In August of 2012 President Obama issued an Executive Order on Industrial Energy Efficiency and Combined Heat and Power. The Executive Order sets a goal of adding 40 GW of new CHP by 2020, raising the nation’s CHP capacity by 50%. Why would we do that? What is CHP anyway?
Combined heat and power is not new, having been used in various ways for 100 years. Users of CHP systems generate both heat and electricity from a single fuel source, rather than buying electricity from the grid and using an on-site boiler or furnace to generate heat. A sister technology to CHP is waste energy recovery (WER). WER captures waste heat from industrial processes or buildings and puts it to use, either for direct heating and cooling or to generate electricity. CHP systems can be powered by any fuel – but many are powered by natural gas and some are being powered with different forms of biomass or biogas. CHP systems work well in both industrial facilities and on institutional campuses and buildings.
U.S. electricity production is only around 34% efficient and has been so since the 1960’s. This means we send 66% of the useful energy generated up the stack as waste heat. Combined heat and power can have efficiencies as high as 80%. There is a tremendous of opportunity to improve the efficiency of our current electricity generation system by utilizing CHP and WER technologies.
Today, about 8% of the nation’s electricity is generated with CHP, but the technical potential is far greater. In 2008 Oak Ridge National Lab estimated that CHP could generate roughly 20% of the nation’s electricity. That’s the same percentage as nuclear power. That’s a big deal.
- The Midwest is the manufacturing heartland of the country and many Midwestern states have the some of the highest potential in the country. Ohio has the biggest gap between potential and installed capacity, for instance. IL, IN, MI, and other Midwestern states are among the top candidates for CHP.
- Coal is getting more expensive and natural gas prices are at all time lows. This improves the economics of CHP
- New EPA Boiler MACT rules require coal fired industrial boilers to reduce air emissions, and in some cases, it may be less expensive to replace them with cleaner operating units, like CHP systems
- Businesses are increasingly making various internal and external commitments to reduce global warming emissions and improve energy efficiency performance
- Save $10 billion a year in energy costs
- Save 1% of all energy use in the U.S.
- Reduce U.S. emissions by 150 million metric tons of CO2 annually
How easy will this be to accomplish here in the Midwest?
This all sounds great, so let’s get going! But wait, this is where we find out just how aggressive this goal is. The Midwest share of the 40GW based on population is about 6.6GW by 2020. To meet that goal, installations would have to average 825 MW/year between now and2020. That’s far more than has been built each year over the past 30 years and many times more than recent years. Most of the barriers that have slowed CHP development in recent years are still there. For the most part, they are problems that have to be solved at the state level. In addition to economics, the challenges can include policy differences from state to state, regulatory barriers, and utility rates structures that discourage CHP investment, and utility disincentives to having CHP on their systems.
What will it take to achieve this goal?
The federal agencies are working on it, as directed by the Executive Order. The DOE funded CHP Technical A, including the Midwest CHP Technical Assistance Partnership are ramping up technical assistance to owners of those old coal-fired boilers. But they can’t do it alone, as the President is fond of saying. To realize the potential of CHP, interested industries, state policy leaders, agencies, and regulators; utilities, and clean energy advocates will need to work together with each other and with the federal government to overcome the remaining barriers. Sometimes that requires rethinking long held positions, forging compromise, and even new business models.