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Combined heat and power (CHP)systems, also known as cogeneration, generate electricity(and/or mechanical energy) and thermal energy in a single,integrated system. This contrasts with common practice in thiscountry where electricity is generated at a central power plant,and on-site heating and cooling equipment is used to meetnon-electric energy requirements. The thermal energy recov-ered in a CHP system can be used for heating or cooling inindustry or buildings. Because CHP captures the heat that wouldotherwise be rejected in traditional separate generation ofelectric or mechanical energy, the total efficiency of these inte-grated systems is much greater than from separate systems.

CHP is not a specific technology but rather an applica-tion of technologies to meet end-user needs for heating and/or cooling energy, and mechanical and/or electrical power.Recent technology developments have “enabled” new CHPsystem configurations that make a wider range of applica-tions cost-effective. New generations of turbines, fuel cells,and reciprocating engines are the result of intensive, col-laborative research, development, and demonstration by

government and industry. Advanced materials and com-puter-aided design techniques have dramatically increasedequipment efficiency and reliability while reducing costs andemissions of pollutants.

Conventional electricity generation is inherently ineffi-cient, converting only a third of a fuel’s potential energy intousable energy. The significant increase in efficiency with CHPresults in lower fuel consumption and reduced emissions com-pared with separate generation of heat and power. CHP is aneconomically productive approach to reducing air pollut-ants through pollution prevention, whereas traditional pol-lution control achieved solely through flue gas treatmentprovides no profitable output and actually reduces efficiency

and useful energy output.Since there are two or

more usable energy out-puts from a CHP system,defining overall system ef-ficiency is more complexthan with simple systems.The system can be viewedas two subsystems: thepower system (which isusually an engine or tur-bine) and the heat recov-ery system (which is usuallysome type of boiler). Theefficiency of the overall sys-tem results from an inter-action between the individual efficiencies of the power andheat recovery systems.

The most efficient CHP systems (i.e., exceeding 80% over-all efficiency) are those that satisfy a large thermal demand

while producing relatively less power. As the required tem-perature of the recovered energy increases, the ratio of powerto heat output will decrease. The decreased output of elec-tricity is important to the economics of CHP because mov-ing excess electricity to market is technically easier than isthe case with excess thermal energy. However, there currentlyare barriers to distributing excess power to market.

CHP can boost U.S. competitiveness by increasing theefficiency and productivity of our use of fuels, capital, andhuman resources. Dollars saved on energy are available tospend on other goods and services, promoting economicgrowth. Past research by ACEEE has shown that savings areretained in the local economy and generate greater economic

Editor’s note: This article,which is reprinted with per-mission from the AmericanCouncil for an Energy-EfficientEconomy (ACEEE; Washing-ton, DC, www.aceee.org;Copyright 1998), highlightsimportant efficiencies that canbe achieved through the use ofcombined heat and power(CHP). CHP plays an integralrole in meeting U.S. non-util-ity energy needs. This andother environmental issuesrelated to non-utility energygeneration will be the focusof the upcoming specialtyconference, EnvironmentalIssues for Energy Generation inthe Non-Utility Sector, April 4–5, 2005, in Arlington, VA.Cosponsors of this confer-ence include A&WMA, theCouncil of Industrial BoilerOwners, the InternationalDistrict Energy Association(IDEA), and the U.S. Com-bined Heat and Power Asso-ciation. For more informationabout this conference, go towww.awma.org/events.

Conventional electricity generation is inherently inefficient, converting

only a third of a fuel’s potential energy into usable energy.

Capturing Wasted Energy

Combined Heat andPower

Capturing Wasted Energy

by R. Neal Elliott, ACEEE, and Mark Spurr, IDEA

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benefit than the dollars spent on energy. Recovery and pro-ductive use of waste heat from power generation is a criticalfirst step in a productivity-oriented environmental strategy.

HISTORYCHP is a well-established concept with a long history. Engi-neers have always appreciated the tremendous efficiencyopportunity of combining electricity generation with ther-mal loads in buildings and factories. Interest in CHP hasfluctuated over the years because of changes in the market-place and government policies, and the future is uncertainif we stay with current policies. CHP has evolved differentlyin Europe than in the United States.

At the turn of the century in the United States, CHP sys-tems were the most common electricity generators. As thecost and reliability of a separate electric power industry im-proved in the United States, users abandoned their on-siteelectric generation in favor of more convenient purchasedelectricity. By 1978, CHP’s share of electricity use had fallento only 4%. In the late 1970s, after the energy price increasesresulting from the 1973 and 1979 “energy crises,” a renewedinterest in CHP developed. U.S. industries found they couldreduce energy demand if they built larger, more economicalcogeneration plants optimized for both thermal and electricoutput. However, by this time, utilities had become sophisti-cated in protecting their markets for electricity. Many utilities

refused to purchase excess power from CHP facilities, limit-ing on-site electricity generation to the level usable at the site.

This situation motivated the enactment of the Public Utili-ties Regulatory Policy Act of 1978 (PURPA). This Act playeda critical role in expanding cogeneration into the market-place by addressing many barriers that were present in theearly 1980s. Since PURPA provided the only way for non-utility generators to sell excess electricity, many independentpower producers found a use for some of their waste ther-mal energy. This allowed them to qualify as a cogeneratorunder PURPA. These electricity-optimized CHP systems arecalled “nontraditional” cogenerators.

The 1980s saw a rapid growth of CHP capacity in the UnitedStates. Installed capacity increased from less than 10 gigawattselectric (GWe) in 1980 to almost 44 GWe by 1993. Most of thiscapacity was installed at large industrial facilities, such as pulpand paper, petroleum, and petrochemical plants. These plantsprovided a “thermal host” for the electric generator.

While on average the European Union countries ob-tain approximately the same amount of their electricityfrom CHP as the United States (9%), the market interestin CHP has gained in strength in many European coun-tries. The United Kingdom has seen CHP’s share of elec-tricity power production double in the past decade.Installed CHP capacity grew to 3.7 GWe in 1997, with pro-jections of increases to 5 GWe by the year 2000. Similarly,

Environmental Issues for Energy Generation in the Non-Utility Sector

Environmental Issues for Energy Generation in the Non-Utility Sector

The recent publication of the Industrial Boiler MACT regulation represents yet another significant regulation that stands to impactthe production of energy by industrial and manufacturing facilities,colleges and universities, and local energy companies. This conference will highlight a wide variety of technical and policyissues related to environmental compliance, focusing specifically on the non-utility energy sector.

Topics to be covered include:• Implications of Title V and NSR reforms on industrial energy• Attainment planning for ozone and PM2.5• Implementation of Boiler MACT and residual risk• Control technology research and advancements • Using biogases for energy• Integrated gasification systems

April 4-5, 2005 | DoubleTree Crystal City, Arlington, Virginia

Visit www.awma.org for more information

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30 em march 2005 awma.org

Denmark and the Netherlands have seen tremendousgrowth in CHP since 1980, with these countries now ob-taining more than 30% of their electricity from CHP.

MARKETSThe authors have chosen to divide the market for CHP intothree categories: industrial plants, district energy systems,and small-scale commercial and residential building systems.

The industrial sector represents the largest share of thecurrent installed capacity in the United States and is thesegment with the greatest potential for near-term growth. Largeindustrial CHP systems are typically found in the petroleumrefining, petrochemical, or pulp and paper industries. Thesesystems have an installed electricity capacity of greater than 50megawatts electric (MWe), often hundreds of MWe, and steam-generation rates measured in hundreds of thousands of poundsof steam per hour. Some facilities of this type are merchantpower plants using combined-cycle configurations. They aregenerally owned by an independent power producer that seeksan industrial customer for the steam and sells the electricity onthe wholesale market. Sometimes the thermal customer mayalso contract for part of the electric power.

District energy systems (DES) are a growing market for CHP.DES distribute steam, hot water, and/or chilled water from acentral plant to individual buildings through a network of pipes.DES provide space heating, air conditioning, domestic hot wa-ter, and/or industrial process energy. DES represent an impor-tant CHP market because these systems significantly expandthe amount of thermal loads potentially served by CHP. In ad-dition, DES aggregate thermal loads, enabling more cost-ef-fective CHP. DES may be installed at large, multi-buildinginstitutional campuses, such as university, hospital, or govern-ment complexes, or as merchant thermal systems providingheating (and often cooling) to multiple buildings in urban ar-eas. The addition of CHP to existing DES represents an impor-tant area for adding new electricity generation capacity.

With the arrival of low-cost, high-efficiency reciprocat-ing engines, and the prospect of cost-effective, micro-com-bustion turbines, CHP is now becoming potentially feasiblefor smaller commercial buildings. This area, sometimescalled “self-powered” buildings, involves the installation of asystem that generates part of the electricity requirement forthe building, while providing heating and/or cooling. Pack-aged systems, such as the reciprocating engines fromWaukesha and Caterpillar, have a capacity beginning at 25kilowatts electric (kWe). This size range makes it possible toinstall CHP in smaller commercial applications, such as fast-food restaurants, as well as larger commercial buildings.

The CHP supply market is beginning to develop. Besidesthe above end-use markets, four major categories of playersare emerging:

• Project developers• Equipment manufacturers• Engineering and construction firms• Energy supply companies

These groups offer a range of alternatives from de-sign/build to build/own/operate to comprehensive energysupply/services.

BARRIERSAlthough technologies used in CHP systems have improvedin recent years, significant hurdles exist that limit widespreaduse of CHP. Importantly, these hurdles have the effect oftending to “lock in” continued use of polluting and less-efficient electricity generation equipment. The main hurdlesto CHP are

• a site-by-site environmental permitting system thatis complex, costly, time-consuming, and uncertain;

• current regulations that do not recognize theoverall energy efficiency of CHP or credit theemissions avoided from displaced grid electricitygeneration;

• many utilities that currently charge discriminatorybackup rates and require prohibitive interconnec-tion arrangements—increasingly, utilities arecharging (or are proposing to charge) prohibitive“exit fees” as part of utility restructuring tocustomers who build CHP facilities;

• depreciation schedules for CHP investments thatvary depending on system ownership and may notreflect the true economic lives of the equipment;and

• a market that is unaware of technology develop-ments that have expanded the potential for CHP.

Also, development of new DES as part of a CHP imple-mentation face some additional barriers.

POTENTIALCurrent projections foresee a stagnation of the CHP mar-ket, with no significant additions to capacity because of thebarriers discussed above. However, if these barriers were re-moved, new capacity would likely be built. Estimating thisadded CHP capacity is difficult because of the diversity ofsystem types and potential sites. However, it is anticipatedthat much of the early capacity will occur at larger industrialand institutional facilities that already have boiler systemsand thermal distribution infrastructures (e.g., DES). As timeprogresses, smaller industrial, institutional, and commercialfacilities will begin to make up a greater part of the newcapacity. New DES, which aggregate the thermal demandsof several facilities or buildings, will take longer to become amajor factor in CHP because of the time required to de-velop and grow the piping network.

POLICIESThe U.S. Department of Energy (DOE) and U.S. Environ-mental Protection Agency (EPA) have committed to doubleCHP capacity by 2010. This represents a commitment to addapproximately 50 GWe of additional capacity. From the analy-sis conducted for this report, this goal appears realistic. Nowthat this ambitious goal for expanding CHP capacity hasbeen set, the challenge is to take steps to convert this goalinto action and reality with policies and programs.

The options that should be considered include• reform of environmental permitting regulations

and the permitting process to provide credit forthe inherent efficiency of CHP systems;

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• reform of electric utility regulations to provide fairand open access to the grid for procurement ofstandby power and excess generation sales;

• modernization of the depreciation schedules forCHP equipment to reflect current markets andtechnologies;

• provision of financing opportunities and incentives,such as tax credit, to spur interest in CHP systems;

• development of educational and technicalassistance programs to increase awareness of CHPopportunities and technologies;

• development of research and developmentactivities to expand the range of CHP technolo-gies, especially for small-scale systems; and

• installation of CHP systems in governmentfacilities to demonstrate the benefits and providemarket leadership.

CONCLUSIONCHP can contribute to the transformation of the UnitedStates’ energy future. CHP offers significant, economy-wide energy efficiency improvement and emissions reduc-tions. The existing system of centralized electricitygeneration charts an unsustainable energy path, with in-creasing fuel consumption and carbon emissions, whilecontinuing to squander over two-thirds of the energy con-tained in the fuel. At least half of this wasted energy couldbe recaptured if the United States shifts from centralizedgeneration to distributed systems that cogenerate powerand thermal energy. Besides saving energy and reducingemissions, distributed generation also addresses emerg-ing congestion problems within the electricity transmis-sion and distribution grid.

CHP represents an opportunity to make significantprogress toward meeting the Kyoto commitments on green-house gas reductions. The local air quality improvementsand opportunities for economic growth presented by CHPare equally compelling. CHP presents an opportunity toimprove the “bottom line” for businesses and public orga-nizations, while also providing a path for improving theenvironment.

During the past two years, CHP has become an impor-tant element of the national energy debate. The UnitedStates has taken the first steps toward setting in place poli-cies to promote CHP by establishing a national target. DOEand EPA have begun to review the means for achieving thistarget. The target now needs to be translated into concretepolicies and programs at both the federal and state levelsfor overcoming the significant hurdles to greater use of CHP.

The private sector also needs to take a leadership role.The primary barriers to greater CHP use are regulatory andinstitutional, not technical or economic. The private sectormust work with government regulators and policy-makersto ensure that competition and incentives for innovationare preserved, while creating a favorable regulatory envi-ronment for CHP. And the private sector should activelypursue adoption of CHP—both for environmental and “bot-tom-line” benefits. em

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