The Michigan Public Service Commission recently approved DTE Energy’s request to develop a 34 MW combined heat and power (CHP) plant on the campus of Ford Motor Company’s Research and Engineering Center.¹ This project highlights how ownership of CHP facilities can be a valuable option in a utility’s resource planning and can bring economic and environmental benefits for the utility and its customers over the long term. Due to their size, high efficiency, and grid benefits, utility-owned CHP projects likely offer a better deal to ratepayers than the construction of traditional central power stations.
(Learn about CHP and its benefits is in a previous post.)
In their 2017 white paper, Utility Owned CHP— A Least-Cost Baseload Resource, ICF authors Anne Hampson and Dr. Bruce Hedman explain that utilities deploying CHP as a supply-side resource realize numerous gains over traditional centralized generation, including: ²
- A shortened planning, permitting, and implementation process for CHP (2-3 years) versus that of a large–capacity central station generator (6-10 years);
- Reduced risk through smaller, high-efficiency CHP installations in the face of future utility loads that are difficult to forecast;
- Relieved congestion, potentially deferring the need for investments in transmission and distribution;
- In well-applied sites, the lowest levelized cost of energy (LCOE) among baseload supply options when thermal credit is applied to fuel costs.
The approved plant will be owned by DTE Electric and constructed and operated by DTE Power and Industrial (DTE P&I).³ The CHP plant will provide steam to the Ford Motor Company’s Research and Engineering Center and electricity to Ford Motor Company and other DTE Electric customers.4 The CHP project will cost $62.3 million and is anticipated to be completed by December 31, 2019.5
DTE’s decision to invest in CHP aligns with a key finding from the 2018 Michigan CHP Roadmap report, in which the project team quantitatively modeled the optimized deployment of CHP in Michigan using the State Tool for Electricity Emissions Reduction (STEER) model, an integrated resource planning model that calculates the least-cost resource portfolio to satisfy electricity demand. The STEER model was used to determine the cost and value of CHP as one of multiple resources in Michigan’s future energy mix. Depending on natural gas prices and the availability of renewable energy resources, STEER model results recommended an optimal level of additional CHP deployment in Michigan ranging from 722 Megawatts MW to 2.36 GW by 2030.6
Considering how well CHP performs under various integrated resource planning modeling scenarios, and in light of Michigan’s energy legislation passed in 2016, Public Act 341, requiring Michigan’s electric utilities to include the projected energy and capacity purchased or produced by the utility from a cogeneration resource in their integrated resource plans going forward, we may see additional utility-owned CHP resources proposed in the future.
Learn more about positive steps on CHP in the Midwest in Jamie’s previous blog, “Combined Heat & Power’s (CHP) Reliability Recognized in Recent Actions by Midwestern Regulators and Utilities.”
About Jamie Scripps, guest author: Jamie Scripps is a principal with Hunterston Consulting LLC, where she offers advanced energy policy expertise to clients across the Midwest. Prior to founding Hunterston Consulting LLC, Jamie was a partner with 5 Lakes Energy LLC.
Jamie has provided technical support to the Great Plains Institute’s industrial energy efficiency projects since 2015.
1MPSC, Case No. U-20162, Order dated May 2, 2019, p. 13
2Anne Hampson, Dr. Bruce Hedman, ICF, Utility Owned CHP— A Least-Cost Baseload Resource (2017), available at https://www.icf.com/resources/white-papers/2017/utility-chp-ownership, p. 2
3MPSC, Case No. U-20162, Order dated May 2, 2019, p. 13
6Michigan Energy Office, CHP Roadmap for Michigan Report, February 2018, available at https://www.michigan.gov/documents/energy/CHP_Roadmap_for_Michigan_Full_Report_final_628532_7.pdf, p. 16, 57