Energy Benefits​

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Combined Heat & Power systems creates large amounts of heat in the process of converting fuel into electricity. For the average central utility power plant, approximately two thirds of the energy content of the input fuel is converted to heat and wasted. As an alternative, an end-user with significant thermal and power needs can simultaneously generate both its thermal and electrical energy in a CHP system located at or near its facility. CHP can significantly increase the efficiency of energy utilization, as shown in Figure 2-1.

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CHP Efficiencies

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The figure shows that a typical CHP system can reduce energy requirements by 40 percent compared to separate production of heat and power. For 100 units of input fuel, CHP converts 83 units to useful energy, of which 31 units are electricity and 52 units are for steam or hot water. Traditional separate heat and power components require 168 units of energy to accomplish the same end use tasks.

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Environmental Benefits

 

By increasing energy efficiency, CHP significantly reduces emissions of criteria pollutants such as NOx and SO2, and other greenhouse gases such as CO2. CHP is an option that can provide environmental benefits as part of an economically attractive investment. Figure 2-2 shows CO2 emission comparisons respectively by power generation technology and fuel type. CHP technologies can significantly reduce emissions and compare favorably to advanced low emission central station technologies such as gas-fired combined cycle systems.

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EPA’s CHP Emissions Calculator calculates the difference between the anticipated carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur dioxide (SO2), and nitrogen oxide (NOx) emissions of a CHP system and those of grid-supplied electricity and an on-site boiler. The calculator uses fuel specific emissions factors developed by EPA, and grid emissions factors and region-specific transmission and distribution (T&D) loss data from eGrid.  This tool can be found at:

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https://www.epa.gov/chp/chp-emissions-calculator

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Economic Benefits

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The primary economic driver for CHP & DG is the production of power at rates that are lower than the utility’s delivered price. Figure 2-3 shows the historical and projected retail price of electric and natural gas for commercial customers converted to common units of $/MMBTU. It isn’t difficult to see a trend where electric at the point of use costs approximately 3X that of natural gas.

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Average Retail Commercial U.S. Energy Prices including Short Term EIA Outlook ($/MMBTU)

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Figure 2-4 shows a simple life cycle cost analysis for 3 different 1000 KW CHP systems compared to continuing to purchase power from the grid. It can be seen that the capital costs for the CHP system, operating and maintained costs and energy costs projected out over the expected 20-year life of the equipment are far lower for CHP systems than the ‘do nothing’ scenario where a facility continues to purchase all its power from the electric utility and gas for heating & water heating from the gas utility.

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CHP Options Compared to Purchased Electricity

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Ancillary Benefits

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In a restructured power market, DG, CHP and other on-site generation options can offer grid support to the local distribution utility. On-site generation can offer ancillary benefits to the grid, including:

• Voltage and frequency support to enhance reliability and power quality

• Avoidance or deferral of high cost, long lead time T&D upgrades

• Bulk power risk management

• Reduced line losses, reactive power control

• Outage cost savings

• Reduced central station generating reserve requirements

• Transmission capacity release

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DG and CHP offers a customer enhanced reliability, operational and load management flexibility, ability to arbitrage electric and gas prices, and energy management techniques including peak shaving and thermal energy storage. The value of these benefits depends on the characteristics of the facility, energy use and prices, load profiles, and electric rate tariffs, etc. A DG or CHP investment should consider the possible ancillary benefits including the revenue stream from sale of T&D benefits to the independent system operator (or equivalent) and reduced operating costs, along with the other costs and benefits of the project.

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Current CHP Installations

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CHP is an important electric generating resource in the United States. Currently, over 82.7GW of CHP capacity exists at over 4,400 industrial and commercial facilities across the country. This represents 8% of U.S. electricity generation capacity, however it represents over 12% of annual U.S. power generation, reflecting the longer operating hours of CHP systems as compared to conventional forms of generation.

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CHP can be utilized in a variety of industrial facilities and commercial buildings with coincident power and thermal loads. Figure 3-2 presents a breakdown of CHP capacity by major market sector. The majority of existing CHP capacity in the United States is in the industrial sector and is concentrated in five major facility types: chemicals, refining, paper, food and metals manufacturing.

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CHP systems are installed in every state, however there are significant regional differences in the distribution of CHP sites and capacity. Some states have adopted policies that encourage CHP growth, most notably California, New York and Connecticut, which offer financial and other incentives to CHP projects. Other regional variations come from electricity price variations, energy market structures, and industrial development. For example, chemicals and refining facilities are common in the Gulf Coast states and paper production in the Southeast. States with higher overall energy demand, more energy-intensive industry, and dense population centers with concentrated electricity and thermal energy demand naturally have the highest amounts of CHP capacity.

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Future Market Outlook

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The technical potential is an estimation of market size constrained only by technological limits — the ability of CHP technologies to fit customer energy needs without regard to economic or market factors. Across all CHP categories, there is estimated to be more than 240GW of technical potential at over 291,000 sites within the U.S. table 3-1 represents the total CHP technical potential identified in the United States by application or business type, including on-site CHP at industrial and commercial facilities, export, waste heat to power applications or district energy systems that could integrate CHP.