CHP: An Emerging Market

    April 2, 2014 11:47 AM by Russell Ray, Managing Editor, Power Engineering

    Combined heat and power (CHP), a highly efficient form of generation used to power a wide range of industries, is perhaps the most underutilized and underappreciated source of electricity production in the U.S.

    But cheap natural gas, new incentives for CHP projects and a public demand for greater efficiency and reduced emissions are driving the development of CHP projects across the nation.

    CHP plants, also known as cogeneration 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.

    More than 4,000 MW of new CHP capacity are in some stage of development in the U.S., according to ICF International, a research and consulting firm. Most of that capacity – more than 1,000 MW – will be built in Texas. In the Midwest alone, the industry has announced plans to build 38 CHP projects between 2014 and 2016. More Midwest projects are under development but haven’t been announced.

    In North America, CHP capacity is projected to grow from 93,500 MW now to nearly 116,000 MW in 2020, according to GlobalData, a research and consulting firm.

    Altogether, the U.S. has more than 82,000 MW of CHP capacity at 4,200 sites. More than 70 percent of that capacity is fueled with natural gas. Most of that power is used in industrial applications such as paper, refining, chemical and food processing. CHP is also used to power hospitals, universities, military bases and residential facilities.

    The potential to add more CHP capacity to the U.S. grid is significant, ranging from 50,000 to 200,000 MW, according to some studies.

    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.

    California-based Capstone Turbine Corp. has installed 471 CHP systems in the U.S., which translates to more than 3 million fewer tons of carbon dioxide  (CO2) emissions versus CO2 emissions from conventional power plants. In 2013 alone, Capstone customers avoided nearly 300,000 tons of CO2 emissions.

    CHP accounts for 9 percent of total generation capacity in the U.S. In a 2008 study by Oak Ridge National Labs, researchers found that boosting the use of CHP to 20 percent of total U.S. capacity would save 5.3 quadrillion thermal units of fuel per year. That’s equal to nearly half of the total energy consumed by all U.S. households. Achieving that level of CHP capacity would also cut CO2 emissions by 60 percent, which is the equivalent of taking 154 million cars off the road.

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

    In Europe, CHP capacity is projected to grow from 202 GW now to 245 GW by 2020 at a rate of 3.2 percent a year, according to GlobalData.

    “With its strict emission and carbon savings targets, coupled with its focus on decentralized energy, Europe is comfortably the biggest market for CHP installations,” said Sowmyavadhana Srinivasan, senior power analyst for GlobalData.

    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, the technology offers the flexibility and reliability grid managers need to accommodate growing amounts of variable wind and solar power.

    Like combined cycle gas turbines, CHP systems fueled with gas can be used to support the deployment of renewable power.

    As power producers face a market where centralized coal and nuclear power plants are no longer practical options for new capacity, CHP offers utilities a proven alternative that is cleaner, more efficient and less costly.

    As the Obama administration pursues new carbon limits for new and existing power plants in the U.S., the market for CHP capacity will continue to grow.  

    If you have a question or a comment, please contact me at Follow me on Twitter @RussellRay1.


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Russell Ray

The Power Points blog, written by Russell Ray, managing editor of Power Engineering, covers all forms of power generation, including coal, gas, nuclear and renewable. It examines a wide range of issues and advancements in pricing, policy and technology. You can follow Russell on Twitter @RussellRay1.

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