That's what was done at the Radisson Hotel Newport Beach, which began operating two 155-kW internal-combustion engines in July 2003. They run almost constantly to provide about 300 kW of onsite generating capacity—close to 95% of the hotel's base load. Supplementary power to top off the base and meet peak demand comes from the local utility, Southern California Edison (a subsidiary of Edison International).

This level of continuing reliance on utility power is acceptable to Mark Zovic, the hotel's general manager. "The hotel across the street, which is just a little bigger than us, put in two 450-kilowatt units," he reports. "They thought they could sell the extra energy they produce to Southern California Edison, but that buyback program ended, so they've got those tremendous units sitting there. If one breaks down, they can switch to the other and never be down, but to spend that kind of money on a backup system is not cost-efficient."

In selecting the Radisson's distributed-energy cogeneration system, Zovic received guidance from Energy Consultant H. Ray Kress of Newport Beach, with whom he had worked before on other energy-saving measures, and from West Coast Sales Director John Baginski of DTE Energy Technologies Inc. in Farmington Hills, MI, which supplied the equipment.

"I interviewed five or six companies for cogeneration to reduce the hotel's electric and natural-gas bills," Kress says. "Even though DTE wasn't the lowest bidder, I determined they had a solution that made more sense than anyone else's. John Baginski convinced me to reduce the load of the equipment so the generators would run more efficiently all the time. It gave us the most bang for the buck, dollar for dollar."

The hotel's demand for electricity is less in winter than in summer and fluctuates with the time of day. It ranges from a base load of about 320 kW to a peak load of about 500 kW.

"Many of the other bidders were trying to talk me into installing 400 kilowatts or 450 kilowatts of generating capacity," Kress says, "but those wouldn't have run at full efficiency, so we wouldn't have been getting the best value out of the dollars. Based on John's calculations, we decided to optimize our investment and not spend the extra money on equipment that [might not run] all the time."

The Radisson Hotel Newport Beach has 335 rooms and five suites; 20,000 ft.² of meeting space, including five executive boardrooms; a restaurant and lounge; a cardiovascular fitness center; a large, outdoor heated pool and spa; and a lighted tennis court. It's on MacArthur Boulevard, a half-mile from John Wayne International Airport in Orange County, south of Los Angeles. After 25 years as a Sheraton, it underwent a major renovation and became a Radisson in 2000.

In addition to his role as the hotel's general manager, Zovic is vice president of operations for Larken Inc., a Cedar Rapids, IA–based hotel firm owned by brothers Larry and Ken Cahill. Larry is president and chief executive officer; Ken is executive vice president and chief operating officer.

Larken has a total of 10 properties in California, Massachusetts, Minnesota, Missouri, Montana, Pennsylvania, Texas, and Wisconsin. All report to Zovic. "In that capacity," he says, "I'm always looking for opportunities to save money. I started eight years ago by converting our hotels to low-wattage, high-efficiency lighting. Of course, being in California with all those brownouts in 2001 and 2002, I started looking even more closely at energy issues. I am very interested in more reasonable power rates."

The Radisson Hotel Newport Beach consists of two connected buildings totaling more than 300,000 ft.² The main building has central air conditioning, but 120 guest rooms in the other building rely on individual in-wall units, which are less efficient. "We replaced the old in-wall units with more energy-efficient ones two and a half years ago," Zovic says, "but they still use more power than central air would. That's why I'm so worried about peaks and cost factors."

Zovic talks about energy like an engineer, but he holds an accounting degree. While a student at the University of Wisconsin in Milwaukee, he worked at the city's Pfizer Hotel. For a decade, he owned and operated a restaurant with a wedding and a banquet hall. He has spent 15 years with Larken, including three and a half years at the Radisson Hotel Newport Beach.

Kress assisted with many of the Larken hotels' lighting projects. Three years ago the annual energy bills at the Radisson Hotel Newport Beach ranged from $450,000 to $500,000. Kress brought the annual outlay down to about $350,000 with "demand-side management"—energy-sparing lighting; sensors and controls; an energy management system; and the new high-efficiency, in-wall air conditioners. Rebates from Southern California Edison paid for most of these improvements. "Ray is good at figuring out where rebates are and how to apply for them," Zovic says.

In pursuit of additional savings, Kress began looking for "a supply-side solution—a way to reduce our electric bills by supplying electricity to ourselves at less cost." The Radisson distributed-energy cogeneration system is his first supply-side management venture, after 27 years on the demand side specializing in energy-efficient lighting and energy management systems.

Like Zovic, Kress isn't an engineer. A business and psychology graduate of Iowa Wesleyan College in Mount Pleasant, IA, he went into the electrical-supply field. While running his company, Econoray Products Inc. (now Budget Lighting) in Burlington, IA, he learned a great deal from factory representatives who came to call. "The next thing you know," he says, "I was educating the local electrical engineers." At age 40, he moved to California and became a professional demand-side manager.

The stimulus for the Radisson's installation was his discovery of a good rebate program for distributed-energy cogeneration units offered by Southern California Gas Company (a subsidiary of Sempra Energy).

"The onset of the cogeneration boom in California opened up a brand new way of looking at things," Kress explains. "The utility companies were out there saying, ‘Buy conservation'—the demand side—but the California Public Utilities Commission instituted the supply side. When you start trying to control your costs for the power you're going to use or to generate your own power, you get a phenomenally quick return on investment."
After that, Kress says, the investment pays for itself again and again on a long-term basis. The Radisson's distributed-energy cogeneration system has an anticipated life of 15 years, but it may operate even longer—perhaps 20–30 years.

At the Radisson, Kress did more than consult on the distributed-energy cogeneration project. He bought the equipment from DTE Energy Technologies and became the hotel's primary supplier of electricity. "We did a great contract," Zovic says. "It's based on usage. We pay Ray 10% less than what Edison would charge us."

Now Zovic receives two separate electric bills. For the first 45 days of this arrangement, including September 2003 when hot weather prompted heavy use of air conditioning, the hotel paid Kress about $40,000 and Edison about $13,000.

"I am now in a better position to control my spikes from Edison by producing 300 kilowatts myself," Zovic says. "When the spikes do come, they don't reach as high as they did."

The hotel could have realized substantially greater savings—perhaps 20–30% below Edison's rates—by purchasing the equipment. "It would be good math for the hotel to buy it themselves, better than shared savings—but shared savings is better than not doing it at all," Kress says.

Larken, however, did not want a large initial capital outlay. "We were looking for someone who would give us the project at no dollar cost to us," Zovic says. "We agreed to purchase electricity from him, and at the end of six years, we will receive the equipment."

The equipment consists of two DTE energy|now 155-kW package units, each containing a Waukesha F11 GSID inline, six-cylinder internal-combustion engine powered by natural gas and a Marathon 432 RSL 4009 synchronous generator. (Waukesha Engine is a subsidiary of Dresser Inc.; Marathon Electric Inc. is a subsidiary of Regal-Beloit Corporation.) The engines use advanced, lean-burn combustion technology to achieve high net electrical efficiency.

Each unit is installed on its own 108-ft.² concrete pad next to the building, inside a metal housing that looks like a shipping container. The housing helps to keep the system's noise level to a very moderate 68 dBA at a distance of 7 m. That's quieter than the city traffic passing the hotel. Even though guest rooms overlook the installation, noise from the system doesn't disturb the occupants.

"I'm impressed with the system because of its sound attenuation," Kress says. "These units sit next to the chillers for the central air conditioning, and you can't even hear them over the chillers."

The cogeneration system's connections to the utility grid comply with the California Public Utilities Commission's Rule 21, a measure designed to protect utilities against damage from onsite power flowing into the grid and to ensure synchronization between onsite and grid power.

Some distributed-energy practitioners have accused utility engineers of being overly fussy about miniscule details and dragging their heels to delay projects before ultimately issuing Rule 21 approvals. In contrast, getting the Radisson project approved was "pretty easy," says Mark Fallek, DTE Energy Technologies' chief marketing officer. "We applied to Southern California Edison, met with them, and complied with their requirements. Approval took [less than] two months."

In addition to savings on electricity, the new distributed-energy cogeneration system yields hot water at no additional cost. "The waste heat from the engines heats the water," Zovic says. "In a hotel, it's like gold. Even when every room is full, I never have to worry about running out of hot water. When a group of teens comes in, we may have three or four people to a room, and they all decide to shower at the same time. We can have 90% occupancy and not a squeak about hot-water problems. We're also washing dishes with this hot water, doing laundry with it, and heating the building."

Fallek says the water goes into the engines at 138°F and comes out through a 4-in. pipe at 160°F, carrying away 700,000 Btu of waste heat per hour. Zovic is installing a meter to measure the flow of hot water through that pipe.

He expects to save at least $67,000 on natural gas during the first year and notes, "Normally my gas bill [is] around $12,000 a month. Last month it was $3,000. Instead of heating water with natural gas, I'm running the engines. The gas cost actually is absorbed in my cost per kilowatt-hour, which is 10% less than I pay Edison."

The swimming pool receives no hot water from the cogeneration system. It has its own separate heater. Because it's on the other side of the building far from the engines, a pipe run would have cost too much—especially since the pool requires heating just three months a year.

Kress and Zovic explored putting hot water through an absorption chiller to produce cold water for the central air-conditioning system, but they decided not to do it. "We would have saved more money because at night and during parts of the day we aren't using all of the hot water we produce," Zovic says, "but I was afraid of the cost and the equipment's high maintenance requirements."

They also opted against rewiring the hotel's electrical panels to allow the new distributed-energy system to sustain the hotel's basic electricity needs during a utility blackout. That would cost another $60,000. "At this time, we don't have the money to do it," Zovic says. "We can still go back to do it. It has nothing to do with cogeneration; it's strictly what you do with the power output. For now, we have a diesel generator that can supply emergency power to run the hotel."

The net cost per kW for the project was about $2,200. The retail cost of the Radisson's cogeneration equipment was $690,000, but a 30% rebate from Southern California Gas reduced Kress's capital outlay to $483,000. The payback period would have been about 4.3 years based on retail cost, but thanks to the rebate, it is only about three years. Here's how Kress calculates the payback period:

Assume that the system generates 300 kW during 8,000 hours in a year (91.3% of the time), for an annual total of 2.4 million kW. If that power costs $0.05/kW less to produce than Edison would charge for it, the hotel will save $120,000 a year on electricity, plus another $40,000 a year for waste heat recovery (domestic hot-water production), for a total annual savings of $160,000.

• Retail: $690,000 ÷ $160,000 annual savings = 4.31 years payback period.
• After 30% Rebate: $483,000 ÷ $160,000 annual savings = 3.02 years payback period.

A larger plant would have a lower net cost per kW but a higher total capital cost and a longer payback period. Installation costs also would increase modestly because a larger system has a larger footprint, requiring more excavation and a bigger concrete pad. "That's important to a lot of people," Kress says. "In Newport Beach, real estate is expensive." More sound attenuation also would be required to maintain a tolerable noise level in the immediate vicinity of a larger system.

Kress postulates an alternative system with two generators producing a total of 500 kW. The larger system's net cost per kW would be about $1,700, based on a retail cost of $850,000. With the 30% rebate, the out-of-pocket cost would be $595,000 (23.1% more than for the smaller units).

The larger system would run fewer hours in a year, primarily during the peak summer months. In the actual operation of such a system, only one generator would be running most of the time. Based on 6,000 hours of operation in a year (25% less time than the smaller plant), which Kress says is "pretty generous," such a system would produce about 2.75 million kW (14.6% more than the smaller plant). With the per-kW cost also $0.05 less than Edison's rate, the larger plant would yield an annual savings of $137,500 on electricity, plus $40,000 for waste heat recovery, for a total annual savings of $177,500 (just 10.9% more than the smaller system).

• Retail: $850,000 ÷ $177,500 annual savings = 4.79 years payback period.
• After 30% Rebate: $595,000 ÷ $177,500 annual savings = 3.35 years payback period.

Thus, the payback period for the larger plant would be about six months longer at retail and about four months longer after the rebate. "Those extra months make a huge difference," Kress declares.

Kress advises anyone contracting for supply-side power "to go with a company that is truly reliable and strongly financially backed and that is capable of doing the project on a turnkey basis so you don't have to get involved with change orders.

"As a demand manager, I often go around to look at other people's projects, and I've seen other people do nonturnkey projects that were nightmares. Even a good engineer or an MBA with project flow charts can have delivery-time mix-ups, and people who are supposed to come in and don't show up."

DTE handled all approvals and installations for the Radisson system. "California is a pretty adversarial state when it comes to getting anything done if you put in a smokestack, increase decibel levels, or encroach on a parking space, but they had the professionals to handle everything smoothly," Kress says. "I'm happy I paid the extra money and got DTE to take all that away from me. It was the smartest move I ever made."

Installation was uncomplicated because the units were completely fabricated in the factory and ready for installation when DTE shipped them. "No field erection was involved," Fallek notes. "They went in very quickly and easily."

The hotel's owners asked Kress to spend considerable time on the job site, supervising the installation on their behalf. He says DTE Senior Project Manager Neil "Morty" Mortenson "made my job so easy."

Kress says the system experienced "no significant downtime" in its first month of operation, and when minor glitches occurred, "they fixed [them] fast and they fixed [them] right. That impressed me further that I'd made the right decision."

In addition to the turnkey arrangement, monitoring resources and prompt service are especially important to Kress. He is paying DTE about $310,000 for a three-year monitoring and maintenance agreement. The Radisson's system is monitored remotely around the clock from DTE's energy|now System Operations Center (SOC) in Farmington Hills, a Detroit, MI, suburb.

"We developed the SOC so we could work with distributed energy to monitor and control the equipment remotely," Fallek says. "We're constantly monitoring the units' operation on our computer screens to make sure they're running properly. Our service contract enables us to do servicing on the units as required. If we detect a glitch, we dispatch a local service person."

Kress also can access the Radisson units' operating data on his home computer around the clock. He uses that capability for billing. Although he could troubleshoot the system himself, he lets the SOC do it instead. That way, if a unit shuts down overnight while he's asleep, the SOC knows it immediately and can dispatch a repair crew to fix the problem.

The SOC also fine-tunes the system on a regular basis to keep it running smoothly. "We look at the weekly load profile," Fallek says. "Then we send instructions to the units and tell them when to turn on and off during the week. We may want one to be the lead unit on Monday, the other on Tuesday, and so on, allowing the two units to get an equal amount of run hours. That balances the maintenance so one unit doesn't work harder than the other."

GEORGE LEPOSKY is a science and technology writer based in Miami, FL.

DE - Jan/Feb 2004