CHP in the Hotel and Casino Market Sectors


§ CHP

&EPA COMBINED HEAT AND
POWER PARTNERSHIP

££	 \

CHP in the Hotel and Casino
Market Sectors

Prepared for:

U.S. EPA
CHP Partnership

December 2005

Prepared by:

Energy and Environmental Analysis, Inc.

www.eea-inc.eom

For more information about the EPA CHP Partnership, please
visit: www.epa.gov/chp or email: chp@epa.gov.

For more information about ENERGY STAR for the hospitality
industry, please visit: www.energystar.gov/hospitality.

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CHP in the Hotel and Casino Market Sectors

Note: This report was initially released in December 2005. In November 2007, EPA completed an
addendum to this report containing updated market information. The 2007 addendum can be found on
the CHP Partnership Web site at www.epa.gov/chp/documents/hotel_casino_addendum.pdf.

EXECUTIVE SUMMARY

Hotels and casinos have a number of characteristics that make them good targets for installing
combined heat and power (CHP) systems. The facilities operate around the clock year-round; a portion
of the industry has significant thermal and electric loads even at night: they have significant air
conditioning requirements that could be met with thermally activated technologies running off the waste
heat of an on-site generator; and there are establishments in every state in the U.S.

Hotel and Casino Industry Structure

The industry consists of nearly 48,000 establishments with over 4.4 million guest rooms. Table
ESI shows the breakdown by size. The industry revenues for 2004 were $113.7 billion, up 8% from the
previous year.

Table ES1 Number of Hotels and Lodging Establishments by Size

Number of
Rooms

Property

Rooms

Average
Rooms

<75

27,464

1,163,668

75-149

14,326

1,524,099

106

150-299

4,235

847,089

200

300-500

1,070

398,491

372

>500

503

478,561

951

Total

47,598

4,411,908

Source: American Hotel & Lodging Industry Association, 2005 lodging Industry Profile

Casinos and gaming overlap in the hotel and lodging industry to the extent that there are nearly
300 land-based casinos with associated lodging. There are commercial gaming operations in 11 states.
The two largest commercial gaming centers are in Nevada (Las Vegas, Reno) and New Jersey (Atlantic
City.) The Midwest commercial gaming industry consists exclusively of riverboat and dockside casinos
(Illinois, Indiana, Iowa, Missouri) except for 3 land based casinos in Michigan. The next biggest gaming
center is in the South with casinos in Louisiana and Mississippi. The Southern commercial gaming
market is primarily riverboat and dockside with one land-based casino in Louisiana. Colorado and South
Dakota in the West both allow limited stakes gambling casinos. These facilities bring in much less
revenue than the unrestricted casinos in the larger markets.

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Hotel and Casino CHP Market Assessment

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In addition to the commercial industry there are Tribal casinos in 28 states (Class III casinos
relevant to this study in 21 states.) Figure ESI shows the distribution of casino operations by state and
type.

CASINO LOCATIONS BY CATEGORY

0 Commercial Casino
Racetrack Casino/Pari-mutuel Facility11*

^ Tribal Casino4
Q Card Room5'6
I—> Electronic Canning Device7

1 In Rhode Island, there are video lottery terminals operating
at a closed |al alal fronton, net considered a racetrack casino,
bu t a parl-mutuel facility.

2Racetrack casinos In Florida, Maine, Oklahoma and
Pennsylvania are legal but not operational. Pennsylvania also
has legalized stand-alone sic* facilities, but there are none
operating.

3 The states with racetrack caslnos/parl-rmtuel fa:llltles
operate or will operate Class III gaming machines. There are
two raclnos in Alabama — net Indicated on this map — that
have Class II machines only, which are legal only In the
o:»untles where they operate.

4Native American casinos noted here Include both Class II and
Class III facilities. States w.lth Class II qamlnq only are
Alabama, Alaska, Florida, Nebraska, Texas and Wyoming.
3 The states with card rooms Indicated here do net Include
states that have commercial casinos with poker facilities.

6 The card rooms In Washington operate blackjack and other
house-banked card games In addition to poker.

•'The electronic gaming devices operating In the states
Indicated on this map are recognized as legal operations.

There are some states with similar facilities, but the machines
may not be authorized.

Figure ES1 Geographical Distribution of Casino Gaming by Type

Hotel Market Trends

The hotel industry is finally breaking out of the disastrous recession that followed the 9/11/2001
terrorist attacks on the World Trade Center and the Pentagon. In the three years following 9/11 the hotel
industry had a 36.2% decline in profits. In 2004, this declining trend has turned around with a 7.6%
increase in revenues and an 11.4 % increase in profits compared with 2003. Resort hotels achieved the
greatest increase in profitability in 2004 with operating profits growing by 17.2%. Limited service hotels
gained the least with profits up only 6.2%. Full service, suite, and convention hotels all saw profits rise
by over 10%.

Luxury hotels (Four Seasons, Ritz Carlton, Fairmont) represent the fastest growing market
segment. The worst performing segment is the economy segment (Motel 6, Red Roof, Days). Limited
service hotels (Hampton Inn, Country Inns & Suites, HI Express) are gaining at the expense of full
service mid-level chains (Holiday Inn, Ramada, Best Western).

Consistent with the strength of the luxury market sector, one of the top trends in the casino/resort
segment of the lodging industry is known as entertainment convergence. Destination casinos and resorts
seek to broaden the appeal of their facilities, i.e., attract more people, and to provide a variety of
attractions so that guests will lengthen their stay. These new resorts offer gaming, shopping, golf,
multiple entertainment venues, meeting and conference facilities, time-share condos, residential units,
and other features. The addition of these multiple uses and components makes facilities much larger than

Sources. American Gaming Association, National Indian Gaming Commission,

State Gaming Regulatory Agencies

In 2004, commercial casinos operated in 11 states and Native
American casinos were located in 28 states. Racetrack casinos
and pari-mutuel facilities operated in seven states, and four states
have legalized racetrack casinos, but they are not yet operational,

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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they used to be and creates a correspondingly larger but also more diverse energy load that can be met
by CHP.

Existing CHP

There are currently 98 hotels in the U.S. with CHP systems, representing over 63 MW of
capacity. California contains the most CHP equipped hotels in the country by a large margin with New
Jersey and New York coming in second and third. Due to the load profiles of hotels the majority of CHP
systems that are installed are under 500 kW. Figure ES2 shows this size dispersion with an equal
amount of systems falling in the 0 to 100 kW and the 100 to 500 kW categories. The systems in the
larger categories are mainly located at resort hotels with larger campuses that require more power. There
are three hotel casino resorts with CHP systems, two of which are in the largest two categories with
capacities of 4.9 MW and 5.2 MW.

Size Range

# Sites

0-99 kW

100-499 kW

500-999 kW

1,000-4,999 kW

>5 MW

41%

40%

~ 0-99 kW

¦ 100-499 kW

~ 500-999 kW

~ 1,000-4,999 kW

¦ >5 MW

Figure ES2 CHP Systems in the Lodging Industry by Size

Energy Consumption in Hotels and Casinos

Figure ES3 shows annual energy costs per available room by type of hotel property.1 Resort
hotels pay the most per available room for energy ~ $2,080 in 2003. Convention hotels are the next most
energy intensive followed by full-service and all-suite hotels. Per available room energy costs for
extended stay and limited service hotels are much less than resort hotels at $611 and $573 respectively.
About three fourths of energy costs are for electricity and one fourth for fuel.

1 Robert Mendelbaum, "Hotel Utility Costs Surge Protection is Needed," Hotel Online Special Report, PKF
Hospitality Research March 2004.

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Hotel and Casino CHP Market Assessment

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2003 Energy Costs
per Available Room (PAR)

$2,500

$2,000

< $1,500
Q.

** $1,000
$500
$0

¦ Fuel
~ Electric

*VV ^

vcr

x<5^

Figure ES3 2003 Energy Consumption Expenditures per Available Room by Type of Hotel

For the industry as a whole, energy costs (2003) were $1,254 per available room. Based on the
4.4 million available rooms for the industry, the total energy bill is $5.2 billion or about 5% of total
industry revenues.

The EPA Energy Star Program has energy usage data for 1,222 hotels that are participating in the
Energy Star labeling program. These data were analyzed for this study to provide insight on electric and
natural gas utilization by hotels. Table ES2 shows the results by chain scale for the hotels that recorded
usage of both electricity and gas. There is a general trend of increasing energy intensity in all climates as
the price and service classification increases. This trend is strongest in looking at the EUIs in the
economy and limited service midscale hotel categories compared to full service hotels. The highest EUIs
occur in the highest scale hotels. The impacts of climate on gas heating and electric air conditioning can
be seen to some extent. The relationship is stronger for gas EUI which increases in most cases as the
climate becomes colder. Climate impact on electric consumption is more difficult to see; in only three of
the five hotel types is there a higher electric EUI in the hot climate compared to the cold climate.

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Hotel and Casino CHP Market Assessment

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Table ES2 Gas and Electric Energy Usage Intensities by Climate and Chain Scale



Climate

Grand

Hotel Type

Data

Cold

Hot

Moderate

Total

Hotel (Economy and Budget)

# of Hotels

9

3

6

18



Avg. Elec kWh/sf/yr

12.07

8.94

8.35

10.31



Avg. Gas KBtu/sf

31.64

19.25

69.66

42.25

Hotel (Midscale w/o Food and Beverage)

# of Hotels

16

12

15

43



Avg. Elec kWh/sf/yr

11.66

15.01

11.97

12.70



Avg. Gas KBtu/sf

36.13

33.36

47.81

39.43

Hotel (Midscale w/Food and Beverage)

# of Hotels

127

55

83

265



Avg. Elec kWh/sf/yr

18.02

15.62

15.00

16.57



Avg. Gas KBtu/sf

70.67

24.49

48.18

54.04

Hotel (Upscale)

# of Hotels

92

145

210

447



Avg. Elec kWh/sf/yr

16.21

16.65

13.24

14.96



Avg. Gas KBtu/sf

52.44

35.67

38.76

40.57

Hotel (Upper Upscale)

# of Hotels

94

94

121

309



Avg. Elec kWh/sf/yr

17.56

20.26

16.83

18.10



Avg. Gas KBtu/sf

54.64

42.78

49.47

49.01

Total Number of Hotels

338

309

435

1082

Total Average of Elec kWh/sf/yr

16.94

17.43

14.46

16.08

Total Average of Gas KBtu/sf

58.58

35.59

44.27

46.26

Typical hotel characteristics for a 195,000 s.f., 230 room full-service hotel were developed for a
range of climates. Energy consumption in Las Vegas and in Minneapolis was modeled to identify the
energy consumption in hot and cold climates respectively. Anaheim, CA represents a mild climate. This
comparison is shown in Table ES3.

Table ES3 Energy Consumption Breakdown by Climate for a 195,000 s.f. Full Service Hotel

Location

Units

Anaheim

Las
Vegas

Minneapoli
s

Climate Type



Mild

Hot

Cold



Thousand







Annual Electric Use

kWh
Million

3,131

3,548

2,960

Annual Gas Use

Btu
Million

7,836

8,780

19,660

Base Gas Demand

Btu

5,038

4,710

6,240

Electric EU11

kWh/s.f.

16.06

18.19

15.18

Gas EUI

kBtu/s.f.

40.18

45.03

100.82

Peak Demand

kW

745

840

832

Average Demand

kW

357

405

338

Minimum Demand

kW

250

260

240

Peak Load/Avg. Load

% of Avg

208%

207%

246%

Min Load/Avg. Load

% of Avg

70%

64%

71%

CHP Sizing Strategies









100% Electric/80% Thermal Use (kW)

144

134

178

Max Size for 100% Electric Use (kW)

250

260

240

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Energy consumption can be characterized as follows:

¦	Electric consumption ranges from 3 to 3.5 million kWh per year - hot climate cooling
loads push total consumption up by 16% compared to mild and cold climate usage

¦	Annual gas demand in the cold climate application is more than twice that of the hot and
mild climate applications.

¦	The CHP addressable thermal loads are the various water heating loads that are fairly
constant throughout the year. These loads are fairly similar in the various climate
applications varying only as a function of colder groundwater temperature in the cold
climate application. In a warm climate application, 64% of the annual gas consumption
represents the primary target for replacement with CHP supplied thermal energy.

¦	Minimum electric loads are similar for the applications across climate types of 240-260
kW. Minimum electric loads are important to CHP sizing and operating strategy because
a system sized at or below this point can be run at full load continuously thereby
maximizing the utilization of the equipment and minimizing operating complexity.

¦	Sizing a CHP system to the addressable thermal load results in a system sized below the
minimum electric demand. Sizes range from 134-178 kW.

Energy consumption for large casino hotels was evaluated for two facilities, the Turning Stone
Casino in New York and the Borgata in Atlantic City, New Jersey. Based on this energy consumption
data, loads were estimated for casino hotels in both a Northeast climate (Atlantic City) and a hot climate
(Las Vegas.) Table ES4 summarizes energy consumption measures for a 2000 room casino hotel with
and without absorption cooling for both a hot and cold climate.

Table ES4 Load Analysis for Mega-Hotel in Alternative Locations and Configurations

Energy Measure

Units

Actual

Estimate 1

Estimate 2

Estimate 3

Climate



Atlantic

Atlantic







City

City

Las Vegas

Las Vegas





Absorptio

Absorptio



Cooling

Million

n

Electric

n

Electric

Annual Electric Consumption

kWh/year

86.1

99.4

86.1

104.9

Annual Gas Consumption

MMBtu/year

498,441

229,364

538,220

159,748

Electric Load Factor

Percent

61%

53%

61%

56%

Electric EUI

kWh/year/s.f.

28.7

33.1

28.7

35.0

Gas EUI

KBtu/year/s.f.

166.1

76.5

179.4

53.2

Peak Load

MW

16.1

21.3

16.1

21.3

Average Load

MW

9.8

11.3

9.8

12.0

Minimum Load

MW

7.0

7.4

7.0

7.4

Base Thermal Load

MMBtu/hour

30

12

29

12

Base Thermal Share of Total

Percent

53%

46%

47%

66%

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Technical and Economic Market Potential for CHP in Hotels and Casinos

Table ES5 summarizes the results of the market screening. There are nearly 9,500 hotels of
appropriate size to warrant consideration. To date, only 79 of the hotels within these size categories have
installed CHP. Appropriately sized CHP systems installed in this target market provide a technical
market potential of 2,773 MW. Based on a simple economic market screen undertaken using typical
CHP cost and performance values for each size and average gas and electric prices by state, the
economic market potential was estimated at 1,456 MW.

Table ES5 Summary of Hotel CHP Market Screening Results

Screening Approach

100-199

Number of Rooms
200-499 500-999 1000-1999

2000+

Total

Hotels in U.S.

6,323

2,614

379

116

9,464

Hotels with CHP

Remaining Market (sites)

6,290

2,584

370

111

9,385

Appropriate CHP Size (kW)

380

1,000

5,000

10,000

Technical Market Potential (MW)

566

982

370

555

300

2,773

Economic Market Potential (MW)

130

371

170

495

290

1,456

% of Market Economic

22.9%

37.8%

45.9%

89.2%

96.7%

52.5%

Conclusions

The large mega-resort hotels of 1,000 rooms or greater represent a distinct and very important
market segment. These huge facilities have more in common from an energy standpoint with a small
university than with a small business hotel or roadside motel. These facilities are typically, though not
exclusively, associated with the casino gaming. There are multiple restaurants, nightclubs and other
entertainment venues, spas, casinos, health clubs, movie theaters, shops, and often large attractions -
zoos, aquaria, fountains, even an "active" volcano. The facilities occupy millions of square feet of
building space and the energy usage intensity per square foot is much higher than for the typical business
hotel.

There are 148 hotels in the U.S. with more than 1,000 rooms. The economic market potential for
CHP in these mega-sites represents 54% of the total economic potential for CHP in the hotel industry.
There are 32 hotels with more than 2,000 rooms and 75% of them are on the Las Vegas strip. These
facilities could support CHP systems with an average size of 10 MW each representing 20% of the
economic potential.

One of the big drivers for CHP in these large facilities is to provide the thousands of tons of air
conditioning needed using the waste heat from the on-site electric generation. Industrial gas turbine
generators can produce power for the facility baseload needs and the high temperature exhaust can be
converted to steam in heat recovery steam generators that can be used to drive a central heating and
cooling plant.

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The remaining identified market is in hotels with 100 to 999 rooms. These facilities are less
energy intensive than the large casino and resort hotels, but they still have round-the-clock electric and
thermal loads that can effectively support CHP. As the hotel sizes get smaller, the cost of absorption
chillers goes up, and their effectiveness goes down. It is not considered cost-effective with current
technology to try to include absorption cooling in a hotel system until the generator size reaches about
300 kW. This size can support about a 100-ton absorption system. Hotels need to have more than 200
rooms before such a system would be warranted.

In smaller hotel sizes, without adding cooling, it is very important to size the system to the
available thermal load. As shown in Section 4, a system with 70-80% seasonal utilization of the
available thermal load is going to be utilizing only about 60% the capacity of a system that is sized to the
minimum facility electric load. The problem is that there are fairly wide swings in thermal energy
consumption during the day, with nighttime values dropping considerably. The key thermal load is the
hot water for the guest rooms, though it may be possible to augment these loads with hot water needs for
the kitchen, laundry, pools, and even space heating seasonally.

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CHP in the Hotel and Casino Market Sectors

1. INTRODUCTION

Hotels and casinos have a number of characteristics that make them good targets for installing an
economic combined heat and power (CHP) system. They operate around the clock year-round; a portion
of the industry has significant thermal and electric loads even at night: they have significant air
conditioning requirements that could be met with thermally activated technologies running off the waste
heat of an on-site generator; and there are establishments in every state in the U.S. There are 98 hotels in
21 states that have operating CHP systems; these systems have an electric capacity of 63 MW.

This report describes the hotel and casino industry characteristics and trends and provides an
evaluation of energy consumption by facility type and location. This characterization is the basis for a
technical and economic screening of CHP market potential. The analysis was conducted to support the
Environmental Protection Agency's Combined Heat and Power Partnership Program as a means to
provide information and tools to industry in order to encourage cost effective implementation of CHP in
applications that provide economic, efficiency, and environmental benefits.

The report is organized in the following sections:

2. Overview of the Hotel and Casino Industries -an analysis of the industry structure,
geographical distribution and trends.

3. Existing CHP in Hotels and Casinos -the current inventory of operating CHP systems.

4. Energy Consumption and Load Profiles -energy usage characteristics related to CHP
implementation including electric and thermal energy usage intensities, load shapes, and
electric and thermal energy coincidence.

5. CHP Technical and Economic Potential - a screening model of CHP market potential by
size and state

6. Conclusions - overall evaluation of the competitiveness of CHP in the industry.

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Hotel and Casino CHP Market Assessment

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2.

OVERVIEW OF THE HOTEL AND CASINO INDUSTRIES

Hotels and other lodging industry accommodations vary greatly in size and in the services they
provide:

Large hotels and motels offer a variety of services for their guests, including coffee shops,
restaurants, cocktail lounges with live entertainment, retail shops, barber and beauty shops, laundry and
valet services, swimming pools, fitness centers and health spas. Hotels and motels often have banquet
rooms, exhibit halls, and ballrooms to accommodate conventions, business meetings, wedding
receptions, and other social gatherings. Conventions and business meetings are major sources of revenue
for these hotels and motels.

Resort hotels and motels offer luxurious surroundings with a variety of recreational facilities such
as swimming pools, golf courses, tennis courts, game rooms, and health spas, as well as planned social
activities and entertainment. Resorts are located primarily in vacation destinations near mountains, the
seashore, or other attractions. As a result, the business of many resorts fluctuates with the season. Some
resort hotels and motels provide additional convention and conference facilities to encourage customers
to combine business with pleasure.

Extended-stay hotels combine features of a resort and a residential hotel. Typically, guests use
these hotels for a minimum of five consecutive nights. These facilities usually provide rooms with fully
equipped kitchens, entertainment systems, ironing boards and irons, office spaces with computer and
telephone lines, access to fitness centers, and other amenities.

Residential hotels provide living quarters for permanent and semi-permanent residents. They
combine the comfort of apartment living with the convenience of hotel services. Many have dining
rooms and restaurants that also are open to the general public.

Casino hotels provide lodging in hotel facilities with a casino on the premises. The casino
provides table wagering games and may include other gambling activities, such as slot machines and
sports betting. Casino hotels generally offer a full range of services and amenities and may also contain
conference and convention facilities.

In addition to hotels and motels, the industry includes bed-and-breakfast inns, recreational vehicle
(RV) parks, campgrounds, and rooming and boarding houses that provide lodging for overnight guests.
Other short-term lodging facilities in this industry include guesthouses, or small cottages located on the
same property as a main residence, and youth hostels—dormitory-style hotels with few frills, occupied
mainly by students traveling on low budgets. Also included are rooming and boarding houses, such as
fraternity houses, sorority houses, off-campus dormitories, and workers' camps. These establishments
provide temporary or longer-term accommodations that may serve as a principal residence for the period
of occupancy. These establishments also may provide services such as housekeeping, meals, and laundry
services.

Hotels and motels make up the majority of lodging establishments and tend to provide more
services than other lodging options.

2.1 Lodging Industry Market Data Sources

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There are a number of government and private data sources that publish statistics for the lodging
industry; however, the definition of the industry and the inclusion or exclusion of certain sub-sectors is
not uniform. The industry is variously defined to include all types of lodging, from upscale hotels to RV
parks. Motels, resorts, casino hotels, bed-and-breakfast inns, boarding houses, dormitories, and nursing
homes are also are included in some government statistics. Table 1 shows the data sources that were
used in this study to define the scope of the lodging industry and the sectors of most interest to CHP
development.

Table 1 Data Sources Used, Establishments Included, and Data Available

Data Source

Base Year

Establishment
s Included

Target
Establishment
s

Market
Segments
Included
(Relevant
Segments)

Data Included

U.S. Economic
Census

2002
Partial;
1997

60,870
(2002)

46,446
(2002)

11 (6)

Sales, Payroll,
Employees

U.S. EIA/CBECS

1999
Complete

2003
Summary

153,000
(1999)

89,000
(1999)

5(2)

building size, age,
energy equipment,
energy consumption,
employment

American Hotel
& Lodging
Industry
Association

2004

47,584

5(5)

rooms, RevPAR,
occupancy rates,
promotional spending,
other marketing
statistics

PKF Hospitality

Research

(proprietary)

2004

sample 5,000

n.a.

6(6)

Financial statistics -
published utility
consumption costs by
type of facility

Smith Travel
Research, Inc.
(proprietary)

2004
Updated
yearly

49,122

all

7(7)

Establishments by state
and by chain scale2l -
additional detailed data
available by subscription

EPA Energy Star
Database

Application
s to date

1222

Hotels applying for
Energy star labeling
provide size, chain
scale, number of rooms,
electric and gas usage

Meeting Industry
Megasite3

2005

24,563

17,423

8(2)

Website designed to
allow meeting planners
to screen facilities by
location, number of
rooms, meeting space
and other factors

U.S. Economic Census - The Economic Census provides state-by-state (and more specific)
geographical detail on businesses defined as accommodations. Within this classification system (NAICS
721) there are 11 submarkets - the first five submarkets are the focus of this assessment:

Chain scale refers to the type of hotel chain. There are seven categories: luxury, upper upscale, upscale, midscale
with food and beverage, midscale without food and beverage, economy, and independent.

3 http://www.mimeaasite.com/mimeaasite/index.isp

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1.

hotels more than 25 rooms,

hotels less than 25 rooms,

motels,

motor hotels,

casino hotels,

organization (membership) hotels,

bed & breakfast inns,

other traveler accommodations,

RV parks and campgrounds,

10.

recreational camps except campgrounds, and

11.

rooming & boarding houses.

The number of establishments, revenues, and employment by sector are provided. The advantage
of this data series is that it provides good geographical detail and highlights larger facilities, particularly
casinos that would be targets for CHP. Partial data are available from the 2002 Economic Census. Full
state-by-state data from 2002 have not been published4, but are available from the 1997 Census. A key
disadvantage of the data series is that there is no information on building size or number of guest rooms.

EIA Commercial Buildings Energy Consumption Survey - The CBECS data series has a
variety of useful energy consumption and equipment characteristics statistics. The Lodging sector of
CBECS is rather uniquely defined in that it includes nursing homes, and college dormitories - two
sectors that are not generally considered part of the lodging industry. In addition to the inclusion of these
sectors, there is not a good separation of the market segments of interest - hotels, motel, inn, resort, and
other. There are only two submarkets that are considered part of the industry under consideration for this
study - hotel and motel/inn/resort. There are complete tabulations of the data but cross tabulations are
often not available in the public data. For example, there are breakdowns by type of equipment, building
size, by subsector, and by region, but getting the type of equipment for a certain market segment and a
specific building size isn't available. The geographic detail only goes down to a multi-state regional
level and the 1999 CBECS is somewhat out of date. There are very preliminary data available for the
2003 CBECS, though there was not enough detail to be of use for this study.

American Hotel and Lodging Industry Association Lodging Industry Profile - The AH&LA
annual industry trends publication provides good information on the annual trends in the lodging
industry. The market is made up of 5 segments: suburban, highway, urban, airport, and resort. Facility
sizes are characterized by number of guest rooms, though this information is not reported by sub-market.
Some trends are called out by region or state, but the basic data series is for the total U.S. The AH&LA
does not report energy statistics but their research group provided references to other sources. The
information is reported every year.

PKF Hospitality Research - PKF publishes a survey of financial trends for 5,000 of the largest
hotels in the U.S. This series is available on a subscription basis. Energy and utility expenditure
information and hotel revenue and profitability data are used in this report based on publicly available
articles and press releases concerning the detailed survey.

4 as of October, 2005.

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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Smith Travel Research, Inc. - STR provides a number of industry statistical reports on a
subscription basis. Customized reports for individual metropolitan areas are available that provide
physical and financial information on hotels within a local market. The data set used for this study was a
comparison of hotels (number of hotels and number of rooms) by chain scale and state.

EPA Energy Star Database - There are approximately 1200 hotels that are participating in
EPA's Energy Star program. Approximately 10% of the hotels participating have received Energy Star
certification. These data were used for this study to evaluate gas and electricity consumption in hotels by
size, number of rooms, and geographic location. This analysis is presented in Section 4.

Meeting Industry Megasite - A website designed for meeting planners, the MIMegasite allows
a registered user to search their database of nearly 25,000 meeting facilities. The site includes
information on hotels, golf resorts, convention centers, conference centers, bed and breakfasts,
convention & visitors' bureaus, tourism bureaus, and other venues. Only the first two categories were
searched for this report. Search criteria include country, state, major market, hotel size, largest meeting
room, room rates, and available dates for meetings. The number of rooms criteria is very sensitive with
20 categories to search from less than 25 to 2500+. Based on a particular screen, individual facilities are
identified by name, with additional information provided on other amenities at the site.

A number of other marketing firms sell industry statistics - Mintel, Standard & Poor,
Datamonitor Business Information Center, Factiva, Business Source Premier, etc. The main
disadvantage of these data series is the high cost and the limited focus on energy and utility issues.

Data sources used for the casino hotel market segment, not shown in Table 1, are statistics and
membership data maintained by the American Gaming Association and the National Indian Gaming
Association.

The remaining overview of the lodging market provides detail on the applications, sizes,
geographic distribution, energy equipment, and energy use characteristics. Due to the lack of consistency
in the source data described in Table 1, it was not possible to create a single internally consistent
structure for the industry that covers all of these market characteristics.

2.2 Lodging Industry Market Size

As of the last Economic Census in 2002, there were 50,877 establishments in the economic
category of travelers' accommodations (NAICS 7211). The number of establishments by type is shown
in Table 2. The detailed breakdown by state is not available yet for 2002 data, but the 1997 data are
shown in Table 3 by type of facility and by state.

Table 2 Economic Census Figures for Lodging (Accommodations) Industry 2002 and 1997

Annualized

Market Categories

2002

1997

Growth Rates

%/yr

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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Sites

Sales
($million

)

Sites

Sales
($million)

Sites

Sales

Hotels (except casino hotels) with 25
guestrooms or more

16,782

61,333

Hotels with less than 25 guestrooms

46,163

90,541

2,386

582

1.34%

4.27%

Motels

21,829

9,206

Motor hotels

2,139

2,206

Organization hotels

124

Casino hotels

283

34,385

257

20,652

1.95%

10.73%

Bed & breakfast inns

3,537

890

2,898

687

4.07%

5.30%

All other traveler accommodation

894

175

736

175

3.97%

-0.02%

RV (recreational vehicle) parks &
campgrounds

4,157

1,733

4,085

1,394

0.35%

4.45%

Recreational & vacation camps (except
campgrounds)

3,177

1,740

3,513

1,341

1.99%

5.35%

Rooming & boarding houses

2,659

719

3,485

757

5.27%

-1.02%

Total Accommodations

60,870

130,320

58,162

98,457

0.91%

5.77%

Figure 1 shows the real revenue growth for the accommodations industry from 1997 to 2003.
The total industry had revenues of just under $90 billion 2000 dollars. There was a small 1% recession in
1998 and a larger 6% recession in 2001 caused by 9/11. About 70% of revenue in this sector is
concentrated in the South and West. In addition, the Northeast and Midwest regions suffered greater
declines in the recessionary periods and less robust recoveries indicating a continued shift in travel to the
South and West.

O
O

T3
0)
C

Accommodations
Real Revenue Growth

100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0

i-
-------
Table 3 1997 Economic Census of Lodging Industry (NAIC 7211 Travelers'

Accommodations) Number of Establishments by Type and State

Travelers'

Hotels

Casino

Motor

Accommo-

State

>25rooms

<25rooms

Motels

Hotels

Other

dations

Alabama

257

304

617

Alaska

111

281

Arizona

340

436

917

Arkansas

200

304

596

California

1,856

292

2,384

236

396

5,165

Colorado

389

540

150

1,235

Connecticut

143

102

302

D.C.

114

Delaware

128

Florida

1,382

156

1,436

111

123

3,210

Georgia

641

606

1,411

Hawaii

241

294

Idaho

181

334

Illinois

514

553

1,209

Indiana

281

320

706

Iowa

148

335

584

Kansas

146

281

481

Kentucky

234

303

603

Louisiana

253

246

587

Maine

138

326

185

730

Maryland

264

209

553

Massachusetts

315

322

188

927

Michigan

455

100

705

131

1,445

Minnesota

328

110

444

122

1,033

Mississippi

181

246

513

Missouri

383

514

1,076

Montana

125

310

524

Nebraska

247

377

Nevada

254

170

554

New Hampshire

114

157

106

420

New Jersey

365

580

1,153

New Mexico

170

359

670

New York

759

119

811

162

1,922

North Carolina

603

656

145

1,521

North Dakota

143

233

Ohio

444

556

1,159

Oklahoma

172

318

536

Oregon

196

517

886

Pennsylvania

536

104

479

120

1,306

Rhode Island

154

South Carolina

386

479

999

South Dakota

272

425

Tennessee

504

552

1,207

Texas

1,018

1,384

236

128

2,859

Utah

149

248

470

Vermont

103

140

137

451

Virginia

487

563

1,237

Washington

341

511

131

1,091

West Virginia

161

314

Wisconsin

351

108

555

120

1,184

Wyoming

250

387

Total U.S.

16,782

2,386

21,829

257

2,139

3,697

47,090

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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The statistics reported by the American Hotel & Lodging Industry Association (Table 4) show
that as of year-end 2004, there were 47,598 properties with over 4.4 million guestrooms. The industry
revenues for 2004 were $113.7 billion, up 8% from the previous year.

Table 4 Number of Hotels and Lodging Establishments by Size

Number of
Rooms

Property

Rooms

Average
Rooms

<75

27,464

1,163,668

75-149

14,326

1,524,099

106

150-299

4,235

847,089

200

300-500

1,070

398,491

372

>500

503

478,561

951

Total

47,598

4,411,908

Source: American Hotel & Lodging Industry Association, 2005 Lodging Industry Profile

As will be discussed later, the larger the hotel, the greater the energy consumption, both overall
and in terms of energy usage intensity per square foot. The high energy consumption in the roughly 1500
hotels larger than 300 rooms represents the priority target for CHP development.

Table 5 shows the distribution of hotels by state and by chain scale. Chain scale refers to the
classification of hotel chains by the services offered and by cost ranging from luxury at the high end to
economy and independent at the lower end. As shown in the table, the luxury and upper upscale chains
both average more than 300 rooms/hotel nationally. Table 6 shows the total number of hotel rooms by
state. Taken together these data can be analyzed to identify where the highest concentration of high end
and large hotels reside.

Table 7 shows the top ten markets for high end hotels, first by most luxury and upper upscale
hotels per state and then the top ten states in terms of largest average size for upper upscale hotels.
Luxury and upscale hotels are concentrated in two areas: resort areas like California, Florida, Nevada,
Louisiana, and Arizona and in large metropolitan areas - convention centers in states with large
metropolitan areas: California (Los Angeles and San Francisco), Texas (Houston), New York (New
York City), Illinois (Chicago), Massachusetts (Boston.), and Washington, DC.

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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Table 5

Number of Hotels by State and by Chain Scale

Hotels

State

Luxury

Upper
Upscale

Upscale

Midscale w/ Midscale w/o
F&B F&B

Economy

Independen
t

Total

Alabama

147

212

292

764

Alaska

195

252

Arizona

110

135

231

431

1026

Arkansas

143

322

652

California

203

249

516

381

942

3,094

5,428

Colorado

104

143

188

634

1,170

Connecticut

151

338

Delaware

144

District of Columbia

111

Florida

132

200

307

421

538

1,983

3,611

Georgia

101

150

352

582

514

1,755

Hawaii

199

315

Idaho

131

265

Illinois

125

271

311

507

1,377

Indiana

223

224

294

891

Iowa

121

194

220

604

Kansas

138

221

526

Kentucky

137

203

261

725

Louisiana

106

126

328

726

Maine

410

501

Maryland

122

235

590

Massachusetts

479

820

Michigan

135

237

266

615

1,349

Minnesota

110

253

349

838

Mississippi

121

151

266

614

Missouri

184

264

518

1,134

Montana

271

442

Nebraska

107

171

386

Nevada

449

623

New Hampshire

270

341

New Jersey

123

674

1,061

New Mexico

141

324

645

New York

171

129

233

1,012

1,688

North Carolina

144

350

376

684

1,672

North Dakota

110

204

Ohio

125

323

366

414

1,368

Oklahoma

151

314

659

Oregon

104

114

490

844

Pennsylvania

153

225

260

465

1,231

Rhode Island

128

South Carolina

204

226

523

1,087

South Dakota

108

180

374

Tennessee

115

256

367

477

1,296

Texas

110

224

370

623

818

1,519

3,678

Utah

111

252

525

Vermont

238

299

Virginia

167

255

343

434

1,342

Washington

113

107

146

547

975

West Virginia

157

312

Wisconsin

140

208

561

1,056

Wyoming

216

360

National Total

237

1,362

2,354

4,664

6,930

9,964

23,611

49,122

Avg. Rooms/Hotel

320

386

158

125

Source: Smith Travel Research, Inc.

Energy and Environmental Analysis, Inc. 9 Hotel and Casino CHP Market Assessment

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Table 6

Number of Hotel Rooms by State and by Chain Scale

Rooms

State

Luxury

Upper
Upscale

Upscale

Midscale w/
F&B

Midscale
w/o F&B

Economy

Independent

Total

Alabama

329

2,968

3,579

7,428

12,303

14,778

18,224

59,609

Alaska

547

1,616

1,043

2,616

509

1,220

11,027

18,578

Arizona

2,525

13,527

10,605

12,342

13,335

19,740

28,966

101,040

Arkansas

418

1,295

1,714

6,425

8,010

9,654

16,202

43,718

California

12,550

82,332

43,333

59,872

33,988

72,181

176,516

480,772

Colorado

1,901

11,357

9,048

11,854

12,912

13,069

37,158

97,299

Connecticut

4,904

5,047

4,469

3,528

5,206

10,391

33,545

Delaware

216

1,039

1,098

1,399

1,718

1,664

4,060

11,194

District of Columbia

2,919

10,704

2,646

2,136

100

898

6,764

26,167

Florida

10,924

49,618

35,148

48,851

45,368

55,142

147,923

392,974

Georgia

2,495

20,717

14,284

17,154

30,574

45,793

34,860

165,877

Hawaii

6,441

18,191

8,484

6,989

23,620

63,725

Idaho

337

303

879

4,445

2,989

3,281

6,007

18,241

Illinois

5,026

27,389

14,611

18,754

23,924

24,922

33,557

148,183

Indiana

6,170

6,823

9,574

18,304

18,132

18,670

77,772

Iowa

1,547

1,649

6,395

9,012

10,889

12,042

41,534

Kansas

2,256

2,898

6,143

6,372

9,105

10,520

37,294

Kentucky

3,599

4,272

9,124

10,666

15,487

16,945

60,093

Louisiana

2,739

9,781

5,972

14,854

10,302

11,621

23,668

78,937

Maine

714

394

2,965

1,993

2,753

18,389

27,208

Maryland

412

9,067

6,447

11,096

9,528

11,210

15,589

63,349

Massachusetts

1,925

14,438

10,241

9,739

7,497

7,068

26,266

77,174

Michigan

1,140

8,003

8,645

16,870

20,842

20,640

33,575

109,715

Minnesota

677

6,019

7,164

8,634

9,536

15,751

19,154

66,935

Mississippi

955

717

6,407

9,835

9,949

27,155

55,018

Missouri

1,244

12,045

6,617

12,628

16,549

19,004

32,698

100,785

Montana

453

4,208

3,419

5,471

12,387

26,017

Nebraska

1,996

966

3,872

4,847

6,217

7,975

25,873

Nevada

974

18,208

8,145

7,687

3,268

7,499

138,019

183,800

New Hampshire

926

1,547

1,904

2,036

1,457

11,987

19,857

New Jersey

15,152

10,971

11,303

8,608

10,343

45,291

101,668

New Mexico

2,867

2,833

5,787

7,268

9,763

16,110

44,687

New York

7,903

26,781

12,793

24,561

12,385

17,087

72,139

173,649

North Carolina

406

10,414

10,357

16,861

31,681

31,550

36,471

137,740

North Dakota

466

2,074

2,067

3,167

6,311

14,085

Ohio

815

12,197

12,222

17,795

25,995

30,332

24,082

123,438

Oklahoma

4,801

3,160

7,539

6,696

10,461

16,209

48,866

Oregon

4,255

3,776

8,785

8,652

8,032

25,411

58,911

Pennsylvania

1,553

12,920

14,558

20,277

21,173

20,297

26,250

117,028

Rhode Island

1,502

1,377

948

1,463

964

3,539

9,793

South Carolina

255

5,903

4,940

8,956

18,054

18,461

41,495

98,064

South Dakota

184

442

3,437

3,500

6,011

7,614

21,188

Tennessee

925

11,880

5,988

14,355

21,901

27,947

29,169

112,165

Texas

4,545

42,491

34,823

40,533

56,108

65,770

89,657

333,927

Utah

170

3,679

1,929

7,393

6,497

8,047

13,454

41,169

Vermont

113

309

635

1,489

1,705

1,240

11,546

17,037

Virginia

1,448

16,832

13,290

23,568

23,627

28,592

26,825

134,182

Washington

1,138

8,185

5,627

13,320

10,587

12,251

27,216

78,324

West Virginia

605

700

2,991

4,774

5,191

10,727

24,988

Wisconsin

307

3,242

5,098

11,166

11,023

14,210

31,343

76,389

Wyoming

285

2,443

4,173

1,820

4,358

9,747

22,826

National Total

75,760

526,336

372,523

584,145

618,848

773,875

1,550,920

4,502,407

Source: Smith Travel Research, Inc.

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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Table 7 Top Ten States by Number of High End Hotels and by Largest Average Size
for High End Hotels

Most Luxury and .. . .

a ¦ ¦ Hotels

Upper Upscale Hotels

La rg est Ave rag e '
Upper Upscale Hotels

California

246

Nevada

1,214

Florida

162

Hawaii

728

Texas

124

New York

515

New York

Louisiana

515

Illinois

District of Columbia

510

Georgia

Illinois

449

Virginia

Georgia

423

Arizona

California

406

Massachusetts

Alaska

404

Colorado

Massachusetts

390

Percent of U.S.

58.1%

Average Rest of U.S.

338

Table 8 shows the number of hotels by state and by number of rooms for hotels having 100 or
more guest rooms. The table breaks down hotels by five size categories. As will be described later, 100-
room hotels were chosen as the minimum size category for a hotel to economically consider CHP. There
are nearly 9,500 hotels in the U.S. with 100 rooms or more. There are 527 hotels with 500 rooms or
more. In the largest size category, there are only 32 hotels in the U.S. with 2000 rooms or more. Most of
these mega-resorts have casinos and three-fourths of these hotels are in Nevada.

2.3 Casino Industry Focus

The U.S. casino industry, which includes land-based commercial casinos, riverboat casinos,
tribal-run casinos, racetrack casinos, and card rooms, generated approximately $45.9 billion in revenue
in 2003, a 5.7% increase compared with 2002 revenues. In 2004, industry revenue is projected to grow
5.1%, to reach $48.3 billion.

There are 48 U.S. states (except Hawaii and Utah) that have some form of legal gambling. Casino
gambling was legalized in Nevada in 1931 and the state did not experience any competition until 1976
when New Jersey legalized gambling. The rapid spread of casinos started in the late 1980s and early
1990s when a number of states including Iowa, Illinois, Colorado, Connecticut and Indiana, began
legislative initiatives to allow commercial and/or tribal casinos to open. Between 1989 and 1998 nine
states legalized casino gambling. In 2004, casino gambling (including commercial casinos, tribal casinos,
racetrack casinos and card rooms) was legal in 34 states.

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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Table 8 Number of Hotels by State and by Number of Guest Rooms

State

100-199

Number of Rooms
200-499 500-999 1000-1999

2000+

Total

Alabama

110

135

Alaska

Arizona

198

267

Arkansas

California

581

337

981

Colorado

155

232

Connecticut

111

Delaware

Florida

606

285

974

Georgia

229

320

Hawaii

Idaho

Illinois

220

115

357

Indiana

102

140

Iowa

Kansas

Kentucky

101

Louisiana

122

189

Maine

Maryland

135

187

Massachusetts

139

219

Michigan

187

249

Minnesota

103

162

Mississippi

Missouri

139

210

Montana

Nebraska

Nevada

187

New Hampshire

New Jersey

153

231

New Mexico

New York

225

101

365

North Carolina

232

277

North Dakota

Ohio

198

279

Oklahoma

Oregon

119

Pennsylvania

230

315

Rhode Island

South Carolina

113

167

South Dakota

Tennessee

170

230

Texas

411

209

646

Utah

Vermont

Virginia

241

342

Washington

131

174

West Virginia

Wisconsin

100

138

Wyoming

U.S. Total

6323

2614

379

116

9464

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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Casinos and gaming overlap the hotel and lodging industry to the extent that there are nearly 300
land-based casinos with associated lodging. The casino industry also includes land-based casinos
without lodging, racetracks, riverboat and dockside casinos. The industry is further split into the
commercial gaming industry with operations in 11 states and the Indian casino operations operating in
28 states (Class III Tribal Casinos in 21 states.) Figure 2 shows the distribution of casino operations by
state and type.

Commercial gaming is permitted in 11 states. The two largest commercial gaming centers are in
Nevada (Las Vegas, Reno) and New Jersey (Atlantic City.) The Midwest commercial gaming industry
consists exclusively of riverboat and dockside casinos (Illinois, Indiana, Iowa, Missouri) except for 3
land based casinos in Michigan. The next biggest gaming center is in the South with casinos in Louisiana
and Mississippi. The Southern commercial gaming market is primarily riverboat and dockside with one
land-based casino in Louisiana. Colorado and South Dakota in the West both allow limited stakes
gambling casinos. These facilities bring in much less revenue than the unrestricted casinos in the larger
markets. Table 9 shows the breakdown of the commercial gaming industry by state.

CASINO LOCATIONS BY CATEGORY

Sources: American Gaming Association, Nattonal Indian Gaming Commission,

State Gaming Reg u latory Agencies

O Commercial Casino

Racetrack Casino/Pari-mirtuel Facility1
Tribal Casino4

0 Card Room5 6

! , Electronic Caming Device7

1 In Rhode Island, there are video lottery terminals operating
at a closed |al alal fronton, not considered a racetrack casino,
but a parl-mutuel facility.

2Racetrack casinos In Florida, Maine, Oklahoma and
Pennsylvania are legal but not operational. Pennsylvania also
has legalized stand-alcne slot facll Itles, but there are none
operating.

3 The states with racetrack caslnos/parl-mutuel facilities
operate or will operate Class III gaming maihlnes. There are
two raclnos In Alabama — not Indtated on this map — that
have Class II machines only, which are legal only In the
cou ntles where they operate.

4Native American casinos noted here Include both Class II and
Class III facilities. States with Class II garrlng only are
Alabama, Alaska, Florida, Nebraska, Te*as and Wyoming.

5 The states with card rooms Indicated here do net Include
states that hafve commercial casinos with poker faclllttes.

6 The card rooms In Washington operate black|ack and other
house-banked card games In addition to poker.

7 The electronic gaming devices operating In the states
Indicated on this map are recognized as legal operations.
There are some states with similar facilities, but the machines
may not be authorized.

Figure 2 Geographical Distribution of Casino Gaming by Type

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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Table 9 Commercial Gaming Facilities and Revenues by State

State

Employee
Wages
$millions

Gross
Revenue
$millions

Tax
Revenue
$millions

Year of

first
Operatio
n

Type of Casino

. . Race- River
Land Track -boat

Nevada

$6,954

$9,625

$777

1931

256

New Jersey

$1,239

$4,490

$415

1978

Mississippi

$1,028

$2,700

$325

1992

Indiana

$590

$2,229

$703

1995

Louisiana

$453

$2,017

$449

1993

Illinois

$377

$1,709

$720

1991

Missouri

$310

$1,330

$369

1994

Michigan

$368

$1,130

$250

1999

Iowa

$279

$1,024

$210

1991

Colorado

$207

$609

$96

1991

South

Dakota

$35

$70

$11

1989

Total

$11,839

$26,934

$4,323

354

Since 1988, when the Indian Gaming Regulatory Act was passed, 224 of the 562 recognized
Indian nations have pursued development of Class II or Class III casinos. The Indian gaming industry
has grown from $212 million in 1988 to over $14 billion in 2004. Table 10 shows the number of Indian
casinos with associated lodging by state. There are a total of 97 Indian casino hotels.

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Table 10 Indian Casinos with Associated Hotels, Resorts, or Lodges

Northeast

Midwest

Connecticut

Iowa

New York

Kansas

Northeast Total

Michigan

Minnesota

Nebraska

North Dakota

Oklahoma

South Dakota

Wisconsin

Midwest Total

South

West

Alabama

Arizona

Florida

California

Louisiana

Colorado

Mississippi

Idaho

North Carolina

Montana

South Carolina

Nevada

Texas

New Mexico

South Total

Oregon

Washington

Wyoming

West Total

For purposes of evaluating the applicability of CHP, the unrestricted land-based casinos, both
commercial and tribal, represent the best target. However, the riverboat and dockside casino activities
have evolved such that there are no cruising requirements in the six states. "Riverboat" casinos in these
states (except for Iowa that only lifted cruising requirements in 2004) are in permanently moored barges.
Such facilities could receive electric and thermal energy services in the same way as permanent
buildings, and therefore it is conceivable that CHP could be applied.

2.4 Industry Trends

The hotel industry is finally breaking out of the disastrous recession that followed the 9/11
terrorist attacks on the World Trade Center and the Pentagon. In the three years following 9/11 the hotel
industry had a 36.2 decline in profits. In 2004, this declining trend has turned around with a 7.6%

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increase in revenues and an 11.4 % increase in profits compared with 2003.5 Resort hotels achieved the
greatest increase in profitability in 2004 with operating profits growing by 17.2%. Limited service hotels
gained the least with profits up only 6.2%. Full service, suite, and convention hotels all saw profits rise
by over 10%.

The number of occupied rooms grew by only 4.3% so the much higher increase in profitability is
due to increased usage of other hotel amenities such as restaurants, lounges, retail shops, and recreational
facilities. Energy costs have fluctuated up in 2001, down in 2002, and up again the last two years. The
rising oil prices in 2005 are creating concern within the industry for not only increased operating costs,
but decreased travel as well.

Increased competition among establishments in this industry has spurred many independently
owned and operated hotels and other lodging places to join national or international reservation systems,
which allow travelers to make multiple reservations for lodging, airlines, and car rentals with one
telephone call. Nearly all hotel chains operate online reservation systems through the Internet. There is a
shift in the demand by type of traveler and by type of facility.

Younger travelers (generation X) are eclipsing baby-boomers as the number one travel segment.

Leisure travel hotel stays, historically subordinate to business travelers' needs, has now equaled
business travel stays and should become the number one reason for hotel stays in the U.S.

5 Trends in the Hotel Industry, PKF Hospitality Research, 2005. (cited statistics from PKF press release.)

Energy and Environmental Analysis, Inc. 16 Hotel and Casino CHP Market Assessment

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Supply and Demand Changes by Sector

Luxury
Upper Upscale
Upscale
Mid w F&B
Mid wo F&B
Economy

77Z'

rnr

16.1
¦ 6.6

-1.81

¦ 2.2

nrs*

-1.1

¦ 1.4

¦ Demand
~ Supply

8.1

-4 0 4 8 12

% Change YTD 2004 (3/04) vs. 2003

Figure 3 Change in Room Supply and Demand by Market Sector

About 70% of all motel and hotel rooms are associated with franchises and national chains. Table
11 shows the largest 15 hotel corporations by number of available rooms in the U.S7. These large
corporations can provide centralized decision making for CHP project development. The top national
chains account for the majority of the development through new construction or ""reflagging" of existing
facilities that are acquired. Table 12 shows the growth in progress for the five top chains in the U.S.
New construction represents the best opportunity for making a CHP decision. Reflagging also represents
an opportunity for facility upgrades during remodeling.

6 Mark V. Lommano, "U.S. Lodging Industry Overview," AH&LA 2004 Travel Industry Summit, Smith Travel Research,
May 14, 2004.

7 In recent years, hotels, motels, camps, and recreational and RV parks affiliated with national chains have been
growing rapidly. To the traveler, familiar chain establishments represent dependability and quality at predictable rates.
National corporations own many chains, although several others are independently owned but affiliated with a chain
through a franchise agreement.

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Table 11 Top 15 National Chains by Number of Available Rooms in the U.S.

Top 15 Domestic Hotel Chains by
Number of Rooms

Domestic
Rooms Hotels

International
Rooms Hotels

Brands

[2] Cendant Corporation

439,279 5,622

64,581 839

Amerihost Inn, Days Inn, Days Serviced Apartments,
Howard Johnson, Howard Johnson Express, Knights
Inn, Ramada, Ramada Limited, Super 8, Thriftlodge,
Travelodge & Wingate Inn

[3] Marriott International, Inc.

380,218 2,236

120,970 563

Courtyard by Marriott, Fairfield Inn by Marriott, Marriott
Conference Centers, Marriott Executive Apartments,
Marriott Hotels and Resorts, Ramada Int'l Plaza,
Ramada International Hotels & Resorts, Renaissance
Hotels & Resorts, & Residence Inn

[5] Hilton Hotels Corporation

357,332 2,184

17,218 75

Conrad, Doubletree, Doubletree Club, Embassy Suites,
Embassy Vacation Resort, Hampton Inn, Hampton Inn &
Suites, Hilton, Hilton Gaming, Hilton Garden Inn, &
Homewood Suites

[1] Inter-Continental Hotel Group

337,643 2,523

214,295 1,133

Candlewood, Centra, Crowne Plaza, Forum Hotel,
Holiday Inn, Holiday Inn Express, Holiday Inn Garden
Court, Holiday Inn Select, Intercontinental, Parkroyal,
Posthouse, Staybridge Suites by Holiday Inn, &
Sunspree Resorts

[4] Choice Hotels International, Inc.

313,982 3,891

78,615 878

Clarion, Comfort Inn, Hotel & Suites, Econo Lodge,
MainStay Suites, Quality Inn, Hotel & Suites, Rodeway
Inn, & Sleep Inn

[6] Best Western International

186,422 2,181

116,924 1,783

Best Western

[10] Accor North America

134,803 1,252

4,167 26

Coralia, Hotel Novotel, Hotel Sofitel, Mercure Hotel,
Motel 6, Red Roof Inn, & Studio 6

[7] Starwood Hotels & Resorts
Worldwide, Inc.

123,747 355

103,543 377

Four Points Hotel by Sheraton, Sheraton, St.
Regis/Luxury Collection, W Hotels, & Westin

[9] Carlson Hospitality Worldwide

82,739 566

70,703 379

Country Inns & Suites by Carlson, Park Inns & Suites,
Park Plaza Suites, Radisson, & Regent Hotels

[12] HVM, L.L.C.

72,961 654

0 0

Extended StayAmerica Efficiency Studios®, Homestead
Studio Suites Hotels®, StudioPLUS Deluxe Studios®
and Crossland Economy Studios® properties.

[14] La Quinta Corporation

65,384 592

50 1

Baymont Inn & Suites, La Quinta Inns, La Quinta Inn &
Suites, Woodfield Suites and Budgetel.

[13] Interstate Hotel & Resorts

64,909 288

573 3

Hotel Operator

[15] Hyatt Hotels Corporation

57,085 115

4,500 12

Hyatt®, Hyatt Regency®, Grand Hyatt® and Park
Hyatt® brands, just added Amerisuites

[16] Host Marriott

51,721 101

1,641 4

Marriott, Ritz-Carlton, Fairmont, Hyatt Regency,
Westfields, Westin, Swissotel, Four Seasons

[17] FelCor Lodging Trust,
Incorporated

40,137 148

814 2

REIT. FelCor maintains a strong relationship with
Intercontinental Hotels Group (NYSE: IHG), Hilton
Hotels Corporation (NYSE: HLT) and Starwood Hotels &
Resorts (NYSE: HOT).

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Table 12 National Chains Share of Industry Growth8

Rooms Under Development

2004

Leading Chains

New
Construe

Reflag

Total

Growt
h Rate

Marriott

41,905

6,204

48,109

4.1

Hilton

37,755

2,679

40,434

4.4

Intercontinental

26,235

4,450

30,685

3.8

Cendant

24,695

7,209

31,904

2.1

Choice

9,896

4,110

14,006

3.0

Total Leading Cos.

140,486

24,652

165,13
8

3.4

% of Industry

54.70%

69.90%

56.50%

Consistent with the strength of the luxury market sector, one of the top trends in the casino/resort
segment of the lodging industry is known as entertainment convergence. Destination casinos and resorts
seek to broaden the appeal of their facilities, i.e., attract more people, and to provide a variety of
attractions so that guests will lengthen their stay. Figure 4 shows the components that are going into the
development of a modern casino/resort property. The addition of these multiple uses and components
makes facilities much larger than they used to be and creates a correspondingly larger but also more
diverse energy load that can be met by CUP.

Casino

Alternative Activities
(Primary Usage)

Live Muse Venue

Restaurants (Casino)

Accommodations

Conference Hotel Resort Hotel

RVPark

Retail I Entertainment
I Family Attractions !

NigMctubs Outdoor Adventure)

Alternative Activities
(Resort Support)

Spa

Mooing Fadstlos
Qdf

Resort Residential

Source: Economics Research Associates

Figure 4 Casino/Resort Use and Services Model

8 Patrick Ford, "New Construction, Top Markets, Leading Companies, Real Estate Transactions," AH&LA 2004 Travel
Industry Summit, Lodging Econometrics, May 14, 2004.

9 Mark E. Dvorchak, From Casino to Resort: Understanding the Entertainment Heirarchy, ERA White Paper, July
2002.

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In this expanded use model, hotel and entertainment companies are seeing the most revenue
opportunities from the expansion of retail facilities, resort residential development, theme parks, and
spas. An example of this model for new resort facilities is the Atlantic City's Marina District, Borgata
Hotel Casino and Spa. The Borgata is the first new casino/hotel/shopping destination built in Atlantic
City in more than a decade. This facility features more than 2,000 guest rooms, 135,000 square feet of
gaming, 11 restaurants, 4 bars, a 35,000 sq ft spa, 8 retail stores, 30,000 sq ft event center for concerts
and conference exhibitions that is part of a total of 70,000 sq ft of conference space, a 1,000 seat theater,
and other entertainment facilities. The facility is served by a state-of-the-art district heating and cooling
plant with 8 MW of backup power. Having centralized heating and cooling makes it easier to add CHP at
a later date.

3. EXISTING CHP IN HOTELS/CASINOS

There are currently 98 hotels in the U.S. with CHP systems, representing over 63 MW of
capacity. California contains the most CHP equipped hotels in the country by a large margin with New
Jersey and New York coming in second and third. This distribution of CHP hotels throughout the U.S.
follows very closely with the proportion of total CHP installations by state. Table 13 shows the number
of CHP hotels that are located in each state.

Table 13 State Distribution of Hotels with CHP Systems

State

# Sites

Capacity (kW)

5,950

1,650

27,003

550

125

1,550

560

125

150

1,710

4,900

7,935

100

5,200

355

1,950

3,150

Total

63,193

Of the existing CHP systems in the hotel/casino sector, the majority are reciprocating engine
systems. Many of these systems were put in during the late 1980s. Table 14 shows the distribution of

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systems by prime mover and Figure 5 shows the start year for each system. In recent years the industry
has installed a number of microturbine and fuel cell systems, with a particularly busy installation year in
2003.

Table 14 Hotel CHP Systems by Prime Mover

Prime Mover

# Sites

Capacity (kW)

Combustion Turbine

12,450

Reciprocating Engine

48,255

Fuel Cell

1,350

Microturbine

1,138

Total

63,193

CHP Hotel Installations by Year

(/)

1 I

¦ 1 1 1 I 1 1

1 1

~ Microturbine

~ Fuel Cell

¦ Reciprocating
Engine

¦ Combustion
Turbine

CDCDCDCD CDCDCDCD CDCDCDCD (OCOOOOOOfT
CD CO OD CO CO CO (D CD ID CD CD CD CDCDOOOOO^
^aiQNiojcDO-^w^aiO) nicdo^njw-^

Start year

Figure 5 Hotel CHP System Installations by Start Year and Prime Mover

Due to the load profiles of hotels the majority of CHP systems that are installed are under 500
kW. Figure 6 shows this size dispersion with an equal amount of systems falling in the 0 to 100 kW
category and the 100 to 500 kW category. The systems in the larger categories are mainly located at
resort hotels with larger campuses that require more power. There are three hotel casino resorts with
CHP systems, two of which are in the largest two categories with capacities of 4.9 MW and 5.2 MW.

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Size Range

# Sites

0-100 kW

100-500 kW

500-1000 kW

1-5 MW

>5 MW

Figure 6 CHP Systems in

Examples of CHP systems in hotels

Hotel CHP Systems by Size Range

500-1000

Lodging Industry by Size

described in the following sections.

Mohcgan Sun Casino and Hotel

The Mohegan Sun Casino and Hotel is a unique casino destination in southeastern Connecticut
that is owned by the Mohegan Tribal Nation. The hotel has almost 1,200 guest rooms and includes a spa,
business center, and several fine and casual dining restaurants.

In 2001 International Fuel Cells sold two PC25TM fuel cells to the Mohegan Tribal Nation for
the hotel casino. The units each produce 200 kilowatts of electricity and 900,000 BTUs of heat,
providing reliable energy for the Mohegan Sun. The heat is used to meet space heating as well as
domestic hot water needs.

The purchase of the fuel cells is part of a larger effort by the tribe to make the hotel casino as
environmentally friendly as possible. "The environment has always been a traditional Mohegan priority.
We are pleased to be able to implement this environmentally sound system at Mohegan Sun," said Jayne
Fawcett, Tribal Ambassador. The Department of Energy and the Environmental Protection Agency
Combined Heat and Power Partnership recognized the Mohegan Sun project's pollution reduction and
energy efficiency with a 2005 CHP Certificate of Recognition.

The tribe also intends to run a public awareness program by inviting outside groups including
school classes to view the fuel cells and learn about how they operate with significantly reduced
emissions. Real-time operating data from the fuel cells will also be available for visitors to view.

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Harrah's Rio All Suite Hotel and Casino

The Rio All Suite Hotel and Casino is a high-end casino resort located in Las Vegas less than a
mile from the Las Vegas Strip. The hotel offers 2,800 suites, shows and lounges, nonstop gaming, as
well as many luxuries associated with top resorts. The Rio also contains five fine dining restaurants with
another ten casual dining restaurants.

The Rio was installed a CHP system, the first system at a Las Vegas casino, in order to reduce its
$9 million annual energy bill. This was accomplished by installing six Caterpillar 3516 natural gas gen-
sets that produce 4.9 MW of electricity for the hotels needs. The system started operation on May 1,
2004 and generates 40 percent of the electricity, 60 percent of the hot water, and 65 percent of the
heating requirements of the resort. Through generating power and thermal energy more efficiently than
the hotel can purchase from the local utility, the Rio has an annual energy savings of $1.5 million. The
system will pay for itself in just over four and a half years.

The CHP system operates around 75 percent overall efficiency and uses 34 percent less fuel than
on-site thermal generation and purchased electricity. The Department of Energy and the Environmental
Protection Agency Combined Heat and Power Partnership recognized the Rio project's pollution
reduction and energy efficiency with a 2003 CHP Certificate of Recognition.

Radisson Santa Maria

The Radisson Hotel of Santa Maria is a 185 room hotel located adjacent to the Santa Maria
Airport. The hotel has conference and meeting rooms, a spa, exercise area with pool, and an 80-seat
gourmet restaurant/lounge. The hotel has served the Santa Maria and Vandenberg communities with
lodging, dining, and business services for almost 30 years but was driven to look into CHP because of
high energy and operating costs.

The hotel installed two Capstone microturbine C60-ICHP systems to reduce the hotel's cost of
electricity, hot water, and space heating. The microturbines each produce 60 kW of electrical energy and
115 kW of thermal energy. The system was installed in parallel to the utility connection and runs
continuously to offset the hotel's average demand of 160 kW. Almost 800,000 Btu/hr of heat is obtained
from the heat recovery units and is used to heat water in the domestic, laundry, and kitchen water loops
with excess heat being utilized for space heating. During the winter months the microturbines provide
for a majority of the hotel's hot water needs, which are supplemented by the existing boilers, however
the system provides all the hot water during the summer months.

The system installation went very smoothly at the Radisson Santa Maria. The system is located in
an easily viewable area adjacent to the mechanical room and is connected to a 200-amp electrical sub-
panel and extended gas service. Since the Capstone systems are precertified to the California Air
Resources Board 2003 DG emissions standards and also to California's statewide Rule 21
interconnection requirements, the installation and startup were quick and easy, and had no impact on
hotel operations.

4. ENERGY CONSUMPTION AND LOAD PROFILES

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This section provides some general energy consumption figures and then explores specific energy
use load profiles for specific hotel types that have enough thermal and electric load to support an
economically sized CHP system. These electric and thermal load relationships are used in the technical
and economic screening of CHP potential in Section 5.

4.1 Energy Consumption Trends

The energy consumption characteristics of the lodging industry have a direct bearing on the
applicability of CHP and the total technical market potential. . This section provides some overall energy
use indicators.

Figure 7 shows annual energy costs per available room by type of hotel property.1" Resort hotels
pay the most per available room for energy ~ $2,080 in 2003. Convention hotels are the next most
energy intensive followed by full-service and all-suite hotels. Per available room energy costs for
extended stay and limited service hotels are much less than resort hotels at $611 and $573 respectively.
About three fourths of energy costs are for electricity and one fourth for fuel.

2003 Energy Costs
per Available Room (PAR)

$2,500

$2,000

< $1,500
Q.

** $1,000
$500
$0

¦ Fuel
~ Electric

—

J J y ^

;Ag>

V<2>

>0<> ^
*

^ sN°

Figure 7 2003 Energy Consumption Expenditures per Available Room by Type of Hotel

10 Robert Mendelbaum, "Hotel Utility Costs Surge Protection is Needed," Hotel Online Special Report, PKF Hospitality
Research March 2004.

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The energy costs reported by PKF Hospitality Research were divided by the average large
commercial energy costs for 2003 reported by EIA. The resulting estimates of energy consumption per
available room are shown in Figure 8. In terms of energy consumed, electricity and fuel consumption is
roughly equal overall. Based on the total industry figures, the total energy consumption for the industry
in 2003 was an estimated 394 trillion Btu/year. (When using a more inclusive EIA definition of the
industry with dormitories and nursing homes included the estimate rises to 450 trillion/Btu per year.)

Estimated 2003 Energy Consumption
per Available Room (PAR)

160
£ 140
2 120
= 100
S? 80

0 60

1 40

20
0

Figure 8 2003 Estimated Energy Consumption per Available Room by Type of Hotel

Using the per room estimates shown above, the annual energy costs of different types of hotels
can be compared. A 2,000 room resort hotel would have a typical annual energy bill of over $4 million
and might have a peak electric demand of 7 to 10 MW. A typical 100 room limited service hotel would
have an annual energy budget of $57,000 with a corresponding peak demand of 100 to 150 kW. These
examples show the importance of segmenting the lodging market when evaluating the market potential
for CHP.

The ability of lodging facilities to utilize CHP depends not only on the amount of energy utilized
but the ways in which the energy is utilized. Figure 9, based on the EIA CBECS data for the lodging
sector, shows the breakdown of electric and gas consumption by end-use for the industry as a whole.
Space heating and water heating are the two largest consumers of energy; both of these end-uses
predominantly use natural gas. Air conditioning is the next biggest end-use followed by lighting.
Together these four end uses account for three quarters of the total energy needs for the industry.

¦ Fuel
~ Electric

—

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Lodging Industry Energy Use by Type

140

2 120
^ 100

£ 80

¦ Gas
~ Electric

= 40
I— 20 1

o J-U

n n n

Figure 9 1999 Energy Consumption by End-Use for the Lodging Industry (EIA Data)

4.2 Energy Consumption Analysis for EPA Energy Star Hotel Participants

The EPA Energy Star Program has had energy usage data submitted by 1222 hotels11. These data
were analyzed for this study to provide insight on electric and natural gas utilization by hotels.

Of the 1200 hotels analyzed, the breakdown by chain scale and by size class of the hotel is shown
in Table 15. About two-thirds of the hotels participating in the Energy Star program are in the Upscale
and higher chains. There are 146 hotels with more than 500 rooms representing 30% of the total market
as reported by the AH&LA.

Hotel size as a function of the number of rooms varies by chain scale. Using a linear trend line
analysis, the average total square footage per hotel room is given for each type of hotel. As hotels
increase in services and price level, the total average square footage per room increases from 535 s.f. for
an economy hotel to 905 s.f. for an upper upscale hotel as shown in Table 16.

11 Twenty-two hotels were eliminated from the analysis for a variety of reasons: no information on number of rooms,
no floor space given, located in a U.S. territory, one duplicate, and cases where the square footage given for the hotel
was too small for the number of rooms. A total of 1200 hotels were analyzed from the EPA database.

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Table 15 Breakdown of EPA Energy Star Hotel Database by Size Class and Chain Scale

Size Class (Number of Rooms)

Hotel Type

<75

75-149

150-299

300-500 >500

Total

Hotel (Economy and Budget)

Hotel (Midscale w/o Food and Beverage)

Hotel (Midscale w/Food and Beverage)

186

279

Hotel (Upscale)

238

165

484

Hotel (Upper Upscale)

136

118

346

Grand Total

488

330

203

146

1200

Table 16 Average Hotel Size per Room in Square Feet

Hotel Chain Scale

Total s.f./
# rooms

Economy and Budget

535

Midscale w/o Food and Beverage

549

Midscale w/ Food and Beverage

656

Upscale

842

Upper Upscale

905

The EPA data were identified by state using the zip codes provided. These states were split into
three rough climate categories, hot, moderate, and cold, in order to evaluate the changes in electric and
gas energy usage intensities (EUI). Table 17 shows the results by chain scale for the hotels that recorded
usage of both electricity and gas. There is a general trend of increasing energy intensity in all climates as
the price and service classification increases. This trend is strongest in looking at the EUIs in the
economy and limited service midscale hotel categories compared to full service hotels. The highest EUIs
occur in the highest scale hotels. The impacts of climate on gas heating and electric air conditioning can
be seen to some extent. The relationship is stronger for gas EUI which increases in most cases as the
climate becomes colder. Climate impact on electric consumption is more difficult to see; in only three of
the five hotel types are there higher electric EUIs in the hot climate compared to the cold climate.

In order to control the impact that size of the hotel has on energy consumption, and to focus in on
the target market for CHP applications, the same analysis was undertaken for hotels in the 300-500 room
class. There are no economy or limited service hotels in this size range in the EPA database. Figures 10
and 11 show the changes in electric and gas EUI respectively. The electric consumption shows a slight
trend toward greater electric EUI in hot climates. Midscale hotels show the highest EUIs, but there are
only 11 represented in this size class compared to 41 upscale and 123 upper upscale hotels. Gas
consumption shows the effects of reduced space heating requirements in midscale and upper upscale
hotels but not in upscale hotels.

The database does provide a strong indication of the level of energy usage in large hotels and
provides a starting point for CHP sizing.

Table 17 Gas and Electric Energy Usage Intensities by Climate and Chain Scale

Energy and Environmental Analysis, Inc. 27 Hotel and Casino CHP Market Assessment

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Climate

Grand

Hotel Type

Data

Cold

Hot

Moderate

Total

Hotel (Economy and Budget)

# of Hotels

Avg. Elec kWh/sf/yr

12.07

8.94

8.35

10.31

Avg. Gas KBtu/sf

31.64

19.25

69.66

42.25

Hotel (Midscale w/o Food and Beverage)

# of Hotels

Avg. Elec kWh/sf/yr

11.66

15.01

11.97

12.70

Avg. Gas KBtu/sf

36.13

33.36

47.81

39.43

Hotel (Midscale w/Food and Beverage)

# of Hotels

127

265

Avg. Elec kWh/sf/yr

18.02

15.62

15.00

16.57

Avg. Gas KBtu/sf

70.67

24.49

48.18

54.04

Hotel (Upscale)

# of Hotels

145

210

447

Avg. Elec kWh/sf/yr

16.21

16.65

13.24

14.96

Avg. Gas KBtu/sf

52.44

35.67

38.76

40.57

Hotel (Upper Upscale)

# of Hotels

121

309

Avg. Elec kWh/sf/yr

17.56

20.26

16.83

18.10

Avg. Gas KBtu/sf

54.64

42.78

49.47

49.01

Total Number of Hotels

338

309

435

1082

Total Average of Elec kWh/sf/yr

16.94

17.43

14.46

16.08

Total Average of Gas KBtu/sf

58.58

35.59

44.27

46.26

Electric Use 300-500 Room Hotels by
Climate

(/)
re
>

Cold Moderate Hot
Climate Type

~ Midscale w/F &B
¦ Upscale

~ Upper Upscale

Figure 10

Electric EUI for 400-500 Room Hotels by Climate

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Gas Use 300-500 Room Hotels by Climate

"2:

re
a>
>
3

70
60
50
40
30

£ 20

10
0

~ Midscale w/F &B
¦ Upscale

~ Upper Upscale

Cold Moderate Hot
Climate Type

Figure 11

Gas EUI for 400-500 Room Hotels by Climate

The thermal to electric ratio for each of these hotels ranges from 0.9 to 2.6 with a class weighted
average of 1.25. This means that for every kWh of electricity consumed, 2700 Btu of natural gas is
consumed. Reciprocating engine and microturbines produce up to twice this amount of recoverable
waste heat, so size matching for CHP will need take into account the thermal requirements at the site.
Thermal requirements can be increased, however, by converting all or a portion of the air conditioning
load to a thermally activated technology.

4.3 Hotel Load Analysis and Examples

Small and limited service hotels and motels do not have the load needed to support an
economically sized CHP system. A 40-unit two story motel in Atlantic City, New Jersey might have a
peak summer electric load of 65 kW, however, the minimum nighttime electric loads are less than 10 kW
and thermal loads are limited. Economics depends not only on the characteristics of the hotel but also on
the cost and performance of the CHP equipment itself. While there is a lot of development work
underway on small electric generators, these systems are currently too costly for all but specific niche
applications.

For this study, an economic cut-off for CHP systems was set at full service hotels with 100 rooms
or more.

4.3.1 Large Full Service Hotel

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A CHP system developer, PowerHouse Energy, Inc. (PHE), provided energy consumption for a
full service hotel that was retrofitted with CHP.12 PHE has installed a number of CHP systems in hotels
in California. The hotel is an Embassy Suites in Brea, California located in North Orange County. The
hotel has 228 guest rooms, a 400-seat restaurant, meeting rooms, a laundry, and an outdoor swimming
pool and spa.

During the site evaluation, PHE did instrumented electric and load consumption monitoring for a
number of days to determine the appropriate sizing and operating strategy for the CHP system. The
primary focus of this monitoring was to determine the minimum nighttime electric loads and the
coincident thermal loads. PHE wanted to size the system for continuous base-load operation with a high
degree of thermal utilization.

Figure 12 shows a portion of the results of monitoring the hotel electric use for a period of
almost two weeks during the summer of 2002. The minimum nighttime electric load was 304 kW and the
maximum peak electric use occurred at 10:00pm, July 17th, (not shown) of 540 kW. The minimum
electric loads during the winter months are 5-10% lower.

504 kW
Peak

304 kW
Min

M 7/29

T 7/30

W 7/31

Th 8/01

Figure 12 Electric Load Monitoring for Brea Embassy Suites prior to Installation of CHP
System

The key to designing an economically viable CHP system is to design a system with high thermal
utilization. PHE evaluated the thermal loads for the building. The addressable thermal loads were hot
water for the guest rooms, space heating, kitchen hot water, the laundry water heater, and the pool and
spa heater. Physical location of the facilities in an existing hotel is as important as the size and timing of
the loads.

David Moard, President, Powerhouse Energy, Inc., personal communication.

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PHE monitored the thermal consumption of the domestic hot water for guest use. The existing
pair of 1.2 MMBtu/hr boilers operated for 8-12 hours per day providing about 1.0 MMBtu/hr of useful
heat energy to the hot water. The average energy required by the guests for hot water was 9.72
MMBtu/day (averaging 0.34mmBtu/hr).

PHE installed Capstone microturbines in parallel with the hotel's existing electrical utility
connection. The microturbines are run continuously to provide approximately 115 kWh of electrical
power to offset the hotel's average 300 kWh electrical demand. Approximately 750,000 Btu/hr thermal
heat output of the microturbines is recovered and circulated through a Unifin heat recovery unit and
supplied to the domestic hot water storage tanks to offset the guest rooms, laundry and kitchen thermal
requirements. The captured thermal heat, using a 40°F temperature rise in the water that is pumped at 80
gpm through the heat recovery unit of the turbines and into the domestic hot water storage tank, reduces
the operational run time of the hotel's two existing 1.2 million Btu/hr water heating boilers. The boilers
remained in a reserve or backup capacity to the CHP system, running only a couple hours per day in the
winter months. The CHP system provides virtually all the domestic water heating needs during the
summer months.

The outdoor pool heating is integrated into the CHP system by a thermal heat exchanger, tying
the domestic and pool hot water heating loops. The excess thermal heat, not utilized by the day or
nighttime domestic demand of the hotel, is diverted to preheat the pool hot water loop. This ensures
maximum usage of thermal energy available from the system; in this case about 90% of the thermal heat
generated by the microturbines is used 100% of the time.

Based on a number of applications provided by PHE and supplementary analysis, a thermal load
analysis by end-use is provided in Table 18 for a hotel that is based on the requirements of a hotel the
size of the Brea Embassy Suites - 230 guest rooms and estimated to be about 195,000 square feet.
Figure 13 shows a graphic representation of loads compared to alternative CHP sizing. Water heating
loads are the most important for CHP size matching. These loads are steady throughout the year but have
two large peaks during the day and drop down to maintenance loads only during the middle of the night.
Space heating loads can fill in the nighttime thermal use, but only in the wintertime. Kitchen loads peak
with each meal. Laundries typically run a single shift starting early in the morning and stopping in early
afternoon. Pool heating loads can be shifted to nighttime thereby creating higher utilization of the CHP
system at night. The key for a developer such as PHE is that each hot water application that is added to
the system requires another heat exchanger loop and associated piping at a cost of about $7,000 per
added heat exchanger. This fact limits the attractiveness of linking up several different loads within the
hotel.

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Table 18 Thermal Energy Requirements for 228-Room Full Service Hotel

Thermal Load

Boiler
Capacity
kBtu/hr

Ave rag
e Use
kBtu/hr

Annual
Use
MMBtu

Typical
Schedule

Guest Hot Water

1,200

340

2,978

Peak morning
and evening

Laundry/Kitchen

750

788

Daytime/meal
prep.

Pool

300

438

Can be shifted

to night-time

Spa

300

788

Steady

Space Heating

2,000

Variable

Climate driven,
highest at night

Cooking

Non-
boiler

230

2,015

Meal prep.

Total Thermal

800

7,008

plus space
heating

CHP

Addressable

570

4,993

plus some
space heating

3
O

m
*

Typical Thermal Loads 230 Room

Hotel

1 3 5 7 9 11 13 15 17 19 21 23
Hours

~ Space H

¦ Spa

~ Pool

~ Kitchen

¦ Laundry

~ DHW

CHP Sized
to Min Elec.
Load

CHP Sized
to thermal
load

Figure 13

Thermal Load Breakdown for Typical 230 Room Hotel

Typical hotel characteristics for a 195,000 s.f., 230 room full-service hotel were developed, based
in part on partial data provided for the Brea Embassy Suites. These characteristics were put into an

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energy load model.13 The modeling allowed the hotel to be "moved" around the country to determine the
impact of climate on energy loads. Orange County is a comparatively mild climate. Energy consumption
in Las Vegas and in Minneapolis was modeled to identify the energy consumption in hot and cold
climates respectively. This comparison is shown in Table 19.

Table 19 Energy Consumption Breakdown by Climate for a 195,000 s.f. Full Service Hotel

Location

Units

Anaheim

Las Vegas

Minneapoli
s

Climate Type

Mild

Hot

Cold

Thousand

Annual Electric Use

kWh
Million

3,131

3,548

2,960

Annual Gas Use

Btu
Million

7,836

8,780

19,660

Base Gas Demand

Btu

5,038

4,710

6,240

Electric EUII

kWh/s.f.

16.06

18.19

15.18

Gas EUI

kBtu/s.f.

40.18

45.03

100.82

Peak Demand

745

840

832

Average Demand

357

405

338

Minimum Demand

250

260

240

Peak Load/Avg. Load

% of Avg

208%

207%

246%

Min Load/Avg. Load

% of Avg

70%

64%

71%

CHP Sizing Strategies

100% Electric/80% Thermal Use (kW)

144

134

178

Max Size for 100% Electric Use (kW)

250

260

240

Energy consumption can be characterized as follows:

¦ Electric consumption ranges from 3 to 3.5 million kWh per year - hot climate cooling
loads push total consumption up by 16% compared to mild and cold climate usage

¦ Annual gas demand in the cold climate application is more than twice that of the hot and
mild climate applications.

¦ The CHP addressable thermal loads are the various water heating loads that are fairly
constant throughout the year. These loads are fairly similar in the various climate
applications varying only as a function of colder groundwater temperature in the cold
climate application. In a warm climate application, 64% of the annual gas consumption
represents the primary target for replacement with CHP supplied thermal energy.

¦ Minimum electric loads are similar for the applications across climate types of 240-260
kW. Minimum electric loads are important to CHP sizing and operating strategy because
a system sized at or below this point can be run at full load continuously thereby
maximizing the utilization of the equipment and minimizing operating complexity.

¦ Sizing a CHP system to the addressable thermal load results in a system sized below the
minimum electric demand. Sizes range from 134-178 kW.

13 The Model used was EQuest 3.5 an energy simulation model for commercial buildings. EQuest was funded under
the California Public Interest Energy Research Program and is publicly available.

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A CHP system sized at the minimum electric load would be able to meet an air
conditioning load that was converted to absorption cooling or some other thermally
activated technology and also space heating loads.

The energy and sizing relationships shown in the table were used in the market screening
approach described in Section 5.

4.3.2 Very Large Resort/Casino Hotel

Turning Stone Resort and Casino

An example of a very large casino resort is the
Turning Stone Resort and Casino in upstate New York.
This resort operated by the Oneida Indian Nation
recently underwent a $310 million expansion that will
ultimately double the space to nearly 2 million square
feet. This expansion included a $13.1 million gas
turbine combined cooling heating and power facility
that provides 5.5 MW of power on a continuous basis.
The turbine exhaust heat is recovered using a heat
recovery steam generator (HRSG) producing steam at
125psig for service hot water, space heating, and 2,000
tons of absoiption chiller capacity to provide space
cooling.

The resort consists of 4 separate lodging
accommodations with over 750 rooms and suites These
accommodations include the original 4-story, 271
room, 20 suite hotel, the new 19-story 287 room, 7
suite Tower, a 4-story 88 room all suite Lodge, and a
no-frills 2-story 63 room inn. There is a 500,000
square foot casino with 2400 slot machines, over 100
table games, and a 1300 seat Bingo parlor. There are
11 restaurants and coffee shops, a fitness facility with
S5:? indoor pool, a 30,000 s.f. Event Center for
entertainment and trade shows, a 2400 car parking
garage, and a large Clubhouse serving the three golf courses that has additional banquet and meeting
facilities. There is also an RV park and a soon to be completed spa. The resort employs 4200 people and
has over 4.5 million visitors per year.

Before the current expansion, the facility used 28.7 million kWh per year at a cost of $2.4 million
and 94,000 MMBtu/year of natural gas at a cost of $500,000. The peak load on the facility was 6 MW
with a minimum demand of 2.5 MW. The expansion, most of which is completed, will more than double
the consumption of both gas (200,000 MMBtu/year) and electricity (57.6 million kWh) with a
corresponding peak demand 11.1 MW and minimum demand of over 5 MW. Peak cooling load will
increase to nearly 4,000 tons.14

"4 BCHP Feasibility Study for Turning Stone Casino, CDH Energy Corporation, March 2003.

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Figure 14 shows the comparison of the post expansion facility load with the load after a 5.5 MW
CHP system with absorption cooling was installed. Without CHP, the facility electric loads would have
been a minimum of 5.5 MW with summer peaks of over 11 MW. With the BCHP system (building
cooling heating and power) the facility generates its own power year-round and peak loads are reduced
by 2.9 MW due to the addition of gas cooling using double effect absorption chillers fired by the steam
produced by the HRSG. The spikes in April and October represent scheduled outage periods for the gas
turbine during which time the facility relies on the electric chillers to meet the cooling load. As designed
at full build-out, the CHP system meets 90% of the electric energy for the facility (84% from the turbine
generator and 6% from the displaced electric cooling). The CHP system as analyzed in the feasibility
study was projected to meet 79% of the peak load - 52% from the generator output and 27% from the
displaced electric cooling load. Figure 15 shows the projected facility load with absorption cooling and
the utility purchases with BCHP.

The CHP system is designed to assume 69% of the facility thermal loads in addition to providing
the steam energy for the absorption chillers.

Base Case (Case #1)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

BCHP (Case #4)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: CDH Energy Corporation

Figure 14 Load Comparison for the Facility with and without CHP

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i 1 1 1 1 1 1 1 1 1 r

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: CDH Corporation

Figure 15 Facility Loads and Utility Purchase Requirements for CHP System

The CHP system was completed and went into operation in 2004. Gas prices are much higher
now than during the planning period resulting in recent operating losses. The Oneida Indian Nation is
planning to connect some of their own gas wells to the facility, which will provide a captive source of
fuel for the system. The heat recovery hasn't reached full potential yet as all of the new space has not yet
been completed, so the total CHP efficiency is currently approximately 50% ~ below the projected 70-
75%.

The resort had to change out the casino air handlers and revise designs in an effort to control the
indoor air quality of the casino. The casino is exempt from New York State's smoking ban in public
buildings and there was a significant problem in both air quality and equipment performance due to the
smoke that needed to be removed from the casino floor. The resort facility management questioned the
understanding of A&E firms and CHP developers concerning the complexities of a casino compared
with more standard hotel designs. There was also considerable discontent concerning the utility standby
rate structure and the electric industry restructuring rules concerning wholesale power markets that have
perpetuated high power costs in New York State.

The Borgctta Casino Hotel and Spa and the Marina Thermal Facility

The Borgata Casino Hotel and Spa located in the Renaissance Pointe area of Atlantic City's
Marina District, completed in 2003, is touted as the first "Las Vegas style" resort in Atlantic City. The 3
million square foot facility is served by an energy plant called the Marina Thermal Facility that provides
hot water and chilled water and emergency back-up electricity for the complex.15

15 Energy consumption data in this section was provided by the Marina Thermal Facility developer, DCO Energy, LLC.

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The resort is an extensive and complex facility that does share the typical features of a Las Vegas
strip casino hotel, such as:

¦ 2002 guest rooms and suites

¦ 7 story parking garage

¦ 70,000 ft2 Event Center

¦ 125,000 ft2 Casino

¦ 11 Restaurants

¦ 2 night clubs and 3 bars

¦ 50,000 ft2 European Health Spa & Pool

¦ 11 Retail Boutiques

¦ 1.5 million ft2 (140,000 m2) tower

¦ 1.5 million ft2 (140,000 m2) low rise building.

Thermal energy and back-up power is provided by the brand new Marina Thermal Facility
(MTF), a 26,000-square-foot plant, to provide the hot and chilled water needed to heat and cool The
Borgata Casino Hotel. The $54 million plant is capable of providing nearly 15,000 gallons of chilled
water and 2,600 gallons of heated water per minute, delivering enough hot and chilled water to meet all
of The Borgata's heating, cooling and domestic hot water needs.

Electric Use

The Borgata consumes about 86 million kWh/year. Figure 16 compares the peak summer week
with a cold winter week. Loads are lowest on Mondays and Tuesdays increasing throughout the week to
a peak on the weekends. Peak summer load for 2004 was 16.1 MW; peak winter loads are between 9 and
10 MW per day. Minimum electric loads of 7 MW/day occur during the winter with minimum daily
summer loads above the peak winter loads of 10 MW/day.

Thermal Energy Use

The thermal energy delivered to the casino was evaluated in terms of the energy content. Figure
17 compares the thermal delivery for January, April, August, and October. These months show winter,
summer, and Spring/Fall thermal loads. The graphs show that thermal loads are high in both the summer
and winter with cooling and heating loads swapping the primary roles. In the spring and fall months,
thermal loads are about 60% of winter/summer values. Figure 18 shows the loads on an annual basis.
These loads reflect thermal energy delivered to the facility. The estimated gas consumption to deliver
this energy, assuming 80% efficient boilers, is 498 billion Btu/year.

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18.0

16.0

14.0

T3
C

12.0

10.0

8.0

o
'C

6.0

o
a)

4.0

2.0

0.0

CO
T3
C

Marina Thermal Facility
Summer vs Winter Loads

CO
T3
CO
0
15

>
CO
T3
CO
0
C
T3
0

Jan 12-18, 2004

Aug 23-29 2004

CO
T3
CO

CO
T3

-t—•

CO
C/)

CO
T3
C
15

(f)

Figure 16

Summer and Winter Electric Consumption - Marina Thermal Facility

100

January 2004

100

August 2004

100

April 2004

100

15-Minute Data

October 2004

Figure 17

Seasonal Thermal Loads - Marina Thermal Facility

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60,000

±3 50,000
c

I 40,000

+->
m

c
o

Monthly Thermal Use

Atlantic City

¦ Chilled Water

¦ Hot Water

^ \® A

°^°^°

Figure 18

Annual Thermal Loads by Month - Marina Thermal Facility

Effect of Climate and Cooling Equipment Changes on Energy Use

The use of absorption chillers is a feature of the Borgata that is not as common as the use of
electric chillers. In an electrically cooled facility, the thermal energy use would be represented by the hot
water delivery components of the previous two figures. In this type of facility, gas consumption would
be reduced by more than half to 229 billion Btu/year.

Electric use would be correspondingly increased as shown in Figure 19. Peak load would be
increased by about 4.5 MW and annual consumption increased by 13 million kWh. Peak cooling load is
actually 5.4 MW but this cooling peak doesn't correspond to the peak facility load which occurred at
3:15pm August 29th. Peak loads for cooling in the hot desert climate of Las Vegas are not increased
compared to corresponding peak loads in Atlantic City due to the greater contribution of the cooling
tower to overall cooling loads.

Most hotels with characteristics similar to the Borgata are in Las Vegas. Therefore, heating and
cooling loads were re-estimated for the facility based on remodeling the temperature sensitive loads. In
Las Vegas, heating loads are much lower and cooling loads are much higher. Figure 20 shows the
monthly thermal loads estimated for the facility in the Las Vegas climate. On an annual basis, hot water
loads (including space heating) are 70% of what they are in Atlantic City, chilled water loads are 140%
of what they are in Atlantic City.

Energy and Environmental Analysis, Inc. 39 Hotel and Casino CHP Market Assessment

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Marina Thermal Facility

Aug 23-29 Estimated Loads with All Electric Chillers

25.0

20.0

15.0

5.0

0.0

¦ Added Chiller Loads
n Electric Loads

Figure 19 Effect of Converting Absorption Chiller Loads to Electricity

Monthly Thermal Use

~~ ~~~ Las Vegas
60,000 i

¦ Chilled Water || 1

£ 50,000 - ¦ Hot Water I I I

40'000 Hill

I ulllllta

Figure 20 Monthly Total Thermal Loads - Las Vegas Climate

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Table 20 summarizes energy consumption measures for the Borgata and for 3 alternative
configurations of climate and cooling energy source.

Table 20 Load Analysis for Mega-Hotel in Alternative Locations and Configurations

Energy Measure

Units

Actual

Estimate 1

Estimate 2

Estimate 3

Climate

Atlantic

City

Las Vegas

Absorptio

Cooling

Million

Electric

Annual Electric Consumption

kWh/year

86.1

99.4

86.1

104.9

Annual Gas Consumption

MMBtu/year

498,441

229,364

538,220

159,748

Electric Load Factor

Percent

61%

53%

61%

56%

Electric EUI

kWh/year/s.f.

28.7

33.1

28.7

35.0

Gas EUI

KBtu/year/s.f.

166.1

76.5

179.4

53.2

Peak Load

16.1

21.3

16.1

21.3

Average Load

9.8

11.3

9.8

12.0

Minimum Load

7.0

7.4

7.0

7.4

Base Thermal Load

MMBtu/hour

Base Thermal Share of Total

Percent

53%

46%

47%

66%

For these large facilities, the inclusion of thermally activated cooling systems allows a significant
economic expansion of the CHP system. These size relationships are used in the next section for the
market screening analysis.

5. CHP TECHNICAL AND ECONOMIC MARKET POTENTIAL

This section describes the results of an analysis of the technical and economic market potential
for CHP in hotels and casinos. Figure 21 shows the basic approach that consists of the following steps:

¦ Evaluation of the number of hotels by size and by state based on the breakdown shown in
Section 2 - Table 8.

¦ Removal of the existing CHP, described in Section 3, from the database of remaining
hotels.

¦ Characterization of the appropriate CHP sizing for hotels by size class based on the load
analysis presented in Section 4.

¦ Calculation of the technical market potential in megawatts which is the sum-product of
the CHP sizing times the number of hotels by size and state after the hotels that already
have CHP are subtracted.

¦ Characterization of average gas and electric prices by state using EIA data.

¦ Characterization of the cost and performance of typical CHP systems in the size classes
selected for each of the hotel size categories based on prior EEA analyses.

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¦ Calculation of paybacks for each size and state category based on the CHP system
performance and the average energy prices.

¦ Calculation of the economic market potential as all CHP capacity that shows an economic
payback of less than 10 years.

Figure 21 Hotel Market CHP Screening Approach

Table 21 summarizes the results of this market screening approach. There are 9,464 hotels in the
target market of hotels with more than 100 rooms. The hotels are separated into five size categories.
Nearly two thirds of the hotels fall into the 100-199 room size, and 94% of the hotels are less than 500
rooms. There are 148 mega-hotels in the U.S. with more than 1,000 rooms. There are 98 hotels with
existing CHP but 19 of these are in hotels with fewer than 100 rooms; therefore only 79 hotels with CHP
are subtracted from the target market16.

Appropriate CHP sizing for each category is shown in the Table. For the 100-199 room size, it
was assumed that CHP would be sized to the addressable thermal load which is less than the minimum
electric load. This value was based on the estimated sizing described in Section 4.3.1 for a 230 room full
service hotel. This value was reduced proportionally to an assumed average size of 150 rooms. For the
200-499 room category it was assumed that sizing would be at the minimum electric load and include
absorption chillers for air conditioning. The CHP system for the 500-999 room size category was set at 1
MW based on evaluation of existing CHP systems. CHP for the 1000-1999 room size category was
sized based on the Turning Stone Casino system. The sizing for the 2000+ rooms category was based on
a sizing that was 40% larger than the energy requirements of the Borgata/Marina Thermal Facility.

The total remaining technical market potential for CHP in this target market is 2,773 MW. After
screening each state and size category for paybacks, the economic market potential is 1,456 MW based
on current energy pricing and near-term technology cost and performance. Only 23% of the market
below 200 rooms is economic. However, as the hotel and CHP system sizes get larger, the share of the
technical market that is economic increases. In addition, the largest hotels are more and more
concentrated in the states that have favorable economics so that 90% of the 1000-1999 room hotels are
economic and 97% of the 2000+ room hotels are economic.

16 The nineteen existing CHP systems installed in hotels with 100 rooms or less were also installed prior to 1990.

This size of hotel is not normally considered a candidate for CHP in today's environment.

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Table 21 Summary of Hotel CHP Market Screening Results

Screening Approach

100-199

Number of Rooms
200-499 500-999 1000-1999

2000+

Total

Hotels in U.S.

6,323

2,614

379

116

9,464

Hotels with CHP

Remaining Market (sites)

6,290

2,584

370

111

9,385

Appropriate CHP Size (kW)

380

1,000

5,000

10,000

Technical Market Potential (MW)

566

982

370

555

300

2,773

Economic Market Potential (MW)

130

371

170

495

290

1,456

% of Market Economic

22.9%

37.8%

45.9%

89.2%

96.7%

52.5%

Additional detail is presented in the following sections and detailed state-by-state results are
presented in Appendix A.

Energy Prices

To compute economics for a CHP system, it is necessary to understand the applicable electric and
gas rates that hotels must pay for their energy. In analyzing CHP competitiveness for a real project, it is
important to understand the specific tariffs that are used and other factors such as standby charges. For
this simple screening, the purpose is simply to indicate areas of the country that appear to have favorable
conditions based on a comparison of average prices. Average retail price information was taken from the
Energy Information Administration (EIA).

In this report, natural gas prices reported by the Energy Information Administration (EIA) were
used as the basis. EIA reports average prices of natural gas at several points in the supply chain,
including:

• Electric Utility Power Generation Station (lower than industrial customer rate)

• Industrial Customer

For commercial and industrial customers, the EIA industrial price point was used as an estimate
of the cost of natural gas prior to the installation of the CHP system. Gas utilities frequently offer lower
rate tariffs to customers that install CHP systems. To estimate the price of natural gas after the CHP
system is installed, the EIA industrial and utility generation prices were averaged. The rationale for this
approach is that commercial and industrial CHP customers are likely to pay a reduced gas rate after the
CHP system is installed, but the rate will not be as low as the rate paid by electric utilities that consume
large volumes of natural gas for central or peaking power stations. For some states, EIA did not report
either the utility or the industrial price. In these cases, the estimated cost for natural gas for the CHP
system was computed by either adding $1.00 to the utility price or subtracting $1.00 from the industrial
price. This approximation was based on reviewing the EIA data, with a focus on California and New
York, and concluding that the average difference between utility and industrial rates is near $2.00. The
gas rates used in this assessment are shown in Appendix A.

Figure 22 shows average industrial electric rates by state. While hotels are not industrial
facilities, the size and scope of operations more closely matches the EIA industrial price than the EIA
commercial price, which is affected by a large number of very small commercial customers. The figure is
ordered from left to right in terms of the rates that produced the lowest paybacks. For example, Louisiana

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has lower electric rates than New York, but is ranked ahead of New York because of its lower gas rates.
The figure shows that there are 13 states in which all hotel size categories pass the economic screen. In
these states, all market sizes are economic. There are an additional 14 states in which only hotels larger
than 1000 rooms are economic. Only 7 of these 14 states actually have such large hotels.

a)
O

16
14
12
10
8
6
4
2
0

Average Industrial Electric Prices

All Hotels Economic

Mega Hotels (1000+ rooms) Economic
States with Mega Hotels Shown In Red

States not shown are not economic

x ^ x
^ < z

tr < <
> 2 o

< >- >< _l = N
Z H U- 2 <

0Q(/)0

Figure 22 Average Large Customer Electric Prices in Order of Highest to Lowest CHP
Competitiveness

CHP System Cost and Performance

For the sizing selected for each category, a typical CHP system was selected based on near-term
technology characteristics. These systems are shown in Table 22. The table shows installed cost, the cost
of adding absorption cooling, heat rate, recoverable waste heat, and non-fuel O&M costs. For small
systems, reciprocating engines, microturbines, and fuel cells can be used. Gas engines were selected for
the comparison because, based on existing technology, they provide the best economics. Larger systems
of 5 to 10 megawatts can utilize gas turbines or multiple engines. Reciprocating engines are more
efficient, but gas turbines provide high quality thermal energy (steam) that can be used to drive efficient
double-effect absorption chillers. Only a portion of reciprocating engine heat can be used to produce
steam.

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Table 22 CHP Technology Cost and Performance

100-199

Number of Rooms

1000-

200-499 500-999 1999

2000+

Typical CHP System Type

Recip.
Engine

Gas
Turbine

Approximate CHP Capacity, kW

100

300

1000

5000

10000

Basic Capital Costs ($/kW)

$1,350

$1,150

$1,100

$900

$950

Absorption Chiller Cost Adder ($/kW)

Not Used

$294

$203

$105

$67

Early Market/Site Specific Multiplier

128%

108%

105%

Installed Costs, $/kW

$1,728

$1,559

$1,407

$1,055

$1,068

Heat Rate, Btu/kWh

11,500

10,350

9,213

11,765

Electric Efficiency, %

29.7%

33.0%

37.0%

29.0%

Thermal Output, Btu/kWh

5300

3709

3345

4674

O&M Costs, $/kWh

$0,018

$0,013

$0,012

$0,008

$0,006

Market Screening

Table 23 shows the economic potential by size and state. The states are ordered from lowest
payback at the top to highest payback at the bottom. The smaller sized systems are economic in fewer
states because the installed costs are higher and the electrical efficiencies are somewhat lower. The
highest economic potential states are shown in green. These state/size combinations have screening
paybacks of less than 5.5 years which corresponds to a return on investment of 10% or greater. The total
high return potential is 908 MW. The state/size combinations shown in yellow have paybacks greater
than 5.5 years and less than 10 years. Facilities in this range were also included in the economic potential
for a number of reasons. Some facilities may accept a longer payback; certain site specific factors might
improve the payback for an individual facility; and there might be other factors such as incentive
payments. For example, California 100-199 room hotels are shown in yellow, screening payback of 5.6
years, though this has been and continues to be a very active state for CHP development due to incentive
payments on CHP that reduce the initial investment.

Table 24 shows the top 10 states in terms of total MW economic market potential. Nevada has
the highest potential due to the extremely high concentration of mega-hotel/casinos in Las Vegas.
California is second followed by Florida, Texas, and New York. Of the 11 states in the top 10
(Mississippi and Georgia are tied at number 10) four of them have commercial casinos and seven have
tribal casinos. Only three of the states have no casinos - Hawaii, Georgia, and Massachusetts.

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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Table 23 Hotel Market CHP Economic Screening Results

States

MW of Economic CHP Potential

Econ. Potential

Total

Highest to

100-

500-

2000

(MW)

Lowest

199

200-499

999

1000-1999

Hawaii

Alaska

New

Hampshire

Connecticut

Rhode Island

Vermont

Massachusetts

California

121

276

New Jersey

Nevada

100

230

387

Louisiana

New York

125

Texas

129

Florida

110

150

Michigan

Arizona

New Mexico

Minnesota

Tennessee

Colorado

Not
Economi

North Dakota

Mississippi

Pennsylvania

Delaware

Georgia

Wisconsin

North Carolina

All other states

U.S. Total

130

371

170

495

290

1,456

High Return
Total

233

310

250

908

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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Table 24 Top State CHP Targets for the Hotel Industry in Terms of MW of Economic
Potential

Top 10 States
(and ties)

Nevada

387

California

276

Florida

150

Texas

129

New York

125

New Jersey

Hawaii

Louisiana

Massachusetts

Mississippi

Georgia

All other states

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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6. CONCLUSIONS

This analysis has shown that there is significant market potential for CHP in the hotel and casino
market. This market potential is concentrated in the larger, full-service facilities. While there are nearly
48,000 hotels in the U.S., less than 10,000 of them have the usage and energy characteristics suitable for
CHP using current technology. The economic cut-off for this analysis was set at 100-rooms or greater,
though it is possible that CHP can be effectively placed in hotels below this size threshold. Of the 98
existing CHP systems in hotels, 20% of them are in hotels with fewer than 100 rooms.

The large mega-resort hotels of 1,000 rooms or greater represent a distinct and very important
market segment. These huge facilities have more in common from an energy standpoint with a small
university than with a small business hotel or roadside motel. These facilities are typically, though not
exclusively, associated with casino gaming. There are multiple restaurants, nightclubs and other
entertainment venues, spas, casinos, health clubs, movie theaters, shops, and often large attractions -
zoos, aquaria, fountains, even an "active" volcano. The facilities occupy millions of square feet of
building space and the energy usage intensity per square foot is much higher than for the typical business
hotel.

The remaining identified market is in hotels with 100 to 999 rooms. These facilities are less
energy intensive than the large casino and resort hotels, but they still have round-the-clock electric and
thermal loads that can effectively support CHP. As the hotel sizes get smaller, the cost of absorption
chillers goes up, and their effectiveness goes down. It is not considered cost-effective with current
technology to try to include absorption cooling in a hotel system until the generator size reaches about
300 kW. This size can support about a 100-ton absorption system. Hotels need to have more than 200
rooms before such a system would be warranted.

In smaller hotel sizes, without adding cooling, it is very important to size the system to the
available thermal load. As shown in Section 4, a system with 70-80% seasonal utilization of the
available thermal load is going to be utilizing only about 60% the capacity of a system that is sized to the
minimum facility electric load. The problem is that there are fairly wide swings in thermal energy
consumption during the day, with nighttime values dropping considerably. The key thermal load is the
hot water for the guest rooms, though it may be possible to augment these loads with hot water needs for
the kitchen, laundry, pools, and even space heating seasonally.

While there is an economic opportunity to expand the use of CHP in the hotel industry, the
current market penetration is just under 1% of available sites. When only sites within the economic states

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

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and sizes are considered, the market penetration increases to 2% for the 100-199 room hotel category up
to 7% for the largest size category of more than 2,000 rooms. Hotel management is focused on hotel
business and investment is geared to adding to guest amenities. However, hotels are comfortable with
contracted facilities management and arrangements with energy service companies. General awareness
of CHP advantages needs to be increased in the hotel industry, and detailed options and approaches need
to be circulated among engineering firms, potential developers, and energy service companies that serve
the industry.

Energy and Environmental Analysis, Inc.

Hotel and Casino CHP Market Assessment

-------
APPENDIX A: TECHNICAL AND ECONOMIC MARKET SCREENING TABLES
Table A1 Target Market for CHP in the Hotel Industry

State

100-199

Number of Rooms
200-499 500-999 1000-1999

2000+

Total

Alabama

110

135

Alaska

Arizona

198

267

Arkansas

California

581

337

981

Colorado

155

232

Connecticut

111

Delaware

Florida

606

285

974

Georgia

229

320

Hawaii

Idaho

Illinois

220

115

357

Indiana

102

140

Iowa

Kansas

Kentucky

101

Louisiana

122

189

Maine

•sf

Maryland

135

187

Massachusetts

139

219

Michigan

187

249

Minnesota

103

162

Mississippi

Missouri

139

210

Montana

Nebraska

Nevada

187

New Hampshire

New Jersey

153

231

New Mexico

New York

225

101

365

North Carolina

232

277

North Dakota

Ohio

198

279

Oklahoma

Oregon

119

Pennsylvania

230

315

Rhode Island

South Carolina

113

167

South Dakota

Tennessee

170

230

Texas

411

209

646

Utah

Vermont

Virginia

241

342

Washington

131

174

West Virginia

Wisconsin

100

138

Wyoming

U.S. Total

6,323

2,614

379

116

9,464

Energy and Environmental Analysis, Inc.

Hotel and Casino Market Review

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Table A2 Existing CHP by State and Hotel Size (as of September 2005)

State

Number of Rooms

Grand
Total

<100 100-199 200-499 500-999 1000-1999 2000+

Alabama

Alaska

1 1

Arizona

Arkansas

California

O
CM

Colorado

Connecticut

1 1

Delaware

Florida

Georgia

Hawaii

1 2

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

112 1

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

4 4

New Mexico

New York

CM
CM

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

1 1

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

U.S. Total

19 33 30 9 5 2

Energy and Environmental Analysis, Inc.

Hotel and Casino Market Review

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Table A3

Remaining Hotel Technical Market Potential (Sites))

State

Hotels by Number of Rooms

Total

100-199

200-499

500-999 1000-1999

2000+

Alabama

110

135

Alaska

Arizona

198

266

Arkansas

California

561

319

940

Colorado

155

232

Connecticut

109

Delaware

Florida

606

284

973

Georgia

229

320

Hawaii

Idaho

Illinois

220

115

357

Indiana

102

140

Iowa

Kansas

Kentucky

101

Louisiana

122

189

Maine

Maryland

135

187

Massachusetts

138

215

Michigan

186

248

Minnesota

103

162

Mississippi

Missouri

139

210

Montana

Nebraska

Nevada

186

New Hampshire

New Jersey

149

223

New Mexico

New York

223

101

359

North Carolina

232

277

North Dakota

Ohio

197

278

Oklahoma

Oregon

119

Pennsylvania

230

315

Rhode Island

South Carolina

113

167

South Dakota

Tennessee

170

229

Texas

410

208

644

Utah

Vermont

Virginia

241

342

Washington

131

174

West Virginia

Wisconsin

100

138

Wyoming

U.S. Total

6290

2584

370

111

9385

Energy and Environmental Analysis, Inc.

Hotel and Casino Market Review

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Table A4 Remaining Hotel Technical Market Potential (MW))

State

MW CHP Technical Potential by Number of Rooms
100-199 200-499 500-999 1000-1999 2000+

Total
MW

Alabama

Alaska

Arizona

Arkansas

California

121

276

Colorado

Connecticut

Delaware

Florida

108

110

369

Georgia

Hawaii

Idaho

Illinois

115

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

100

230

387

New Hampshire

New Jersey

New Mexico

New York

125

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

166

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

U.S. Total

566

982

370

555

300

2,773

Energy and Environmental Analysis, Inc.

Hotel and Casino Market Review

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Table A5 Average Energy Prices by State

State

Average

, , x , Average Average

"US na Industrial CHP Gas

E'ectnc Gas Price Price
Pnrp

L aI $/MMBtu $/MMBtu
0/kWh

Alabama

4.42 $7.15 $6.15

Alaska

9.03 $2.09 $2.41

Arizona

5.79 $7.14 $6.41

Arkansas

4.54 $7.69 $6.69

California

8.60 $7.74 $6.78

Colorado

5.54 $6.36 $5.92

Connecticut

9.47 $8.31 $7.31

3.68 $7.70 $6.70

Delaware

5.25 $7.60 $6.60

Florida

6.29 $8.49 $7.37

Georgia

5.10 $7.42 $6.42

Hawaii

14.89 $12.87 $11.87

Idaho

3.95 $6.80 $5.80

Illinois

4.79 $7.96 $7.21

Indiana

4.38 $7.73 $6.73

Iowa

4.66 $7.16 $6.98

Kansas

4.87 $6.40 $5.95

Kentucky

3.67 $7.24 $6.24

Louisiana

6.28 $6.39 $5.39

Maine

3.46 $10.16 $8.32

Maryland

4.85 $10.07 $9.07

Massachusetts

9.06 $11.41 $8.91

Michigan

5.55 $6.85 $5.85

Minnesota

5.10 $6.47 $5.47

Mississippi

5.04 $6.97 $5.97

Missouri

4.79 $8.67 $7.67

Montana

4.41 $7.94 $6.94

Nebraska

4.33 $6.44 $6.57

Nevada

7.53 $7.20 $6.53

New Hampshire

11.08 $10.60 $9.60

New Jersey

8.79 $8.44 $7.44

New Mexico

5.46 $7.08 $6.08

New York

7.28 $8.45 $7.46

North Carolina

5.06 $7.46 $6.46

North Dakota

4.41 $5.55 $4.55

Ohio

4.91 $9.17 $8.17

Oklahoma

4.92 $8.78 $7.78

Oregon

4.07 $6.13 $5.13

Pennsylvania

6.06 $9.02 $8.02

Rhode Island

9.60 $9.38 $8.14

South Carolina

4.45 $7.53 $6.53

South Dakota

4.94 $6.08 $6.03

Tennessee

4.77 $5.83 $4.83

Texas

6.44 $5.75 $5.76

Utah

4.26 $7.20 $6.53

Vermont

8.04 $5.88 $4.88

Virginia

4.47 $7.70 $6.70

Washington

3.78 $7.16 $6.16

West Virginia

3.87 $7.24 $6.24

Wisconsin

5.30 $7.82 $6.82

Wyoming

3.93 $6.34 $4.90

U.S. Average

5.47 $6.24 $6.09

Energy and Environmental Analysis, Inc.

Hotel and Casino Market Review

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Table A6

CHP Investment Paybacks by Size and State, Sorted Best to Worst

State

CHP Paybacks by Number of Rooms and State
100-199 200-499 500-999 1000-1999 2000+

Hawaii

3.10

2.63

2.29

1.49

1.64

Alaska

4.22

3.51

2.68

1.84

1.88

New Hampshire

4.69

3.86

3.48

2.16

2.39

Connecticut

5.17

4.22

3.71

2.34

2.50

Rhode Island

5.30

4.32

3.91

2.43

2.62

Vermont

5.45

4.43

3.75

2.44

2.50

Massachusetts

5.40

4.39

4.31

2.63

2.77

California

5.97

4.81

4.26

2.65

2.82

New Jersey

6.13

4.92

4.45

2.72

2.94

Nevada

8.25

6.38

5.81

3.41

3.72

Louisiana

9.80

7.38

6.86

3.98

4.18

New York

9.88

7.43

7.44

4.04

4.52

Texas

13.52

9.58

8.71

4.64

5.30

Florida

15.05

10.40

12.10

5.64

6.48

Michigan

15.82

10.81

11.52

5.71

6.21

Arizona

18.26

12.02

13.34

6.12

7.04

New Mexico

18.14

11.97

13.52

6.28

6.96

Minnesota

19.00

12.37

13.63

6.44

6.95

Tennessee

19.31

12.52

13.29

6.48

6.78

Colorado

21.44

13.49

14.51

6.51

7.57

North Dakota

23.39

14.31

15.75

7.29

7.55

Mississippi

24.87

14.92

18.97

7.67

8.63

Pennsylvania

24.31

14.69

22.75

7.71

9.90

Delaware

27.62

15.97

22.85

8.21

9.70

Georgia

29.60

16.69

24.31

8.52

10.01

Wisconsin

29.41

16.62

25.33

8.53

10.30

North Carolina

31.86

17.46

26.70

8.88

10.53

Wyoming

35.37

18.59

28.19

10.00

10.09

Kansas

52.87

23.02

35.35

10.03

12.73

South Dakota

107.97

30.55

53.90

11.29

16.18

Oregon

57.41

23.94

42.27

11.48

12.66

Alabama

86.27

28.31

98.66

13.42

16.80

Arkansas

176.13

34.76

negative

16.04

22.88

South Carolina

188.66

35.28

negative

16.17

22.56

Virginia

377.87

39.36

negative

17.71

26.46

Illinois

negative

46.85

negative

18.72

35.59

Idaho

negative

45.71

negative

19.46

25.60

Oklahoma

negative

45.56

negative

20.39

43.52

Indiana

negative

48.26

negative

20.75

33.98

Missouri

negative

53.57

negative

23.02

54.83

Montana

negative

56.85

negative

23.56

44.78

Utah

negative

101.25

negative

27.94

70.02

Iowa

negative

284.38

negative

29.85

384.95

Ohio

negative

77.12

negative

30.48

236.85

West Virginia

negative

118.12

negative

36.64

82.26

Washington

negative

157.70

negative

42.24

108.84

Nebraska

negative

74.44

negative

Kentucky

negative

86.80

negative

Maine

negative

Maryland

negative

Energy and Environmental Analysis, Inc.

Hotel and Casino Market Review

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Table A7 Hotel Market CHP Economic Screening Results

States

MW of Economic CHP Potential

Econ. Potential

Total

Highest to

100-

500-

2000

(MW)

Lowest

199

200-499

999

1000-1999

Hawaii

Alaska

New

Hampshire

Connecticut

Rhode Island

Vermont

Massachusetts

California

121

276

New Jersey

Nevada

100

230

387

Louisiana

New York

125

Texas

129

Florida

110

150

Michigan

Arizona

New Mexico

Minnesota

Tennessee

Colorado

Not
Economi

North Dakota

Mississippi

Pennsylvania

Delaware

Georgia

Wisconsin

North Carolina

All other states

U.S. Total

130

371

170

495

290

1,456

High Return
Total

233

310

250

908

Energy and Environmental Analysis, Inc.

Hotel and Casino Market Review

-------