Few states building steam on combined heat and power

Few states building steam on combined heat and power

There’s been a lot of coverage in GreenBiz lately about the challenges that businesses face bringing combined heat and power (CHP) facilities online.

A report released today from the American Council for an Energy-Efficient Economy (ACEEE) finds that, unfortunately, most states lack the policies and regulations necessary to help businesses move forward on CHP projects. If we are ever to meet President Obama’s goal of bringing 40 GW of new CHP online by 2020, states have a lot of work to do.

For those who are unfamiliar with how CHP works, think of it like a mini power plant (“mini” is a relative term, as these facilities can generate hundreds of MW of power) located onsite at industries and institutions that provide electricity and recapture waste heat from power production for use in a variety of ways – from fueling industrial processes to heating interior spaces or water used in buildings. Having onsite CHP greatly reduces the amount of electricity that businesses and institutions have to buy from utilities. Plus, companies that own and operate their own power supply are less likely to be exposed to power outages and volatility in energy markets.

This year’s State Energy Efficiency Scorecard -- ACEEE’s annual ranking of the states on their progress toward advancing energy efficiency -- found only four states that scored more than half of the points available from CHP policies and regulations.

Image of a business provided by Alexzel via Shutterstock

Massachusetts, Ohio, Connecticut and New Jersey are leading the charge on CHP. Most other states are lagging. In fact, a full 40 states and the District of Columbia scored than two points or less out of five available on CHP readiness this year.

Why should this concern the business community? Because it is these very policies, programs and incentives that help pave the way for businesses to take advantage of CHP and accelerate its market adoption. There are multiple ways in which states can actively encourage or discourage the deployment of CHP. Financial, technical, policy and regulatory factors all impact the extent to which CHP is deployed.

For this year’s State Energy Efficiency Scorecard report, we evaluated states’ progress on adopting the following policies, regulations and incentives that would help advance CHP:

  1. Interconnection standards that establish parameters and procedures for CHP projects big and small connect to the grid
  2. Allowing CHP projects to count toward a state’s Renewable Portfolio Standard or Energy Efficiency Resource Standard
  3. Financial incentives for CHP projects such as per-kW payments, project-based grants or tax incentives
  4. Net metering which allows small CHP project owners to get credit for the excess electricity that they produce on site
  5. Adopting output-based emissions regulations that acknowledge the “double bang for the buck” achieved with CHP systems that use a single source of fuel to produce both electricity and thermal energy, greatly reducing the amount of air pollution emitted
  6. Other financial assistance to help CHP projects move forward such as low-interest loans, loan guarantees and available bonding authorities
  7. Additional CHP-friendly policies such as technical assistance and education campaigns

Texas provides a good example of how output-based emissions regulations can be developed to help remove barriers to CHP deployment. Texas’ new permitting process provides certain qualifying CHP systems a speedier approval process -- estimated at four to six weeks as opposed to the previous process that could take up to one year. This new process will hopefully help add more CHP capacity to the 61 MW already installed in the state in 2010-2011 by reducing the cost and time associated with acquiring appropriate permits.

Ohio is also helping businesses move forward on CHP by partnering with the U.S. Department of Energy to offer technical assistance to companies with older boilers that will be impacted by U.S. Environmental Protection Agency clean air regulations. The state is also hosting conversations with utilities about how to make supplemental and backup power rates fair for CHP installations connected to the grid. The state’s CHP-friendly stance has helped put more than 57 MW of CHP online in 2010-2011.

Not only can CHP be a more reliable power source for many businesses, it is also a much cleaner and more efficient way to generate power than traditional utility-scale power plants. Producing power onsite eliminates the energy loss associated with transmitting electrons from remote power plants to individual customers. CHP can generate power at combined electrical and thermal efficiencies of up to 85% while the average delivered efficiency of utility-scale electric power plants is about 33%. Most CHP facilities are powered using natural gas, a much cleaner burning fuel than coal, which makes up 54 percent of the total fuel supply used by utilities to generate electricity. In fact, utilities could help clean up their own acts with CHP. A recent ACEEE report found that a substantial portion of the electric generating capacity needed to make up for retiring old, dirty coal-fired power plants in 12 states could be met through CHP projects on customer sites.

CHP is an energy-efficient, clean and reliable ways to power many of our industries, commercial facilities and large institutions. We need more business leaders to urge state officials to pursue CHP-friendly policies and regulations to help this resource take off and meet the President’s goal.  

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