With the energy transition underway, many businesses and countries throughout the world have committed to reaching net-zero emissions by 2050. To reach this decarbonization goal, we will need to address one of the largest sources of greenhouse gas (GHG) emissions: the production of electricity and heat, which accounts for approximately 73% of our global emissions.
Just as a beautiful symphony needs all its instruments, the net-zero transition relies on integrating a combination of technologies. However, is it possible that combined heat and power (CHP)—a historically combustion-based technology—deserves a part in this symphony?
What is CHP?
CHP, or cogeneration, uses one fuel source to simultaneously produce electricity and thermal energy. The heat that would otherwise be wasted during electricity generation can be used for steam, hot water, or cooling purposes. This allows CHP systems to achieve efficiencies of 65–85%, which is much higher than the national average of about 50% for separate production of electricity and heat.
Resilient and Ready: CHP Systems Are Dependable and Dispatchable
You, and all organizations, depend on reliable power. Whether it’s a light switch, life-saving equipment, or keeping essential wastewater services operational, CHP systems provide a reliable power source that can be dispatched during grid outages or other emergencies.
CHP’s advantageous ability to operate in island mode cannot be understated. Backup power sources keep your business running and protect your livelihood. When Hurricane Maria swept through Puerto Rico in 2017 and left residents without power, Olein Refinery employees who surveyed the plant to assess the damage discovered something remarkable—the on-site CHP plant had remained intact. While much of the island lacked power for eight months, the Olein Refinery operated within a month. According to Olein Refinery’s CEO, “Without the CHP plant, Olein would have gone out of business.”
Sustainable Energy Solutions: The Role of CHP in Decarbonization
CHP helps decarbonize your operation. Due to their high efficiency, CHP systems consume less fuel than conventional separate heat and power sources. Less fuel consumption means less emissions. CHP also increases energy efficiency by producing power close to the point of consumption. Look out your window. Chances are you will see power lines that bring electricity to your business or home. Significant transmission losses occur when sourcing energy from a remote power plant. These losses directly increase carbon emissions because additional electricity needs to be generated by a “dirty grid.” Implementing on-site CHP eliminates these inefficiencies and corresponding emissions.
CHP emissions fall well below the marginal grid emissions associated with grid power. A study conducted by Entropy Research, LLC demonstrates that natural gas CHP can significantly impact avoided grid emissions, even in New England, which implemented a significant amount of renewables on the grid. The marginal grid emissions used in the analysis referenced the United States Environmental Protection Agency (U.S. EPA) Avert model. According to the research, assuming the ISO New England grid becomes carbon-free by 2050, natural gas CHP emissions will equal the marginal grid emissions between the years 2035 and 2040. At that point, CHP will transition to green fuels, keeping CHP below the marginal grid emission curve.
Making Money and Saving Money with CHP
CHP can help your organization make money. Power generated by CHP systems can be sold back to the utility under a power purchase agreement (PPA). If your facility produces biogas on site from anaerobic digestion, you are a great candidate for CHP, as you can utilize this “free” gas to generate revenue. If your facility relies on natural gas, you would need to look at spark spread to determine CHP system profitability. The spark spread is the difference between the revenue earned from selling electricity and the cost of natural gas used to produce that electricity. Facilities with a high spark spread are great candidates for CHP.
CHP systems can also provide your facility with energy cost savings, including offsetting utility bills, shielding facilities from inflation-driven rising energy prices, insulating against gas and electricity price volatility, and reducing demand charges by offsetting energy usage during peak hours.
Wesleyan University closely examined the viability of CHP after experiencing severe power and heat outages due to a massive storm in 2011, followed by Hurricane Sandy in 2012. To prevent further disruption, the university implemented a 676 kW CHP that provides additional resiliency and saves the university $1,000 every day in energy costs.
Navigating Financing and Operations Hurdles in CHP Implementation
Implementing a CHP system may appear daunting. Whatever your core business is—growing tomatoes in a greenhouse, operating a healthcare facility, or a myriad of other operations—it is not managing a big industrial generator or power plant. In addition, you may not have the budget to cover the upfront cost.
With third-party ownership, an energy service company (ESCO) finances, owns, operates, and maintains the CHP system under a long-term contract with the facility. The facility purchases the generated energy from the third party, often through a PPA or Energy Service Agreement (ESA) for rates lower than their utility rates. A win-win arrangement, this structure reduces operational risk for facility owners and requires no upfront capital. It allows you to experience all the benefits of CHP while focusing on what you do best—running your business.
Of course, the direct ownership option allows the facility owner to finance, own, and operate the CHP system, directly benefiting from energy savings and available incentives.
CHP Systems Are Future Ready
Are you concerned that your asset may become obsolete? CHP can run today on the green fuels of tomorrow. CHP manufacturers can easily change to operating on renewable natural gas (RNG), as the fuel characteristics are identical to fossil-based natural gas.
When it comes to operating on fuels like hydrogen, CHP manufacturers have shown they are ready. Today’s existing and newly installed CHP systems can use a substantial blend of clean hydrogen up to 40%, according to equipment manufacturers. Some systems can even run on 100% hydrogen today. For example, Kirkwall Airport in Orkney, Scotland, implemented a 160 kW CHP system operating on 100% hydrogen that provides heat and power to its main buildings.
Meeting Global Future Energy and Heat Needs
With a deep understanding of the energy landscape, Mead & Hunt’s Engineering, Procurement, Construction (EPC) – Renewable Energy Group can assist you in turnkeying your CHP system. As a single source of responsibility, we will guide you through the project development process from initial feasibility through EPC contract.
We look forward to partnering with you on your journey to enhance energy efficiency, decarbonize, and increase sustainability through CHP systems.
