically; we arrived at our solution after what became a big exercise in math," said Jeffrey Perry, Chief Development Officer at Veolia Energy. After completing negotiations, a new agreement, formalized in February 2011, will enable the plant to run year round and completely eliminate the use of cooling water from the Charles River.

This feat is not the result of some breakthrough technology, but rather good engineering and the willingness by all parties to find a solution. Here is how it will work. GenOn will eliminate its cooling water use by retiring two of its three steam turbines and replacing the third one with a new "back pressure" steam turbine, equal in size to the turbine it is replacing. Back pressure steam turbines do not require cooling water. Instead, the steam exiting the turbine will be purchased by Veolia Energy to feed a new, 200,000 pph steam pipe that Veolia Energy will build to send additional steam into its district energy network in Boston. The new pipe is needed because the existing one feeding Massachusetts General Hospital is at capacity at 200,000 pph, but the HRSG can produce 450,000 to 550,000 pph.

For Veolia Energy, this will allow it to sell more cogenerated steam from Kendall Station into Boston and further reduce its own fuel consumption. For GenOn, its power plant operations will no longer be constrained by the use of cooling water and the threat of curtailment. Although it will lose some generating capacity by retiring two steam turbines, this will be offset by the additional steam sales to Veolia Energy. Everybody wins and the waters of the Charles will benefit in the process.

The Next Generation of Cogeneration

After a total investment of over $40 million, the company says that the Cambridge and Boston networks are thriving, supplying steam to 10 customers in Cambridge, including several global leaders in biotechnology and pharmaceuticals, and about 240 customers in Boston. Veolia Energy has also grown nationwide. It owns district energy networks in 14 cities in the United States, meeting the thermal energy needs of large commercial buildings in places such as Boston, Baltimore, Philadelphia, Atlanta and Los Angeles. According to the company, its thermal energy operations have the capacity to produce 12.3 million pounds of steam/hot water per hour⁵ and 267,000 tons⁶ of chilled water.

The International District Energy Association estimates that there are about 2,500 district energy networks in the United States; most large cities, college campuses and hospitals use them.⁷ Veolia Energy sees a significant opportunity to improve those networks by following their model in Cambridge: utilize CHP to produce the thermal energy, thus putting the waste heat to good use. In addition to consuming lower volumes of natural gas to produce energy, CHP plants can also be designed to consume renewable fuels, namely biomass, biogas, and landfill gas.

CHP is not a new concept. What makes this story compelling is not so much the technology, but the creativity and engineering skills used to find common-sense solutions to problems that make both economic and environmental sense. And while every district energy network in the United States is unique, similar creative thinking could yield similar benefits elsewhere.

Nov 2011

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