A word to utilities: Don’t shy away from CHP

John W. Jimison, USCHPA

Combined heat and power, often referred to by its acronym “CHP,” is the oldest form of commercial electricity generation. Thomas Edison installed a CHP plant on Pearl Street, not a simple electric generating station. At the same time, CHP is also a key element of many forecasters’ answers for an evolving electricity industry struggling to meet simultaneous fuel, emission, vulnerability, and market challenges as the 21st century unfolds.

Yet CHP is not an option many electric utilities have seriously considered implementing for their own loads and future growth. As executive director of the U.S. Combined Heat and Power Association (USCHPA), I offer this brief argument that electric utilities should do so.


First, a word about USCHPA. USCHPA was created to promote pro-CHP policy changes for the energy efficiency and environmental cleanliness benefits of CHP. We count among our members many of the leading energy service companies who install CHP, leading manufacturers of engines and equipment that are designed for CHP production, and leading users of CHP in industrial processes. We also include utility members; indeed Art Smith of NiSource is currently our president. No bones about it: USCHPA wants electric utilities to be involved in achieving the goal we share with the Department of Energy of doubling CHP in the U.S. economy by 2010. We want utilities to help us meet our partnership objectives with EPA to use CHP as a key means of meeting emissions targets and looming greenhouse-gas concerns. We want utilities to be involved because they are the institutions that have the greatest ability to make it happen and happen fast.

Why should you play with CHP? Consider these benefits:

  • You double or triple your fuel conversion efficiency (and cut your effective fuel cost) by capturing the useful thermal energy of the generating fuel.
  • At the same time, you cut your effective emissions on an output basis to half or a third of what they would otherwise be-and we’re working hard to make sure you get credit for the reduction.
  • You provide new power near your load at reliability levels and power quality levels you know you can’t promise over your grid.
  • You backfeed power into your system and reduce any T&D constraints you are staring at on peak days.
  • At the same time, you defer or eliminate needed upgrades or new T&D investments with their accompanying NIMBY (not in my back yard) nightmares.
  • You eliminate line losses for your new generation-what you make is what you sell. You add capacity with extremely modest to virtually invisible site impacts compared to the difficulties of siting a new central station generator.
  • You reduce your system vulnerability to deliberate acts of disruption, a design factor that will be a permanent part of your planning from last September 11th forward.
  • You do all this with extremely short lead-times using proven off-the-shelf technology to meet incremental load growth with incremental capacity growth.

Where is CHP today?

Why aren’t most utilities already crawling all over this? Here’s our view, which we hope you help promptly prove wrong:

  • Some utilities do not want the type of electricity market that CHP plants will encourage, which indeed will be a pro-competitive market with independent CHP power generators as well as utility-related ones. But it will not be an unsafe market for utilities-private CHP developers almost universally design to meet thermal loads, not to participate in (much less “game”) the power markets, and generate less power then they require. You’ll have to offer non-discriminatory terms to other people’s CHP plants matching those your own plants get, but that’s not new either: Unbundling and non-discrimination have been written on the wall for a long time.
  • Many utilities still read “CHP” and think “PURPA cogeneration plants,” including the mandates that were so distasteful in the ’70s and early ’80s. But no one’s building QFs (qualifying facilities) any more. While non-affiliated CHP plants obviously require the ability to buy and sell power at reasonable prices where they don’t have an open market alternative, they prefer a competitive market to any regulatory mandate dictating a long-term deal on short-term realities, and so should you.
  • On a power-only basis, the efficiencies of smaller gas turbines, fuel cells, or clean reciprocating engines may not match a state-of-the-art CCGT, but that’s the whole point. No one can afford any more to approach these questions on a power-only basis.

  • Many utilities don’t know what to do to market the thermal energy. Hey, if you’ve got steam, hot water, chilled water, or other thermal services close enough to a user to sell it competitively with his or her alternative, guess what? He or she will buy it. Or cut a deal with the user hosting the CHP facility from the outset, dividing the capital costs, fuel costs, and upkeep in proportion with the ratios of electric and thermal output; you’ll both be huge winners. Thermal energy is not your business? Of course it is-just look at the top of your stacks. You’re just not getting paid for any of it. And soon you’ll be paying more to deal with it.

USCHPA wants utilities to join in adopting, promoting, and proliferating CHP for all of these reasons. But no secrets here: We’re also tired of seeing companies who should be allied in advancing this evolutionary improvement in the electricity industry working in opposition to our efforts to make CHP possible on the basis of anachronistic notions of industry structure and roles, outmoded ratemaking concepts and cost-recovery shibboleths. Come along with CHP and you’ll create shareholder value not only in a low-cost high-return benefit to the bottom line, not only in corporate good citizenship, but also in joining the vanguard of an evolutionary change toward distributed clean resources that this industry is inevitably going to be making in any event. There’s no sense fighting the future (or each other) when there is so much room for everyone to win. And for an industry with the pride in its traditions that the electric utility industry rightfully has, you just need to realize that CHP is in fact the best of those traditions. It’s time to implement Thomas Edison’s whole concept, not just the electric part.

Jimison is USCHPA’s executive director and general counsel. You can learn more at www.uschpa.org, or contact him via e-mail at uschpa-hq@admgt.com.

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