Combined Heat and Power in 2013: Improving conditions for adoption

Widespread adoption of industrial and commercial combined heat and power (CHP) systems has the potential to improve America’s energy footprint on a grand scale. Recent policy initiatives and current market conditions will make 2013 a favorable time for manufacturers to adopt CHP systems as a way to improve their energy efficiency.

Recent figures from ICF International estimate that up to 7% of existing electric generating capacity in the U.S. is from CHP systems, or roughly 82 GW. Industrial CHP is well established with 87% of current CHP capacity from industrial plants, but significant potential for expansion remains. According to Richard Meyer, Energy Analyst for the American Gas Association (AGA), “AGA member utilities work closely with their industrial customers, and many of these customers can benefit from combined heat and power technologies.  The natural gas industry will play a critical role in helping to advance the adoption of CHP technologies by working with the electric utility industry, regulators, and other stakeholder groups to develop new and innovative approaches for providing CHP solutions to customers and helping to ensure the natural gas infrastructure is in place to serve CHP applications.”

CHP also improves resilience of the electric grid. Few investments can ensure as reliable a hedge  against production downtime that a disruption in electricity supply can cause a manufacturing facility as a CHP system. When Hurricane Sandy cut the power supply for much of lower Manhattan, buildings and facilities that operated  internal CHP systems had electricity for critical applications. Particularly for manufacturing facilities in hurricane prone regions, this reliability offered by CHP adds even further to the economic benefits.

These advantages are now supplemented by the increase and expected long-term supply of natural gas from shale formations. This increase in supply and accompanying drop in prices make natural gas fueled-CHP more competitive with other sources of electricity (see figure). Particularly when the compliance costs with current and future environmental regulations (such as Boiler MACT or potential carbon pricing) are factored into industrial investments, natural gas powered-CHP offers a good opportunity to ensure lower-cost and reliable power.

While several regulatory and financial hurdles remain to wider adoption of CHP,  several initiatives seek to address  these barriers in new ways. The President’s Executive Order on CHP, which aims to encourage widespread CHP adoption, is a demonstration of federal commitment to industrial CHP. The order directs Federal agencies to foster a national dialogue through ongoing regional workshops to encourage the adoption of best practice policies and investment models that overcome barriers to investment in CHP, provide public information on the benefits of unlocking investment in industrial energy efficiency, and use existing Federal authorities that can support these investments.  In addition, the EPA has finalized the boiler MACT rule and updated its CHP resources.

Much remains to be done at state and local levels, with innovative regulations and partnerships a vital step in fostering CHP. One example includes a recent project by the Four Seasons Hotel in Philadelphia to install a dedicated CHP system using Philadelphia Gas Work’s Commercial Industrial Customer Incentive Program, which incentivizes the installation of CHP. The Public Utilities Commission of Ohio partnered with the Department of Energy in a pilot program to provide technical assistance engaged with a variety of industrial and energy efficiency stakeholders in the state and effectively connected affected facilities with clean energy solutions.  This site-specific technical assistance will be replicated across the U.S. through the DOE’s regional Clean Energy Application Centers.

Graph courtesy of ICF International.

Alliance Industrial Intern Evan Perkins was a major contributor to this article.