Michigan has plenty of room and reasons for installing a greater level of combined heat and power (CHP) generation facilities but must overcome several thorny economic barriers to expanding the CHP capacity, according to a new report prepared for state and federal energy officials.
The CHP Road Map for Michigan anticipates that utilities can viably add up to 2,360 MW of new CHP capacity and improve the state’s energy efficiency at the same time. Michigan already is home to 88 CHP systems statewide totaling 3,500 MW, according to the project team including the Michigan Energy Office, 5 Lakes Energy, Sustainable Partners LLC, the Energy Resources Center at the University of Illinois-Chicago and NextEnergy.
Gov. Rick Snyder has called on the state to make smart energy policy a priority by reducing energy waste and increasing reliability. CHP systems—also called cogeneration, generating electricity and thermal energy from a single source of fuel, often natural gas—often boast energy efficiency ratings of 65 percent or higher, compared with 45 to 60 percent from conventional power generation units, the report noted.
“A confluence of executive and legislative interest in energy policy, coupled with recognition of the potential of CHP to participate in meeting Michigan’s energy needs, means the time is right to accelerate CHP deployment in Michigan,” the report reads. “By avoiding electric line losses and utilizing much of the thermal energy normally wasted in power generation, CHP significantly reduces the total primary fuel needed to supply energy services, reducing greenhouse gas emissions and saving fuel and money.”
The potential financial windfall from CHP investment is significant, the Road Map estimated. Reaching a goal of 1,014 MW in new generation capacity would take a direct investment of $865.6 million, with annual operations and maintenance activity averaging $67.million but return yearly profits of $109.5 million and fuel cost savings of $94.7 million, according to the report.
The environmental impact, meanwhile, would reduce air emissions by a predicted 662 tons of CO2, 379 tons of NOx and 39 tons of SOx per year, according to the report.
“CHP technology can be deployed quickly, with few geographic limitations, and can utilize a variety of fuels, both fossil and renewable,” the report added. “CHP may not be widely recognized outside industrial, commercial, institutional, and utility circles, but it has quietly been providing highly efficient electricity and process heat throughout the United States for decades to vital industries, large employers, urban centers, critical infrastructure like hospitals and wastewater treatment plants, and university campuses.”
Financial challenges are not insignificant, however. CHP systems are expensive to install upfront, while access to financing and regulatory barriers can negatively impact the bottom line, the researchers acknowledged.