Cogeneration, Reciprocating Engines

What’s Fueling the Fire?

Issue 11 and Volume 118.

HIPOWER SYSTEMS Custom Natural Gas Generator.
HIPOWER SYSTEMS Custom Natural Gas Generator.

The Growing Market for Natural Gas Generators and Engines

By Rafael R. Acosta, HIPOWER SYSTEMS

The growing popularity of natural gas as a fuel source is no secret to most power industry professionals, given that natural gas has at least partially replaced oil and coal in power plants across the nation. However, natural gas is becoming an increasingly popular fuel for industrial and commercial generators (gensets) as well. A 2013 report from Pike Research asserts that the market for natural gas generators will rise to nearly $10 billion by 2018.

Rising diesel costs, coupled with a corresponding drop in natural gas prices, are often cited as a reason for the increased interest in natural gas engines and gensets. As is often the case with market changes, the growth of the natural gas engine and genset markets is far more complex than that. Myriad factors, from regulatory and environmental compliance pressures to new developments in genset and engine features, are driving demand and compelling commercial and industrial facilities to power their generators with natural gas.

A Quick History

It seems logical that growth in the natural gas generator market would be paralleled by growth in the market for natural gas. Statistics from the U.S. Energy Information Administration (EIA) appear to support this assumption. Petroleum is still king in the United States, but since 2006 its use has been in decline. As of 2012, natural gas constitutes 27 percent of total U.S. energy consumption.

However, according to the EIA much of this consumption occurs in only a few industries-especially chemical production. The need for feedstock in this industry, specifically in ammonia-based fertilizer and methanol plants, is the key driver of industrial natural gas consumption. (Natural gas liquids are steam-cracked in chemical production. These plants are the most natural-gas-intensive industrial end users.) Furthermore, the EIA has predicted that natural gas consumption in the residential and commercial sectors may drop between now and 2015 before rising again. Yet, natural gas generators will continue to explode in popularity.

This creates an interesting conundrum. Given that the primary use of gas in chemical plants isn’t to power gensets, and that commercial customers aren’t using as much gas, what is behind the expansion of the natural gas generator market? A deeper dive into the current environment will demonstrate what is fueling this growth.

Byproduct Gas Finds a “Home on the Range”

One of the primary areas showing substantial interest in natural gas gensets is oil drilling, where natural gas is a byproduct of oil production. This gas has traditionally been flared off, a process once recognized as the more “environmentally friendly” option, compared to emitting the gas unburned.

However, with pressure mounting from state and local regulatory agencies to reduce CO2 emissions at exploration and drilling sites, petroleum sector companies are seeking better alternatives. In North Dakota for example, new flaring standards require that drillers must capture 90 percent of all byproduct gas by 2020. To reach this figure, requirements are being phased in beginning immediately. As of October 2014, the required capture percentage has risen to 74 percent.

Capturing rather than flaring gas makes economic sense, even with natural gas prices so low. In the Bakken alone, drillers burn off more than 350 million cubic feet of natural gas each day, more than $100 million worth each month. Not only are environmentalists upset about this, but mineral rights holders aren’t pleased either. Most oil producers are ramping up to sell this gas, but processing and transportation beyond a local market can make such a solution complicated and expensive to implement.

Savvy producers are exploring every possible avenue for using this gas efficiently, with one logical solution being to replace older, inefficient diesel generators with natural gas units. These gensets can burn properly treated byproduct (e.g. well-head) gas to drive oil well pump jacks, power man-camps and other buildings, and meet additional electrical needs close to the well site. In making these upgrades, producers gain productive use of more byproduct fuel locally, and acquire more efficient, feature-laden generators at the same time.

Of course, well head gas must be analyzed and cleaned before it can be burned safely in a generator, and this can present an additional complication. This usually happens in a multi-stage process of conditioning (removing impurities) and polishing (removing water and condensate). However, a handful of manufacturers, including HIPOWER SYSTEMS, make generators that can burn raw gas directly out of the wellhead. Gensets such as these provide natural gas producers with even better value from their natural gas generator purchases.

Satellite Image of Flaring in North Dakota
Satellite Image of Flaring in North Dakota

Managing the Greenhouse

Another factor driving the market for natural gas gensets and engines is the intense focus on reducing greenhouse gas emissions. The most well-publicized benefit in this area relates to the use of natural gas as a replacement for coal and petroleum, especially in power plants. In 2011, total U.S. CO2 emissions were down by nearly nine percent from peak levels of 6,020 million metric tons in 2007, an improvement largely attributed to the substitution of natural gas for coal and petroleum in power plants.

However, the lower environmental price tag of natural gas is also spurring sales of gensets and engines that burn this fuel. In a fitting twist of fate, natural gas gensets are becoming key players in the success of alternative power producers such as wind farms. Not only do generators often power some of the equipment on remote wind farms, but they also provide power-supply continuity for these intermittent power sources.

In another area, natural gas engines are playing a role in expanding the feasibility of combined heat and power (CHP) systems. These cogeneration systems, which produce energy not only from the power source itself but also from the heat which that source emits, are expected to be a major contributor to the reduction of CO2 emissions in the United States. CHP systems can operate at efficiency levels as high as 80 percent, a marked improvement over conventional power supplies, which operate at only about 45 percent.

Per a joint report from the U.S. Department of Energy and the Environmental Protection Agency, CHP systems are poised to cost-effectively satisfy a significant portion of the growing U.S. electricity requirements while continuing to meet the country’s thermal demands. Currently, CHP makes up about eight percent (82 GW) of total U.S. generating capacity, but the Obama administration has set an official goal of upping that capacity to 122 GW (a 40 GW increase) by 2020.

One of the keys to achieving this goal is broader adoption of CHP systems, especially in commercial and industrial buildings, as opposed to their current use predominantly in power plants. New developments in the latest generation of natural gas reciprocating engines are making these systems cost effective down to 50 KW, which analysts expect to be a major driver of increased adoption.

The Little Engine That Could

Another dynamic accelerating the popularity of natural gas generators is the extraordinary amount of function and technology that can now fit into a fairly small and portable package. Thanks to miniaturization and more efficient designs for engines, components, and enclosures, it is now possible to find fully self-contained, enclosed natural gas generators, complete with built-in transformers and power distribution panels, with working power ratings of several MW.

Some of these units are stationary and must be lifted by crane to be transported from one location to another. However, using a truck-type chassis, it is possible to manufacture units that can be towed by a sufficiently powerful vehicle. These units can have working power ratings of more than 2 MW.

Even more impressive is the size of these self-contained packages. Excluding the wheeled chassis, an enclosed generator in the 350KW size range might measure no more than 13 by seven feet, yet be equipped with 110-percent spill containment, exterior power distribution panels with receptacles and Cam-Loks, and other popular features. Sub-base fuel tanks can make the entire power generation package even more compact. In urban environments, when delivery down narrow roads is a factor, or in any situation where space is at a premium, having so much power in such a small package is a benefit.

fossil-fired electric

Power on Demand

Between the increase in disruptive weather events and the vulnerability of the power grid (with projected upgrade costs reaching $2 trillion), there has also been a measurable increase in sales of permanent standby generators; the choice of fuel for these generators is often natural gas. In many cases, these are not small units previously popular for powering emergency exit lights and other limited power needs. Rather, industrial and commercial enterprises in all locations are opting for units that can power their entire operations for hours or even days. Choosing natural gas units not only makes greater economic sense than ever before, it also enables urban purchasers to more easily meet regulatory and other requirements when applicable, and to take advantage of existing pipeline supply channels.

HIPOWER SYSTEMS noticed that Hurricane Katrina generated some interest in these units, but Superstorm Sandy was really the wake-up call. If a city as modern and well-run as New York can be significantly impacted by storm-related power outages, everyone is at risk. Natural gas generators became particularly enticing after this event, because the damage and flooding were so widespread that tankers and trucks could not deliver diesel fuel to locations with standby generators. Had the owners of those generators installed natural gas units instead, their pipeline supply would likely not have been affected.

Furthermore, both industrial and commercial companies are becoming much more cognizant of the demand-based benefits-including peak shaving-of standby generators. Today, net-zero power generation is a possibility in many areas, and using inexpensive natural gas as the fuel source increases the financial benefit all the more.

A Win for Everyone

Diesel generators and engines are not going away anytime soon. For many industries and applications, they are still a practical solution. However, there’s no doubt that natural gas generators and engines are more appealing than ever. The supply of domestically-produced natural gas is steadily increasing, and prices are dropping correspondingly. This is due in part to the exploration of unconventional sources of gas like coal beds, tight sandstone, and shale formations. Because of this, natural-gas powered generators hold a lot of promise for many applications.

Furthermore, companies in all sectors are seeking ways to improve their environmental record for public relations reasons, if not regulatory ones. According to a March 2012 Nielsen report, “The Global, Socially Conscious Consumer,” 64 percent of North American customers say they prefer to buy products and services from firms that give back to society. Among the socially conscious solutions they wanted their companies to embrace, environmental improvements were the number one choice. When organizations use natural gas engines and gensets to meet their distributed power needs, they can rightly claim that they are “cleaning up their acts.”

Author:

Rafael R. Acosta is president of HIPOWER SYSTEMS, a supplier of power distribution and standalone power-generation equipment in the U.S. and Canada.

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