Brad Pitt, Angelina Jolie and combined heat & power

By Elisa Wood

Dec. 4, 2008

The universe contains many mysteries. A big one for me is: Why doesn’t the United States use more combined heat and power (CHP)?

It requires an energy geek, of course, to even ask that question. Most of the world knows nothing about CHP, even when referenced by its other name: cogeneration. So it was heartening to see the Department of Energy’s recent effort to educate the public in a Dec. 1 report: “Combined Heat and Power: Effective Energy Solutions for a Sustainable Future.” http://www1.eere.energy.gov/industry/distributedenergy/

What’s the problem with CHP? People are unaware of it – even though it’s been around for 100 years. It could benefit from a marketing makeover, especially a name change. Combined heat and power does not roll off the tongue easily like solar and wind, nor does it evoke an image of efficiency and greenness.

Here is a quick definition: CHP systems are a form of distributed energy (like solar) built close to where they are used. They generate electricity and use the excess heat that is produced to cool or warm the building. So a CHP system uses one fuel to create two resources – power and usable heat. As a result, CHP plants are about 35% more efficient than typical generators.

“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 to some of the most vital industries, largest employers, urban centers, and campuses in the United States,” says the report.

It appears the United States may finally embrace the resource. The DOE report proposes that 20% of US generation capacity come from CHP, up from today’s 8.6%. Because CHP is so efficient, its greater use would mean far less greenhouse gas emissions. In fact, the report finds that under the 20% scenario, the US could avoid over 60% of its projected increase in carbon dixoide emissions between now and 2030.

Several states are putting policies in place to help advance CHP, particularly energy efficiency portfolio standards. These standards require that energy efficiency make up a certain percentage of the state’s mix of electric resources. Fourteen states allow use of CHP to meet the standard.

CHP also should get a boost from a new 10% federal tax incentive signed into law as part of the financial recovery package in early October. The credit applies to small and medium-sized CHP projects.

That still leaves the problem of the brand name. Suggestions welcome! Preferably something that could make combined heat and power the “Brangelina” of the energy world.

Visit Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets podcast and newsletter.

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December 4, 2008 | | Tags: , , , , , | 2 Comments »

Why it is so Hard – and so Important – To Increase Distributed Resources

By Lisa Cohn

August 14, 2008

If distributed resources are such a good idea, why don’t we build more of them?

A report released this week by Tufts University sheds some light on the answer. Despite all of the talk about the efficiency they bring to the grid, resources like solar energy and combined heat and power still face significant regulatory and monetary hurdles.

Consider the following findings from “Distributed Energy: The Way Forward” produced by Tufts’ Center for International Environment and Resource Policy.

* A company that develops on-site power pays 200 – 300 more basis points in debt service than a utility competitor. This is because private developers, unlike utilities, do not enjoy guaranteed equity returns, which are highly valued by lenders.

* Parent companies of manufacturers often erect insurmountable financial hurdles to installation of combined heat & power. Firms like US Steel, BP and DuPont characterize them as non-core investments, only allowed if they can achieve a one-year payback.

* Developers often face hostile utility policy, characterized by high exit fees and standby power charges, as well as ineffective net metering.

“These various tariff barriers and fees are often so high that they discourage any alternative to the status quo,” the report says. “For example, Boston University was offered a large grant and a 10-MW fuel cell system at well below the market rate plus installation assistance from the Massachusetts Technology Collaborative. However, when confronted with potentially high standby rates and other potential impediments by the utility, the university decided not to go forward with the project.”

Distributed energy is particularly important because it offers promise of driving down energy costs, which have been hitting record highs. High energy prices are bad news for a lot of reasons, but a big one is the link between energy costs and economic growth. The only long-term predictor of GDP growth is falling energy costs, says the report, quoting Bob Ayres, director of the Centre for the Management of Environmental and Social Responsibility.

The answer? Nothing quick and easy, but a unified push by industry representatives will help. Too often industry groups act without coordination, says the report.

Details about the study are available at http://fletcher.tufts.edu/ierp/projects.shtml.

Visit energy writer Lisa Cohn at www.realenergywriters.com and subscribe to her free EE Markets newsletter and podcast.

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August 14, 2008 | | Tags: , , , | 3 Comments »

Reducing Hospital Costs through Efficiency

By Elisa Wood

August 7, 2008

The energy and healthcare industries share a mutual woe. Both are experiencing meteoric price increases.

The Alliance to Save Energy projects a household’s energy costs will be about $6,300 this year, representing about 13% of median pre-tax earnings. Meanwhile, the National Coalition on Health Care reports that medical costs rose 6.9%— two times the rate of inflation last year with total spending of $2.3 trillion or $7,600 per person. http://www.nchc.org/facts/cost.shtml

Fortunately, the U.S. Department of Energy has launched a program that brings energy efficiency to hospitals to drive down energy costs and reduce some of the financial pressure on the healthcare industry. http://www1.eere.energy.gov/buildings/energysmarthospitals/

The program is important because hospitals are significant energy consumers. A hospital’s energy intensity is 2.5 times that of a commercial building. U.S. hospitals spend more than $5 billion annually on energy, which is 1-3% of their budgets and equivalent to at least 15% of profits.

The program’s goal is to improve efficiency 20% in existing buildings and 30% in new construction. Cost savings are expected to be large — every $1 a non-profit hospital saves on energy is equivalent to generating $20 in new revenue, according to the DOE.

Hospitals are particularly good candidates for combined heat & power, which is 70-95% more efficient than conventional power production. CHP, as it is known, achieves this efficiency because it uses the heat produced in the generation process, rather than wasting it, as large grid-connected power plants do. Thus, it is able to use less fuel to electrify, heat and cool a building. http://files.harc.edu/Sites/GulfCoastCHP/Presentations/CHPForHospitals.pdf

CHP also offers hospitals back-up power if the electric grid goes down. During Hurricane Katrina, when almost everything was out of service, the 642-bed Baptist Medical Center in Jackson, Mississippi continued to care for patients without disruption because of its 3.2 MW CHP plant.

The DOE offers a free screening for hospitals so that they can see if they are good candidates for CHP http://www.bchp.org/prof-assessment.html#form

Pairing energy efficiency with other societal needs, such as bringing down healthcare costs, makes for good public policy. It offers the proverbial killing of two birds with one stone, or in this case with one coin reducing a double-burden on the average American’s pocketbook.

Visit energy writer Elisa Wood at www.realenergywriters.com and subscribe to her free EE Markets newsletter and podcast.

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August 7, 2008 | | Tags: , , , , | 1 Comment »

CHP Gains Stature as Efficiency Measure

By Elisa Wood

June 19, 2008

Combined heat and power is a form of alternative energy that has been available for many decades. Yet it’s remained below the radar screen in policy discussion about our energy future.

However, it appears to be gaining new stature as lawmakers and regulators seek ways to make energy use more efficient.

Also called cogeneration, the technology creates both electricity and heat in one unit. Most power plants throw away two-thirds of the energy consumed in production. But CHP plants use the excess energy to heat, cool or humidify the building. As a result CHP reclaims one-third of the energy that would otherwise be lost.

In addition, CHP plants are usually built very close the factory, hospital, college or office building they serve. So electricity is not lost as it travels long distances over transmission lines, as is often the case with large, central power plants that serve many consumers and businesses.

Taking notice of CHP’s virtues, some states have created portfolio standards that encourage its development. The standards require that utilities use a certain amount of alternative energy to meet efficient or clean energy targets. This approach has been highly successful over the last several years in spurring development of wind, solar and other green energy sources in the US.

Now eight states allow part of the requirement to be met through installation of CHP. In Connecticut, for example, a factory, school other large energy user can install CHP to meet its heat and power needs and receive a kind of tradable credit for doing so. The energy user then can sell the credit to a utility that needs to meet state requirements.

In addition to Connecticut, the eight states are Colorado, Hawaii, Nevada, North Carolina, North Dakota, Pennsylvania, and Washington. These states should serve as interesting testing ground to see if portfolio standards accelerate use of CHP as they have wind and solar energy.  We encourage those interested in CHP to check out the Environmental Protection Agency’s CHP partnership, an agency that is playing a strong role in encouraging use of the resource. See http://www.epa.gov/chp/

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June 20, 2008 | | Tags: , , | 1 Comment »
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