part 1: overview of cogeneration and its status in asia - Fire

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Cogeneration in Asia today 59 1.5.2 Launching of innovative facilities management schemes Many industries have been compelled to go for captive power generation, but do not have the skill and competence necessary to operate these units efficiently. Though they realize the importance of increasing efficiency of their generating facility, they are not willing to lose focus on their core businesses. A captive power plant presents itself as another cost centre, without giving any return from the investment or directly contributing any profit to the company. Moreover, it requires qualified staff and management time. Initiatives have been taken by specialized companies to offer facility management services to such enterprises so that all their energy supply needs are met and guaranteed, allowing the enterprises to concentrate on their core business activity, to avoid making investment on energy supply, and to mitigate operation and maintenance risks. All that they have to do is to pay their monthly energy bill, as they would have done in the case electricity was purchased from the grid. Figure 1.3 A typical facility management company (PT. Cogindo DayaBersama) Having well qualified and experienced staff, the facility management firms shoulder the responsibility of investing on the cogeneration plant, managing the operation and maintenance as well as fuel supply, spare parts and supply of consumables. Acting as the sole point of responsibility, these firms strive to provide quality, reliable and cost-effective energy products since energy is their core business. 1.6 Philippines Boundary of Industrial/Commercial Area Industrial or commercial activity Activity of the Enterprise All forms of energy Monthly energy bill Cogeneration Plant Owned by the Facility Management Company The base-load or stand-by generating capacity of industries in the Philippines is estimated to be 600 MW, 58 per cent of which is operated in cogeneration mode. Industries with cogeneration systems have generally designed their equipment to meet only the on-site electricity needs. Many of these facilities are found to be under-utilized. Most of the cogeneration installations have been commissioned prior to the oil shock of the 1970s. Fuels Spare Parts & Consumables O&M Activities & Personnel
60 Part II: Cogeneration experiences in Asia and elsewhere Sugar sub-sector alone accounts for about 60 per cent of the total generation capacity of 346 MW. Other sub-sectors having important cogeneration capacities are the pulp and paper, wood and petrochemical industries. 1.6.1 Policy and institutional framework for supporting cogeneration 7 Studies conducted by the Department of Energy (DOE) place the cogeneration potential at around 400 MW. The government has manifested a growing interest to promote industrial cogeneration, with the following rationale: 1. development policy: recognizing that adequate power supply is one of the basic prerequisites for sustained economic growth, decision was taken to allow private sector participation in the power sector; 2. additional resources: the private sector can be expected to bring additional resources or equity funds; 3. efficiency improvement: many industries with continuous demand for low quality steam can install power generation units and use the waste steam for industrial process needs, thus high fuel use efficiency can be achieved; 4. environmental benefits: cogeneration offers substantial reductions in exhaust gas emissions. Government has therefore instituted policies, incentives and programs for supporting cogeneration along with renewable energy technologies. The Executive Order No. 215, which took effect in July 1987, allows for private sector participation in power generation, including cogeneration. It applies to those intending to sell the generated electricity to the utility or to third parties. Those wishing to qualify as a cogenerator have to satisfy certain technical, efficiency, and financial criteria. Fiscal incentives extended to the cogenerators include income tax holiday for six years, reduced duty of only 3 per cent on imported capital equipment and spare parts, tax credit on domestic capital equipment and spare parts and tax deduction for labour expenses. For purchase of power from cogenerators having less than 10 MW capacity, standard power purchase rates are adopted which reflect the structure of capacity and energy costs of the national utility for varying levels of power availability and dispatchability. The electric utility shall sell power to the cogenerator upon request. The back-up power provided by the utility will be at a rate approved by the Energy Regulatory Board. The host utility is obliged to interconnect and wheel the electricity generated to a third party; for cogeneration with less than 10 MW capacity, the utility will shoulder all the costs. For cogeneration facility of any size, maintenance cost of the interconnection facility shall be borne by the electric utility. In September 1997, the National Power Corporation signed a power purchase agreement for the biggest cogeneration facility that will add 304 MW of power to the Luzon grid and at the same time, supply quality steam to an oil refinery and a chemical plant. 7 A. M. Nabong, “Status of cogeneration development in the Philippines”, ESCAP South-East Asia Sub-regional Seminar on Promotion of Energy Efficiency and Pollution Control through Cogeneration, Hanoi, 10-11 November 1998.
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PART 1: OVERVIEW OF COGENERATION AN
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