Electric Generation in a Nut Shell
With all of the talk about Berlin Borough’s Electric Generation Project, maybe a few quick facts might help.
1. Why is the Borough Council considering internal generation?
If we run a four megawatt generator just six hours per year, we can save over $300,000 per year. Just to re-emphasize that this is not a misprint, run the generator six hours per year and save $300,000 or more.
That, in a nut shell, is why internal generation for peak shaving is a no-brainer for Berlin Borough.
At first glance, this seems rather peculiar but it’s an intentional effort on the part of the Federal Energy Regulatory Commission (FERC) to incentivize what they call Distributed Generation and Peak Shaving, which basically means moving the electric generation closer to the load and shaving the peak off consumption during times of high energy usage.
The price we pay for energy is based on our consumption as measured during 6 one hours periods throughout the year and then used as a multiplier to factor the price that we pay on the following year. This multiplier is called our Peak Load Contribution or PLC. So it follows that if we can zero peg our PLC by running a generator at just the right time, we can reduce or eliminate our PLC.
Please bear in mind that the generator is NOT intended to produce continuous energy (Although they can do that should the grid go down) but will only run during a one hour window six times per year when they measure our PLC. As such, fuel consumption and maintenance are really not much of an issue. In fact, the money saved in energy consumption is more than enough to cover fuel and maintenance.
2. How much will this cost?
The cost depends on the size and type of generator that we select. For instance, if we wish to cover the borough’s entire load, we need to have a generator in the 4 megawatt class.
Your Borough Council is trying to find that balance between capacity and affordability that hits the “sweet spot” for Berlin Borough’s Energy Portfolio.
Our best estimates run from $505,000 for 1 MW to $1.8 million for 3 MW with a payback running at nine years for both.
3. What’s in it for me?
As you probably already know, Berlin Borough operations are largely funded not by taxes but by the proceeds from our municipal electric system through Payment In Lieu Of Taxes or PILOT. It’s the PILOT payments that support nearly all of the borough functions and allows taxes to remain at a mere 1.5 mills.
While the municipal electric system subsidizes everything else in the borough, your electric rates are the lowest of any municipal electric in the state. This is no small accomplishment and one for which we can thank the wisdom of our forefathers in retaining the borough’s electric system.
Our challenge is to continue that frugal tradition and maintain the electric system in a form that provides both PILOT subsidies and low rates. But with recent EPA decisions to close coal-fired power plants, forecasts show energy prices climbing by over 63% over the next ten years.
As a result, your Borough Council faces the dilemma of either raising electric rates to reflect the growing energy costs or raising taxes to compensate for the diminished PILOT subsidies from the electric system.
Fortunately, your Council is seeking a third option by adapting to the FERC mandated Distributed Generation / Peak Shaving price structure in an effort to maintain your bargain electric rates while retaining the PILOT subsidies that keep your taxes low.
That’s why Internal Generation is our opportunity to anticipate the coming energy challenge in a proactive way that keeps taxes low, rates even lower, and lights on in your home when the rest of the world is dark.