1 EERMC Public Meeting on Combined Heat and Power September 17, 2013

2 Rhode Island Legislation “Beginning on November 1, 2012 or before, each electric distribution company shall support the installation and investment in clean and efficient combined heat and power installations at commercial, institutional, municipal, and industrial facilities….”

3 National Grid Electric’s 2013 CHP Program  System qualification  Must be an electric customer  System must provide electric and thermal output  Thermal leading or using waste hear to generate electricity  55% minimum system efficiency using HHV  Technology must be one of following: IC engine, GT, steam turbine, back pressure turbine, or fuel cell  Must be cost effective  Recruitment through vendor and customer education  Potential for prequalifying vendors  Align vendor presentations to customers with Company technical requirements  Scoped through engineering study  Measure thermal loads  Size CHP  Assemble cost estimate  Consider barriers to successful implementation  Cofunded by utility if done by preferred firm

4 National Grid Electric’s 2013 CHP Program  Must pass screening process and RI benefit cost test (BCR > 1)  Benefit cost test must include cost of all fuels and CHP maintenance  Economic development benefit  Air quality benefits  Adjusted distribution benefits

5 National Grid Electric’s 2013 CHP Program  Incentive available for eligible projects  $900/kW per net kW for projects 55% to 59.99% efficiency  Net kW is nameplate kW output minus auxiliary  $1,000/kW for projects 60% or greater efficiency  25% bonus for any efficiency if facility also implements (or has implemented energy efficiency in previous five years) of at least 5% of site energy use  Also eligible for Advanced Gas Technology Incentive  Total incentive package (EE, AGT and performance rebates) cannot exceed 70% of total project cost.  Incentives subject to budgetary limitations and caps  Large projects  Projects 1 MW or larger eligible for a performance incentive of $20/kW- year for metered load reduction  Projects 1 MW or larger commit to 10 years of operation or will have to refund prorate portion of incentive  Incentives greater than $3 million subject to PUC approval

6 National Grid Electric’s 2013 CHP Program  Other requirements  Compliance with Minimum Requirements Document  Thermal and electric metering required  Metering hardware and data collection services may be provided at little or no cost to the customer  O&M services contract required through first major overhaul  May not operate until Company provides authorization to interconnect  All systems require commissioning; 20% of incentive payment retained until commissioning is complete  ISO-NE capacity rights belong to National Grid  Customers will be billed on general services tariff, with a minimum customer charge, as opposed to backup service rate

7 AGT Program (Advanced Gas Technology)  The program is based upon adding natural gas load during the company’s off peak period, rather than reducing load through conservation efforts  To accomplish this, the company gives incentives to innovative projects that add non-heating load  Incentive is minimum of  the additional margin gain from the project, up to 75% of the project’s future margin  75% of the project cost  the amount needed to buy down the payback period to 1.5 years  remaining AGT fund balance  Any rebate over $250K needs PUC approval  Customers are allowed to participate in both EE and AGT programs as long as they meet both sets of requirements

8 RI CHP Target Markets  Markets that we found to be the best target segments are:  Hospitals  Universities/Colleges  With Central Heating Plants that have a continuous summer load  Industrial  Nursing Homes  These are all large users of hot water & electricity that are coincidentally used

9 How is the program performing this year? Successes:  A 12.5 MW cogeneration system being installed at a local plastics company.  A 60 kW unit being installed at a local multi-family site Ongoing:  Two projects being reviewed at RI universities Projects that didn’t go ahead:  CHP at (3) different Hospitals  A 1.1 MW at a local college

10 Current Barriers to CHP in RI  Economics don’t meet customer’s requirements  For example: Nationalgrid has done several TA studies on projects ranging from 700 kW to 1.5 MW and these have came back with paybacks ranging from 6.3 years to 13 years.  Low priority on customer’s radar (not their core business) Lack of Gas Distribution Problems found with past projects (and our solutions): Waste heat misstatements or incorrectly installed Lack of maintenance (Now require service contract) Fuel price fluctuation

11 Discussion

12 What do you think about National Grid’s 2013 CHP Initiative?

13 Have you noticed any differences in the receptiveness by potential host customers to CHP?

14 What more should National Grid be doing to support CHP development in Rhode Island?

15 What do you, your company, or your customers perceive the benefits of CHP to be?

16 What factors make CHP projects successful or unsuccessful?

17 What is your assessment of the potential for economic development of CHP in Rhode Island?

18 Summary of meeting discussion and next steps