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Old Is New with Cogeneration

March 21, 2019
Industry innovators are again turning to combined heat and power plants.

In recent years there has been a lot of buzz over distributed energy resources (DERs) with renewables based systems such as solar installations getting the limelight. However, before solar DERs were a thing and even before we coined the phrase DER, there were distributed power facilities that provided significant benefits in compatible commercial and industrial settings. These facilities employed cogeneration or combined heat and power (CHP) technology to convert waste or excess thermal energy to more efficient heat and power. While frequently located unobtrusively and operated out of sight today, this technology is as important as ever in the movement to increase energy efficiency, lower utility costs and minimize the risk of power disruptions through distributed supply.

Prior to the adoption of the Public Utilities Regulatory Policy Act (PURPA) of 1978, most cogeneration installations were located at refineries, pulp mills or other industrial sites with significant steam and electric loads. Excess steam was used to generate electricity that was consumed entirely within the facility. After PURPA was adopted, utilities were required to buy back excess power from cogenerators at their avoided generation cost. While reaching an agreement with a utility to actually buy their excess generation was never easy, the new law helped pave the way for a broader use of cogeneration with a growing number of installations at factories, hospitals, hotels and housing facilities that required a year-round source of hot water and electric. Facilities with a cooling or refrigeration load also got into the act with combined cooling, heat and power (CCHP) installations or tri-generation operations.  

CHP is experiencing renewed attention for several reasons. Foremost is the decline in price and increased availability of natural gas, which is the fuel of choice for the majority of new installations today. Gas engines have improved in efficiency and reliability, are available in a broader range of sizes and are much cleaner and easier to permit and maintain than the diesel engines they often replace. The influx of digital technology into the power sector also has contributed to the increased interest in CHP. Like the integral components in other forms of distributed energy supply, CHP operational systems, grid connections, monitoring and communication systems have become smaller, less costly and easier to integrate into legacy systems with the aid of digital advancements.   

Because of the increased efficiency of cogeneration, the U.S. EPA has formed a CHP partnership to promote this technology and share information about its use. The agency’s website includes a catalog of CHP technologies with an overview of how CHP systems work, key concepts of efficiency and power-to-heat ratios, and some cost and performance for commercially available CHP prime movers. According to the agency, there are over 4,400 CHP facilities in service nationwide.

CHP projects may be getting greater attention as a result of the rising interest in microgrids, or possibly, it is the other way around. In either event, both may be attractive for municipal and institutional applications, commercial campuses or large buildings like public housing where critical infrastructure upgrades are needed, long term stable energy prices are desirable and upfront capital is limited.  Another driver may be resiliency and the guarantee of a 24/7 power supply.  Finally, CHP can provide anchoring baseload service for a microgrid that includes a renewable energy resource like PV.

As CHP technology matured and gas prices declined, another game changer has taken place to bolster CHP and connecting microgrid networks. That is financability. When technology and fuel risk are diminished, it is much easier to get project financing. This opens the market to a whole new group of facility owner/operators with limited debt raising capability or the inability to take advantage of certain types of tax incentives. Enter the third party developer-owner who can raise capital, take on certain project risks and help the facility owner address their facility’s energy requirements. Of course, building owners need to do their due diligence to ensure potential energy partners have experience and financial backing to address any hiccups along the way.

The very first commercial power station developed on Pearl Street in Manhattan was in fact a cogeneration plant supplying district heating as well as electricity. How interesting it is to see that industry innovators are again turning to combined heat and power plants for highly efficient baseload power.

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