CHP: An Opportunity for Struggling Utilities


While the cost of producing large centralized power in the US continues to increase, the cost of distributed power continues to decrease.

Just last month, the Environmental Protection Agency (EPA) finalized a new rule establishing strict wastewater discharge standards for toxic metals, including mercury, lead and selenium. To comply, more than 130 U.S. power plants will be required to make hefty investments in new technology. The estimated cost of compliance, according to the EPA, will be $480 million a year.

Clean Power PlanThe Clean Power Plan, the most far-reaching energy-sector regulation in the history of the US, was finalized in August and calls for sweeping new requirements to cut carbon dioxide emissions 32 percent below 2005 levels by 2030. The controversial new rule will cost power producers a whopping $8.4 billion annually by 2030, the EPA said. Other estimates put the compliance cost much higher.

EPA’s Mercury and Air Toxics Standard, which established the first limits on mercury, arsenic and acid-gas emissions from coal-fired plants, became effective earlier this year but was stayed because regulators failed to consider the cost of complying with the new rule - $9.6 billion.

In addition, federal regulators recently finalized new rules for coal ash management and storage and announced plans to implement stricter standards for ground-level ozone pollution.

The rising cost of centralized power coupled with stagnant revenue growth caused by flat or declining demand for electricity means investor-owned utilities should give serious thought to providing distributed power to its larger customers such as hospitals, universities and industrial complexes.

I’m talking about combined heat and power (CHP), also known as cogeneration. CHP plants recycle the waste heat produced during power production for manufacturing processes and other useful purposes. By capturing and utilizing the excess heat, CHP plants can achieve energy efficiency rates of 75 percent or higher, well above efficiency rates for conventional power stations.

What’s more, CHP plants offer more reliability because they are independent of the grid, a benefit that was plainly evident after Superstorm Sandy struck the East Coast in October 2012. In the aftermath, while thousands of people were left without power from the grid, the lights remained on at college campuses, hospitals and apartment complexes equipped with a CHP system.

The demand for CHP plants is significant for several reasons: Low natural gas prices; rising costs for central power stations; and a need for more resilient and reliable power generation assets. Doug Friedel, projects director for Industrial Power Generation Services at Black & Veatch, said utilities should be getting into this emerging market because, unlike their industrial customers, utilities are specialists in financing and building power projects.

“They (customers) don’t really want to be in the business of generating power,” Friedel said. “A utility is in the business of generating power. It’s what they do. The customers are reluctant to make this kind of investment.”     

The Obama administration wants to boost CHP capacity by 40,000 MW, or 50 percent, by 2020. That was the goal established in an executive order directing several federal agencies and departments to encourage more investment in CHP projects through existing programs and policies.

If that goal is met, American businesses would save an estimated $10 billion a year in energy costs. The emissions reduction would be tantamount to taking 25 million cars off the road.

 In addition to using very little water, CHP plants emit 40 percent fewer emissions compared with conventional power stations.

 “If it’s twice as efficient, it also puts half of the pollutants into the atmosphere,” Friedel said.

 CHP, or cogeneration, has been around for 100 years. It has quietly been providing highly efficient, reliable power to the nation's most important industries for a long time. In addition to CHP's high efficiency ratings, today’s technology offers the flexibility and reliability grid managers need to accommodate growing amounts of variable wind and solar power.

 “It’s really interesting that a technology as old as combined heat and power has seen such a regeneration of interest,” Friedel said.

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