What do the Obama Administration, Department of Energy, Environmental Protection Agency, CHP Association, and the California Cogeneration Council all have in common?
They are all promoting the development of more combined heat and power (CHP or cogeneration) applications. In fact, they want to increase CHP from its current 82 GW of production in the United States by another 40GW, by 2020, and, in the process, produce a lot of free hot water. Information on the following subjects includes:
- What is combined heat and power (CHP)?
- Existing applications
- How to evaluate your CHP prospects
- How to do it right or wrong
- Financial considerations, including tax deductions and subsidies
What is Combined Heat and Power?
Combined heat and power, also known as cogeneration, C H P, or "\ˈchip\", generates clean and efficient electric power and useful thermal energy (hot water or steam) from a single fuel source. Instead of purchasing electricity from the local utility and burning fuel in an on-site furnace or boiler to produce the needed thermal energy, an industrial or commercial user can provide both energy services from an on-site CHP. This creates one energy-efficient source and provides a 2 for 1 benefit.
Consequently, CHP provides significant energy efficiency and environmental advantages over separate heat and power sources. As with all power generation, CHP deployment has unique engineering, cost, operational, and other characteristics. Users recognize it as a proven and effective available clean energy option that will help the United States enhance energy efficiency, reduce greenhouse gas (GHG) emissions, promote economic growth, and maintain a robust energy infrastructure. Success exists if done right.
CHP Prime Movers
CHP prime movers, or power generation technologies, include reciprocating engines, microturbines, industrial turbines, and fuel cells. Natural gas is the cleanest and most common fuel; propane is less common, but also relatively clean. There is a growing trend toward dual-fuel systems that can combust either natural gas or diesel. (Click the following pictures to get in-depth information about each CHP technology)
While CHP has been in use in the United States in some form or another for more than 100 years, it remains an underutilized resource today. CHP currently represents approximately 8% of U.S. generating capacity compared to over 30% in countries such as Denmark, Finland, and the Netherlands. Its use in the U.S. has been limited, particularly in recent years, by a host of market and non-market barriers. Nevertheless, the outlook for increased use of CHP is bright. Policymakers at the federal and state level are beginning to recognize the proven benefits of CHP and the role it could play for providing industry and businesses increased capacity that is clean, reliable, & cost-effective energy. A number of states have developed innovative approaches to increase the deployment of CHP to the benefit of users, utilities, and ratepayers. CHP is being looked at as a productive investment by some companies in the eastern U.S. and Midwest who are facing significant costs to upgrade outdated coal and oil-fired boilers. In addition, CHP can provide a cost-effective source of highly-efficient new generating capacity. Finally, the economics of CHP are improving as a result of the changing outlook in the long-term supply and price of North American natural gas — a preferred fuel for many CHP applications.
U.S. and existing CHP applications
The importance of CHP to the United States was highlighted in President Obama’s Executive Order of August 30, 2012, which calls for deployment of 40 GW of new, cost-effective CHP by 2020. Achieving this goal would:
- Increase total CHP capacity in the U.S. by 50% in less than a decade
- Save energy users $10 billion a year compared to current energy use
- Save one quadrillion Btus (Quad) of energy — the equivalent of 1% of all energy use in the U.S.
- Reduce emissions by 150 million metric tons of CO2 annually — equivalent to the emissions from over 25 million cars
- Result in $40-$80 billion in new capital investment in manufacturing and other U.S. facilities over the next decade
Currently, 82 GW of CHP capacity are in use at more than 4,100 sites in the United States. Although 87% of CHP is in manufacturing plants around the country, a growing number of senior care, hotels, high density residential buildings, pools, and sports facilities are also installing systems.
Click here for the current list of California CHP facilities.
How to evaluate your CHP prospects
Is your facility a good candidate for CHP? Not all sites work due to physical plant constraints, operational characteristics, business objectives, and financing limitations. The first decision is, do you want to take advantage of DOE Technical Assistance Partnership resources or go to a knowledgeable CHP developer? The DOE, Pacific TAP (CA incl.), and EPA offer good general overview of CHP applications and efficacy, ready to go to market providers of engineering, equipment, installation, and long-term maintenance.
Here at WinWerks, we want to help shorten the process and bring CHP benefits to you in a controlled and expedited manner. We can take DOE and EPA conclusions and extend them into early cost, operations and schedule guarantees. Alternatively, we can provide a one stop comprehensive feasibility, design, construction, commissioning, and maintenance program to shorten the process by months.
How to do it right or wrong
On-site electricity and hot water energy demands limit CHP market size. There are several other critical factors to address. Screening includes factors such as the ability to retrofit, owner interest in applying CHP, capital availability, fuel availability, and variation of specific electricity and hot water consumption by respective industrial, commercial and residential users. All of these factors affect CHP feasibility for cost, ROI, and ultimate success or failure. The following are examples of how WinWerks can help with doing it right and even re-commissioning of what was done wrong to make it right.
- WinWerks' Do It Right
Even if you like CHP, can you afford it?
This decision typically involves the chief corporate financial officer who will measure the CHP benefits against corporate internal rate of returns. Financing can be from the corporate treasury, bank line of credit, and PACE (Project Assessed Clean Energy) program from local government taxing authority. CHP has tax incentives through the investment tax credits, SGIP (Self Generating Incentive Program in California), local utility and state incentives, and normal IRS depreciation schedules. WinWerks models the specific site's CHP financial characteristics into a GO/NO GO plan of action.