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The Pace of Cogen

For the last few years private and public facilities in New York City and Long Island are more motivated than ever to investigate the pros and cons of cogen. While the many factors driving this interest by owners is well documented (Superstorm Sandy, natural gas versus steam, and incentives from local governments and utilities), the path to making an educated decision on implementing cogen is challenging.

For most customers the return-on-investment from implementing large and small scale cogen is often easy to determine. Buying electricity and making or buying thermal energy is expensive. And, the aging infrastructure of many plants means the cost of making thermal energy is always rising. When the cost of continuing to buy and make electricity and thermal energy is compared to the first cost and life cycle cost of cogen, owners know what they want.

Like any facility improvement project, there are dozens of options and decisions to be made before reaching a return-on-investment decision. While many owners want to apply their traditional approach to real estate decisions with cogen, they quickly realize the rapid pace of these projects is often the most challenging issue they will face.

While there are many factors driving this rapid pace, the primary driver is money. Cogen is not financially viable for most customers without government grants and tax credits. While tax credits are usually straightforward, grants through agencies like NYSERDA or utilities like ConEd have unique requirements. These requirements vary based on the location and size of the cogen project, the type of technology being used, and more. So what can facility owners do to keep pace and secure these needed grants?

There are many options for owners to consider utilizing. One is to work with their stable of readily available consultants. While these consultants have the requisite technical aptitude they are limited to their traditional roles of design, bid and build. While these skills are valuable and necessary, they are needed much later in the cogen development process and therefore don’t match the rapid pace of these projects.

Additionally, owners who use their traditional approach need to retain a large number of consultants and invest a lot of dollars to reach the point in the process where an agency or utility will decide to award their precious grants. Many owners have decided to alleviate this problem by segregating their cogen projects from other projects. As part of this split they are retaining the services of firms that have financial, design, build and service capabilities in a single organization. And, owners are utilizing pseudo-IPD/collaborative project delivery contract models, which are better suited to keeping pace with the cogen project development cycle.

For the foreseeable future it is unlikely the pace of cogen will either slow or stall. Owners need to continue refining their approach to evaluating these projects to ensure they do not miss out on the generous incentives being offered. While many design and construction firms may desire to adapt their approach to keep pace with their client’s needs, few have done so to date and owners need to do their due diligence to secure the services of design and construction firms who have both experience in alternative energy project types and a ‘cogen culture’ in their organization.