As many of our nation’s boilers approach their 30 year mark, a window of opportunity is opening for these antiquated machines to be replaced with a cleaner and more innovative technology. Combined Heat and Power (CHP), also termed cogeneration, is a method of generating thermal energy (heat) and electricity (power) in a single on-site process, offering improved efficiency, greater reliability to the power grid, and reduced levels of harmful air pollutants. Recent innovation in policy and technologies, coupled with rising energy costs and a heightened environmental awareness has brought significant attention and interest to the market for this technology, but delayed utility and regulatory conformity seriously jeopardizes the role that CHP may play in the future of US energy consumption.
Investor-owned utilities argue that a significant increase in distributed electric generation stands to undercut utility profits and cause rate hikes for all power users, and therefore have worked tirelessly to restrict large-scale industrial CHP projects. As a result of aggressive utility practices, the last CHP-friendly piece of legislation to pass on the federal level was the Public Utilities Regulatory Policy Act (PURPA) of 1978 (which set the mandate for investor-owned utilities to purchase surplus electricity produced by distributed generators). Needless to say, the barriers still facing CHP are numerous, including:
1) Lack of a standardized interconnection policy. The term interconnection simply refers to the point of connection between an electricity producing facility and the utility power grid. However, because a surge of energy efficient distributed generation systems entering the electricity arena challenges the traditional notion of monopoly-controlled centralized generation, the process of making that connection is far from simple. Varying approaches by state, and often by utility service territory make interconnecting an unpredictable, time-consuming and often unaffordable venture.
2) Permitting process neglects to credit CHP for efficiency gains. Federal air quality regulations (propagated by the Clean Air Act) have ironically created the framework for a permitting process that discourages the implementation of CHP by (1) basing emissions limits on an input-of-fuel-basis, a method that fails to acknowledge the efficiency gained by recovering waste heat; (2) not acknowledging CHP for emissions offsets including reduced emissions from central generators, application of thermal energy, and the use of opportunity fuels (i.e. burning on-site waste product that would otherwise end up in landfill); and (3) requiring pollution control requirements that do not take into account the size of a generating unit, presenting smaller generators with prohibitively high compliance costs.
3) Regulated electric market allows for prohibitive rates, tariffs, and fees. Since the deregulation scare of the early 1990’s, state utilities commissions have recently shifted focus away from the public interest to center in on protecting return on investments for their utilities. Taking advantage of this fact, utilities often implement discriminatory rate structures to keep other industries out of the market.
Several non-profits are currently lobbying on the national level for the removal of these barriers, and two house bills—the Energy Technology Transfer Act and the Global Warming Reduction Act—include measures to encourage the use of CHP. This is a start, but there is much more to be done to let CHP rise to its full Btu and natural-resource-saving potential!