ACHRNEWS

Obama Sets National CHP Target

President’s Executive Order Establishes Goal of 40 GW of Combined Heat and Power Capacity by 2020

October 1, 2012
CHP plant at the Museum of Liverpool
According to the U.S. Department of Energy (DOE), more than two-thirds of the fuel used to generate power in the United States is lost as excess heat. On Aug. 30, President Barack Obama signed the executive order “Accelerating Industrial Energy Efficiency,” promoting and facilitating a reduction of wasted thermal energy through an investment in combined heat and power (CHP). The initiative establishes a national goal to increase CHP capacity by at least 40 GW by the end of 2020.

Accomplishing the Goal

Obama’s administration plans to achieve this benchmark by encouraging private sector investment by setting goals and highlighting the benefits of investment, improving coordination at the federal level, partnering with and supporting states, and identifying investment models beneficial to the multiple stakeholders involved. If embraced, Obama believes the motion will save energy users $10 billion per year, formulate $40 to $80 billion in new capital investment in manufacturing, and reduce 150 million metric tons of carbon dioxide emissions annually, an amount equivalent to 25 million automobiles.

“While our manufacturing facilities have made progress in becoming more energy efficient over the past several decades, there is an opportunity to accelerate and expand these efforts with investments to reduce energy use through more efficient manufacturing processes and facilities and the expanded use of combined heat and power,” said President Obama, in a written statement. “Instead of burning fuel in an onsite boiler to produce thermal energy and also purchasing electricity from the grid, a manufacturing facility can use a CHP system to provide both types of energy in one energy-efficient step. Accelerating these investments in our nation’s factories can improve the competitiveness of United States manufacturing, lower energy costs, free up future capital for businesses to invest, reduce air pollution, and create jobs.”

American Gas Association president, Dave McCurdy, applauds the President’s push, and believes the goal is indeed attainable.

“This CHP target is not only meaningful, it’s achievable,” said McCurdy, in a press release. “Despite its proven track record, CHP remains underutilized and is one of the most compelling sources of energy efficiency that could, with even modest investments, move the nation toward a cleaner environment.”

In CHP We Trust

CHP, also known as cogeneration, is the simultaneous production of electricity and heat from a single fuel source, such as natural gas, biomass, biogas, coal, waste heat, or oil. CHP is not a single technology, but an integrated energy system that can be modified based upon the needs of the energy end user. Its efficiency comes from recovering heat that would normally be wasted while generating power to supply the heating or cooling needs of the user. By capturing and utilizing waste heat, CHP requires less fuel than equivalent separate heat and power systems to produce the same amount of energy services. Because CHP is located at or near the point of use, it also eliminates the losses that normally occur in the transmission and distribution of electricity from a power plant to a user.

The two most common CHP configurations are gas turbine or engines with heat recovery units and steam boilers with steam turbines.

According to the United States Clean Heat and Power Association (USCHPA), CHP systems currently supply approximately 12 percent of U.S. energy capacity through 82 GW of installed capacity. Industry estimates indicate the technical potential for additional CHP at 130 GW, plus an additional 10 GW for waste heat recovery. California itself has set a goal of generating 4 GW of new CHP by 2020.

A report by Pike Research identified commercial CHP systems will reach $11.2 billion globally by 2022, with 80 GWe installed by that year.

Micro-CHP Systems

While the executive order will open the door for larger companies to install commercial and industrial CHP systems, smaller HVAC contractors may want to focus their efforts on micro-CHP systems. Micro-CHP systems are miniature CHP models that generate enough stand-alone heating, cooling, and electricity production to fulfill the comfort and power demands of smaller facilities.

According to the Annual Micro-CHP report, released by Delta-ee, the global micro-CHP market grew 38 percent to €466 million in 2011 and further growth to €1 billion is expected in 2012. Demand for fuel cell micro-CHP products has intensified in Japan, where more systems were sold in April and June than were sold in all of 2011.

According to research firm MarketsandMarkets, global Micro-CHP annual sales are expected to rise from $376.2 million in 2011 to more than $636 million by 2016.

With more than 50 million North American homes “plug-in ready” for micro-CHP systems, the majority of homeowners showing interest in electricity independence, and the technology moving quickly from the Far East, the opportunity for manufacturers and contractors to benefit from this opportunity is rising and ready for the taking.

Charlie McCrudden, vice president for government relations, Air Conditioning Contractors of America (ACCA) believes government promotion of CHP will provide numerous installation opportunities for HVAC contractors.

“Generally speaking, CHP systems will be good for the HVAC industry,” said McCrudden. “The challenge with CHP systems is always finding ways to match the waste heat to a viable process where the heat can be used. There have been situations where district CHPs have been installed and worked well.”

McCrudden said, from an industry perspective, the executive order does make sense and that CHP systems are worthy investments, if the payback is right.

“For whatever reason, some manufacturers are leaving money on the table by not taking advantage of CHP systems,” he said. “I’m not sure there’s really much, if any, downside other than the equipment is often times being manufactured overseas and imported into the United States.”

Rob Fischetti, principal, Blueprint Energy Group, Norwalk, Conn., — a Yanmar Energy Systems distributor and CHP installer — said he questions whether this order is just government rhetoric and political posturing, but remains optimistic about the possibilities.

“If supportive policy is developed that can help the end users and small businesses, particularly for micro-CHPs, that would be huge,” he said. “We believe that in the transition from fossil fuels to complete renewable we were missing a stepping stone. CHP is that missing link.”

Executive Reactions

Daniel Natura, applications engineer, NewLoop Energy, Chicago — a distributor of Capstone turbine products — believes Obama’s initiative could inject some common sense and good-old American ingenuity into the country’s 50-year-old electric distribution system.

“This is big. The only folks who won’t like it are electric utilities, and let’s face it; their business models are already changing,” he said. “This will span more absorption chiller applications and some creative uses of the waste heat off the prime mover. It certainly will create a number of green jobs.”

Bob Panora, president and COO, Tecogen Inc., believes the executive order, in addition to a recent DOE report (http://1.usa.gov/PuBLmn), is a direct, timely, and specific endorsement of CHP technology, and a powerful educational tool not only for Tecogen Inc., but for the entire industry.

“Interestingly, a just-published U.S. Department of Energy report on CHP references this executive order and argues that CHP is an underappreciated, highly practical, and cost-effective strategy for reducing all types of emissions — both greenhouse gases and smog-related NOx — while creating jobs, and reducing fossil fuel use, among other benefits,” he said. “The report compares the cost and relative benefits of CHP to solar, wind, and a state-of-the-art power plant, with CHP being the most effective strategy relative to efficiency and emissions benefits.”

Barry J. Sanders, president and chief operating officer, American DG Energy Inc., Chicago, — a CHP installer and service company — believes this presidential proclamation will continue to bolster CHP growth. “This is very exciting news for CHP. Despite excellent economics, energy efficiency has taken a back seat to renewable as of late. CHP is all about energy efficiency,” he said. “Our business has been growing over the past few years and this executive order should increase our strong momentum.”

The Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA), enthusiastically support the motion.

“We believe this executive order supporting greater industrial efficiency puts the United States on a path to dramatically increase the deployment of combined heat and power, to the financial benefit of U.S. manufacturers, industrial and construction employment, as well as environmental quality,” said Richard Rivera, president, SMACNA. “When coupled with the administration’s energy efficiency initiatives driving private sector energy reductions in residential and commercial markets, the industrial-efficiency executive order offers our manufacturing sector a competitive advantage that will benefit jobs, efficiency, and our economy.

Sidebar: CHP Savings

Institutions utilizing CHP systems are showing great returns. The University of Texas in Austin has reduced its CO2 emissions by approximately 91,267 tons annually through the installation of its CHP plant, which consists of one combustion gas turbine each from General Electric (43 MW) and Westinghouse (34 MW), both of which have inlet air cooling. In addition, the central plant is equipped with four steam turbines with a combined generating capacity of 62 MW.

The Melrose Five Project, in South Bronx, N.Y., is a 63-unit, multifamily apartment complex. Facility owners elected to install two ecopower™ Micro-CHP systems, each providing domestic hot water heating and 4.7 kWh of electricity at the same time. At the end of the first year, the system revealed a $12,936 energy-cost savings, a reduction of 93,607 pounds of CO2 emissions, generation of 74,100 kWh of electricity for common areas, and supplied 574 MBtu of hot water heating and supplemental building space heating.

A Micro-CHP system, installed by Blueprint Energy Group Inc., inside a 10,000-square-foot home in Riverside, Conn., supplies approximately 85 percent of the electricity needed for the house, and power demand for first call for heat, domestic hot water, a pool, and hot tub. The unit provided an approximate annual net savings of more than $13,000 and provides a projected payback of only one year.

New York Presbyterian Hospital installed a CHP system in 2009. The CHP plant includes a gas turbine drive, a 7,500kW electric generator, and a heat recovery boiler with duct firing. The onsite system operates in a synchronous parallel configuration with the utility grid; supplemental electric energy is provided by Consolidated Edison under normal operating conditions. The system and agreement saved the hospital approximately $5 million per year, generated 100 percent of the hospital’s base electrical load, and two-thirds of its peak electrical load. The CHP system reduced the hospital’s purchased power by 80 percent, increased firm-steam capacity by 23 percent, reduced CO2 emissions by 67,000 tons, and will provide a 100 percent redundant power source for inpatient areas.

Sidebar: Tax Credits

To support his executive order, President Obama has pledged creating various incentives to qualifying businesses. While those tax-cuts have yet to be finalized, numerous CHP tax credits currently exist including the CHP Investment Tax Credit, Investment Tax Credits for Microturbines and Fuel Cells, Renewable Electricity Production Tax Credit, Clean Renewable Energy Bonds, Qualified Energy Conservation Bonds, and more.

For more information on available CHP tax incentives, visit http://1.usa.gov/RRlRls.

Publication date: 10/1/2012