CHP for Industry: Renewed Focus

Photo courtesy of Primary Energy.

As the U.S. economy undergoes a unified thrust toward increased energy efficiency, combined heat and power (CHP, or “cogeneration”), is gaining attention as a capable, mature technology that offers tremendous energy savings across multiple economic sectors.

In light of imminent EPA greenhouse gas (GHG) regulation, CHP is being touted as a tool to reduce energy consumption in large industrial facilities while also reducing GHG emissions.  Compared with base load power plants having generation efficiencies of between 30 and 38 percent, large commercial or industrial facilities that use CHP can achieve efficiencies of up to 80 percent. 

To date, it is unclear to what extent CHP will satisfy Best Available Control Technology (BACT) guidelines under the EPA’s PSD and Title V permitting process.  However, explicit mention of CHP in Environmental Protection Agency permitting guidance materials indicate continued interest in CHP deployment.

CHP Expands in Legislation, Implementation

Policy makers view CHP as a sensible option to efficiently serve both heating and power needs in industrial, commercial and institutional applications, while hedging against volatile energy prices.  In fact, CHP incentives have repeatedly appeared in significant energy legislation over the past half-decade. 

At the same time, several factors are serving as drivers for greater CHP implementation: state Renewable Portfolio Standards (RPS) and Energy Efficiency Resource Standards (EERS); more stringent clean air quality regulations; and recent expansion in domestic natural gas production, which have potential to stabilize natural gas prices. In addition, some observers are pointing to research suggesting numerous benefits of CHP, including reductions in Greenhouse Gas (GHG) emissions and GDP growth to encourage greater incentives to CHP adoption.

How CHP Works

CHP is the concurrent generation of electricity or mechanical power and useful thermal energy from a single energy source. These energy sources, also called prime movers, can include reciprocating engines, gas turbines, boilers or fuel cells. 

CHP systems use heat recovery steam generators (HRSG), heat exchangers or thermally-activated systems such as desiccant humidifiers or thermal absorption chillers to use the excess heat from the energy source for use in any number of applications including facility heating, water heating, power generation, and process heating and cooling.

Benefits of CHP

While typical, base load power plants have generation efficiencies of 30 percent to 38 percent,  CHP systems can operate at efficiency levels as high as 80 percent, by using the otherwise wasted thermal energy. This improved energy efficiency results in reduced fuel consumption and lower levels of greenhouse gas emissions. 

CHP technologies are mature and market-proven, having existed in various forms for more than 100 years.   Currently in the United States, CHP accounts for 85 gigawatts or 9 percent of the U.S. electric generating capacity. Of this total, 88 percent are in industrial applications, providing electricity and steam to energy intensive industries such as chemicals, paper, refineries and primary metals. The remaining 12 percent of CHP applications are found in commercial and institutional facilities such as hospitals, schools, offices and apartment complexes.  In aggregate, CHP capacity avoids more than 1.9 Quadrillion Btu of fuel consumption and 248 million metric tons of CO2 emissions annually. This amount of CO2 reduction equates to removing more than 45 million cars from the road. 

Some recent estimates suggest that greater implementation of CHP systems can yield more significant avoided energy use and emissions. An Oak Ridge National Laboratory (ORNL) study estimated that if the installed base of CHP were to account for 20 percent of the U.S.’s electric generating capacity by 2030, it would avert 60 percent of the estimated potential growth in CO2 emissions between 2006 and 2030, or the equivalent of removing more than 150 million cars off the road.

In addition, CHP systems offer flexibility in fuel selection and can take advantage of both fossil fuels and locally-sourced and renewable fuels such as landfill gas, biomass, or digester gas. Bio-methane sources are particularly well-suited to CHP systems. This model eliminates a hazardous waste stream for local landfills or livestock farms, and instead uses it as a consistent source of heat and power.

Beyond Energy Efficiency

While the energy and environmental benefits of CHP are well-known, CHP can also improve the reliability of electricity supply and reduce pressure on the transmission infrastructure.   By situating a CHP system, which is effectively a distributed power generation system, closer to the end users CHP can eliminate or greatly reduce the electricity losses through transmission and distribution (T&D) facilities, which can account for approximately 8 to 10 percent of the load.  

In addition, positioning a CHP system this way can reduce grid congestion during periods of peak electricity demand. Not only does this improve grid reliability, but it can mitigate average power cost increases by avoiding congestion charges. Finally, there is less vulnerability to power outages with a CHP system closer to the end users as there are not as many exposed power lines. 

Other Market Drivers for CHP

Currently, several programs exist to promote CHP technologies and enhance the value proposition for industrial and commercial users to implement CHP within their facilities. The deployment of CHP technologies is a major focus of U.S. DOE's Industrial Technologies Program (ITP). ITP’s CHP activities are focused on research and development of new and more efficient CHP technologies and systems, technology validation projects and market transformation efforts aimed at removing barriers to CHP adoption. 

In addition, CHP implementation provides direct programmatic benefits to participants of  ITP’s Save Energy Now LEADER initiative as well as the Superior Energy Performance (SEP) program. Companies participating in the LEADER initiative can use CHP towards their 25% energy intensity reduction goal and plants seeking SEP certification can earn points towards certification from implementing CHP.
At the state level, 30 states and the District of Columbia now have RPSs in which electricity retailers are required to include renewable energy sources within their resource portfolios. Some states with RPSs include energy efficiency measures as eligible technology options to meet the provisions of their standard. Because CHP recovers waste heat that can be used for other purposes, CHP is an eligible energy efficiency option under some states’ RPSs. 

Similarly, 26 states have established Energy Efficiency Resource Standards (EERS), requiring utilities to meet annual energy efficiency goals to satisfy a portion of their projected demand growth.  Under EERS, CHP has the potential to serve as a valuable tool in meeting statewide statutory commitments.

As these policy measures converge, compounded by air quality regulations and rising electricity costs, CHP is likely to become more attractive for industrial and large commercial sites.