Paper mill in Louisiana has a 15 MW cogeneration unit selling excess power back to Entergy. Getting credits on Schedule COSP but the avoided cost calculation seems low. They're getting about $0.035/kWh while industrial rate is $0.048/kWh. Entergy says avoided cost is based on marginal generation cost, not retail rates. This normal? Seems like a raw deal for the customer.
Cogeneration Credit Calculation Issues
Isaac - That's unfortunately typical. Avoided cost is usually way below retail because it only reflects what the utility would pay for wholesale power generation. The retail rate includes transmission, distribution, and other costs they're not avoiding when you sell back. Most cogenerators break even on fuel costs and get the thermal benefits as the real value. What's their heat recovery setup like?
Brenda, they're using steam from the turbine for their pulp digesters and paper drying process. So the thermal recovery is the main benefit, you're right. Still frustrating though - seems like there should be more value for providing grid support and reducing transmission losses. Is there any regulatory push to increase cogen compensation?
Some states are looking at grid modernization credits for distributed generation, but it's slow going. Louisiana PSC hasn't been very progressive on that front. Best bet might be exploring direct power purchase agreements with large industrial neighbors if any are close by.