The US Postal Service embraces cogeneration.

By Lyn Corum

The processing and distribution centers of the United States Postal Service (USPS) operate seven days a week, and their sorting machines and sophisticated electronic controls cannot afford to be down for a few hours or a day. Since they can’t toss out that day’s product and start fresh the next day, downtime can mean bringing in additional overtime workers to catch up—at a cost perhaps as much as $1 million an hour.

“We live and die by critical delivery times,” says Joe VandenBerg, a project manager with the USPS. That would not be an unusual statement were it coming from an executive for a highly competitive, market-driven, service-oriented company. But the USPS? Most emphatically, yes—especially this day and age, when stiff competition is coming from United Parcel Service and Federal Express.

One of the major culprits for equipment shutdowns is dirty utility power—fluctuations and sags in electricity frequency and voltage. Honeywell Inc. has had a shared energy savings agreement with USPS since 2002 to provide energy conservation services at all its southern California facilities. When Honeywell recommended cogeneration systems at the San Diego and San Bernardino processing and distribution facilities, Ray Levinson, environmental manager for the USPS’s Pacific area, and his energy management team immediately signed on, realizing a cogeneration system would provide them with the secure backup power supply they needed.

Honeywell subcontracted with Northern Power, a subsidiary of Distributed Energy Systems Corp., to design, construct, and install two cogeneration systems: a 1.5-MW cogeneration system at the Margaret L. Sellers Processing and Distribution Center in San Diego and a 1-MW system at the San Bernardino Processing and Distribution Center. The San Diego system has been operating full time for about a year now, although bugs are still being worked out. The San Bernardino system was scheduled for installation in November 2006.

The USPS signed a second master contract with Chevron Corp. to provide energy conservation services to the USPS facilities in northern California, where it was responsible for installing 1.86 MW of solar and fuel-cell installations. Levinson says USPS now has a total distributed-generation load of 4.4 MW in California.

Focus Is on Cost Reduction
In his 10 years as an environmental manager in California, Levinson has seen a gradual evolution from a search inside USPS for scarce capital dollars to retrofit equipment, for sole-source contracts with utilities, and finally for shared savings performance contracts modeled after the federal government’s Super ESP contracts. With shared savings performance contracts, USPS does not lay out up-front costs to pay for the new projects. Prompted by California’s energy crisis, “we decided we had to do something,” Levinson says.

The systems are housed in sound-attenuating enclosures.

Honeywell and Chevron are responsible for whole building audits in the USPS’s 2,000 facilities in California. From the whole building audits, task orders are drawn up, including recommendations for energy-efficiency projects at between 20 and 50 small post offices and one or more larger buildings greater than 50,000 square feet. Levinson and local managers, including onsite maintenance engineers, then select those recommended projects that are to go forward with the help of technical advisors from Lawrence Berkeley National Laboratory working on behalf of the DOE’s Federal Energy Management Program (FEMP), which has a mandate to assist federal agencies with the technical evaluation of proposals.

In California, Levinson explains, the postal service has 60 buildings over 50,000 square feet, 30 of which are processing and distribution centers between 400,000 and 1 million square feet. These large buildings are responsible for 70% of the power consumed and provide the greatest opportunity for reducing utility costs. Of the 2,000 facilities, 421 have been audited; of those, 381 buildings have had projects installed. Lighting retrofits are typical for the small post offices. Projects at larger buildings typically include air-handling modifications along with the lighting retrofits. Annual energy costs in California alone are $80 million to $90 million. The organization will be happy if it can save $10 million annually, Levinson says.

Honeywell’s work is expected to deliver $4.1 million in energy savings per year in southern California alone. That includes the savings expected from the cogeneration systems. Statewide, the value of the predicted energy savings over 10 years is $108 million, just for the 381 buildings where projects have been completed. There are another 1,600 buildings to be audited or retrofitted.

Honeywell and Chevron are financing the project costs and will be paid back through the savings. The companies are tracking the energy usage of the retrofitted buildings to verify that the savings stipulated up front are being achieved. Payback periods must be 10 years or less, and savings must be based on saving utility dollars, Levinson says. They cannot include predicted labor savings based on the reduction of facility shutdowns due to power failures.

In northern California, Chevron selected PowerLight to install three solar photovoltaic (PV) systems: a 300-kW system in San Francisco, a 400-kW system in Sacramento, and a 910-kW system in Oakland. This latter project was deliberately sized at 910 kW to guarantee it would be larger than the 904-kW solar PV system installed by FedEx Express on its Hub facility at the Oakland International Airport (profiled in the July/August 2006 issue of Distributed Energy). Furthermore, a 250-kW fuel cell was added to the San Francisco installation. The San Francisco and Sacramento systems were dedicated early in 2006, and the Oakland system was dedicated in late October 2006.

Those installations were not the first experience with solar, Levinson says. In 2002, PowerLight installed a 127-kW system on the roof of the USPS’s Marina Processing and Distribution Center in Marina del Rey near the beach in Los Angeles. The USPS received a rebate of $6 per watt from the Los Angeles Department of Water and Power ($683,000) and $125,000 from FEMP for distributed energy resources funding. The USPS paid an additional $225,000 from energy conservation funds. The project was designed to save $25,000 a year and had a nine-year payback.

Soon after the installation, however, the building was sold. Because the solar system rested on the roof and was not affixed, it was moved and reinstalled on the processing center in south central Los Angeles.

The decision to install additional cogeneration systems at any of the remaining 25 processing centers in California will be based on the performance of the San Diego system, Levinson says.

Next on the plate is the USPS’s processing center in Hawaii, where Chevron was recently awarded the shared savings  contract.

Joe VandenBerg, the project manager for the San Diego and San Bernardino projects, will join the energy committee organized at the Hawaii processing center and introduce them to the contractor before it begins the building audit.

Siting Cogeneration
Charles (Chach) Curtis, vice president of onsite power at Northern Power, says that a company’s interest in cogeneration is usually driven by cost savings and a desire to enhance system reliability. The increased efficiency of a cogeneration system—as much as 75% compared to utility-generated power in the 30% range—means reduced carbon-dioxide emissions. Curtis says concern about global greenhouse gas emissions is becoming an important driver for cogeneration systems. A lot of public and private companies are looking to reduce carbon-dioxide emissions, and a cap-and-trade system would be an additional driver for cogeneration, he says.

Jenbacher engines were selected for two US Postal Service facilities in California.

Curtis describes what makes a good site for cogeneration: a stable electrical load on a continuous basis and a coincidence of heating and cooling loads lining up with the electrical demand on a daily basis. “The more hours you can run the system at full capacity, the more efficiently it operates and improves the generation of cost savings,” he says. Sizing a cogeneration system that meets peak electrical usage would double its baseload size, and that additional power would go unused for most of the year. So Northern Power sizes a system to the facility’s baseload.

The USPS’s large processing and distribution centers provide a good fit with cogeneration from a cost savings standpoint and are like industrial plants constantly running large equipment, Curtis says. The sorting equipment throws off heat, and the warm, ambient air added to that generated by a large number of employees creates the need for a stable cooling load. Using all of the waste heat produced by the engine to create that cooling load offsets natural gas usage in the absorption chillers.

Perhaps more important than the cost savings is the reliability the USPS cogeneration systems will provide. The computer-controlled sorting machines use programmable logic controllers that are susceptible to power distortions endemic to utility power. For example, the San Diego processing center is at the end of a distribution line, and the controllers always sense a momentary sag in voltage when a large pump motor is turned on in the factory next door. The controllers, sensing that sag, will shut down the machinery. If that happens, employees have to manually reload the mail over several hours.

With the cogeneration system in place, a monitoring system integrated with the electrical system will sense the utility power exceeding or sagging beyond the system’s bandwidth. The monitoring system will throw a breaker, cutting off contact with the utility line, and the cogeneration system will take over the internal load.

The monitoring system will, at the same time, disconnect such noncritical loads as lighting in the offices and the warehouse to keep the total building load below the peak capacity of the engine generator. The critical equipment that must continue operating are the sorting equipment, air handlers, and lighting in the areas around the sorters.

Northern Power has developed a unique business model of packaging its cogeneration systems at its facility in Waitsfield, VT. After assembling and testing all the components each cogeneration system is stowed in two shipping containers and moved out on a rail spur that begins in the facility (it was a railcar construction facility in a former life), making it easy to transfer the containers to the shipping point from which they are moved by train to the West Coast.

Curtis says building the cogeneration package there keeps labor costs down to avoid California’s higher rates. He adds that shipping all the equipment loose to the job site generally increases installation time and makes it harder to control quality.

Industrial facilities lend themselves to the packaging concept, since the sites usually have room outside the building where the package can be dropped in place. At commercial sites it is usually impossible to drop packaged units inside the building or in a parking garage. Instead, they have to be built from the ground up, thereby increasing costs. However, rooftop locations are good for packaged units, although the runs for cable and wiring will be more expensive, Curtis says.

The San Diego Installation
The Margaret L. Sellers Processing and Distribution Center in San Diego is 670,000 square feet. It employs 1,500 people and has a 2.2-MW electrical on-peak load. The 1.5-MW cogeneration system installed in late 2005 cost $3.1 million and will reduce annual energy consumption there by an estimated 1.7 million kWh per year. It received a $1 million rebate from the California Public Utilities Commission’s Self-Generation Incentive Program (CPUC’s SGIP).

The components are a 1.5-MW 612JGS GE Jenbacher engine, a fabrication model generator, an API heat exchanger, and a heat-recovery unit. A 300-ton Thermax hot water absorption chiller was also installed to replace the existing gas-fired absorption chiller. Using waste heat instead of natural gas to generate cooling eliminated the need to purchase over 165,000 terms annually.

The engine generator was installed in a sound-attenuated enclosure located outside the facility and adjacent to the mechanical equipment rooms. The absorption chiller and heat exchanger are located in the mechanical equipment room where the old chiller had been.

“We had to build a big-capacity plant to deal with the dirty electricity,” says Martin Graham, manager of maintenance operations support for the USPS. This explains the choice of a system size larger than the 1 MW required to qualify for the state rebate.

The USPS has been paying a $5,000 standby charge for a second distribution feeder line on San Diego Gas & Electric’s (SDG&E’s) grid as an insurance policy. “Once we have a good history with the cogeneration system, we’ll close down the second feeder line,” Graham says.

In normal operation, the cogeneration plant will produce enough electricity to supply 85% of the facility’s forecasted power requirements. The system’s overall fuel efficiency will be about 77% with waste heat recovery. The cogeneration system is also expected to reduce greenhouse gas emissions by up to 40%, according to Northern Power.

Staff is still working out the cogeneration system’s bugs. It came online about a year ago. Although operating full time, the equipment is going through normal startup pains described by Graham as “hiccups.”

One of those pains, according to Graham, is with the use of waste heat from the engine by the absorption chiller. The waste heat was so hot, it changed the philosophy of how the maintenance team had historically treated water used by the mechanical chiller that was replaced. The hot water coming into the new plate-and-frame heat exchanger exacerbated the mineral buildup, causing chemicals to stay in suspension with the cooling tower water instead of separating out. The trick in making the water treatment work, says Graham, was to get the new chiller in balance with the engine’s waste heat to maintain the correct cooling water temperature.

The cost of natural gas to operate the cogeneration system was an early worry of the USPS team. Levinson says that when the contracts for the two systems were signed, gas prices had skyrocketed. Headquarters in Washington had signed long-term contracts with Tiger Gas with some discount off the NYMEX price, but still it was high. Levinson and Graham are feeling better now that their gas prices have come down to $4.50 per thousand British thermal units.

Because of the cogeneration system’s variable performance while it is settling in, Graham says, it is still too early to see electricity reductions.

He has seen some reductions in the dollars paid out for electricity. He says he is definitely a proponent of cogeneration and confident the system “will give us peace of mind and save money.”

The San Bernardino Installation
The San Bernardino Processing and Distribution Center employs 900 in its 275,000-square-foot facility and has a 1.8-MW on-peak load. The city of San Bernardino sits below California’s Mojave Desert in the San Gabriel Valley east of Los Angeles—a very hot place with immense air-conditioning needs, making electricity rates and demand charges very high.

According to Honeywell, the facility purchases 9,400,000 kWh annually from Southern California Edison (SCE), and the new cogeneration system is designed to displace 79% of those purchases. Net annual savings, according to Honeywell, are expected to be $360,000. It received a $1 million rebate from the CPUC SGIP program.

The $2.5 million cogeneration system includes a 1-MW 320 JMS GE Jenbacher engine and a fabrication model generator, both packaged with a water-jacket heat exchanger mounted on the base of the engine. Also part of the package is a UTRI waste heat–recovery unit, which will boost the water temperature before it goes into the 220-ton Thermax hot water absorption chiller.

The cogeneration system was sized to 1 MW to fit the available state incentive rebates. System efficiency will be comparable to that of the San Diego cogeneration system, says Seth Beck, the site’s Northern Power project manager. By displacing the current electric chiller alone, it will save 1,867,000 kWh annually.

As this story was heading to the printer, the engine/generator package and system controls were being assembled on a skid at Northern Power’s packaging facility in Vermont. There, the engine is installed and balanced with its components and generator. That equipment is then placed in a container for shipping. The electronics and heat recovery unit are installed in a second container on top.

At the processing center site in San Bernardino, subcontractors have been running piping and wiring and pouring the concrete pad. When the containers arrive, the cogeneration system and all its components will be dropped onto the site and tied in to the electrical wiring and chiller.

Installation Complexities
VandenBerg provides some insight into the complexities these projects encounter as they are being installed. “The amount of coordination that goes into this is phenomenal,” he says, since it involves obtaining air permits, certification with air-quality management districts, and interconnection agreements with the utilities involved: SDG&E and SCE.

VandenBerg says that to do this he had to coordinate the groups talking with each other. For example, the policy at each utility is to deal only with the customer, USPS. But Honeywell was handling the paperwork in conjunction with Northern Power and needed to talk with the utilities. Furthermore, SCE is particularly rigorous with its timelines for review and inspections of equipment before a cogeneration system is turned on.

Shutting down processing centers that operate 24 hours a day to test the new electrical systems for operation is also tricky. In these cases, weekends where there is a holiday on Monday was chosen. In San Diego, VandenBerg chose Veterans Day weekend last year when two full days could be devoted to installing breakers, doing switchgear testing and other infrastructure work that can be done only when power is turned off. Columbus Day weekend was chosen at the San Bernardino facility for completion of that work.

To cap this story off, in October 2006 Ray Levinson was presented an Exceptional Service Award by the DOE’s Federal Energy Management Program in ceremonies at the National Press Club in Washington, DC. This award was one of the seven 2006 Federal Energy and Water Management Awards handed out by the DOE. His energy-management team was awarded a Presidential Award for Leadership in Federal Energy Management for Implementation, also from the DOE, in a ceremony at the White House a day later.

DE - May/June 2007