POWER February 2015 - 23

COMBINED HEAT AND POWER
1. Niche for now? Combined heat and power capacity in the U.S. makes up a mere 7%
of the total. Source: Energy Information Administration
CHP capacity by sector
Non-CHP
93%
Industrial
Commercial
Electric power
Total electric capacity, 2011: 1,051 GW
ernment's " chief sustainability officer. "
Brandt noted that CHP is an important
part of the federal government's program to
increase energy efficiency, both as a way to
save taxpayer dollars and to reduce greenhouse
gases. The federal government, she
said, is " the single largest energy user in the
country, " with an eye-popping $25 billion annual
fuel bill. One of her tasks, she said, is to
help figure out how " CHP can help to achieve
our federal energy goals, " including 40 GW
of new CHP capacity by the end of 2020.
That's a target in a 2012 executive order President
Obama issued, which would represent a
doubling of federal CHP systems.
In September, for example, the Department
of Defense announced it would fund
a 7.9-MW CHP system to replace a steam
generation plant at the Aberdeen Proving
Ground in Maryland, some 30 miles north of
Baltimore, that is being decommissioned in
2016. That CHP project, said Brandt, " will
provide 86% of the site's steam supply and
offset 50% of current electricity use. "
1 MW 200 MW
corn prices that killed the ethanol plant meant
to buy the steam, meant Spiritwood could not
operate cost-effectively. " Critics derided it as
a failure. But another ethanol factory recently
appeared on the scene, and the Spiritwood
project came back to life.
According to the U.S. Energy Information
Administration (EIA), the U.S. has some 70
GW of CHP capacity, amounting to nearly 7%
of the total, most of it installed in the 1980s
(Figure 1). The EIA said the " technology fills
an important energy niche. " The mix, says the
EIA, includes " 25 MW in the industrial sector,
2 GW in the commercial sector, and 43 GW in
the electric power sector. In 2011, the average
capacity factor for generators at industrial CHP
plants was 57%. " CHP in the electric power
sector includes a number of gas-fired combined
cycle units, owned either by non-utility generators
or conventional investor-owned electric
utilities, that provide steam to nearby industrial
facilities or district heating. Commercial CHP
plants typically operate as part of institutions
like hospitals and universities, as with the University
of Illinois system (another example is
the New York University Cogeneration Plant, a
2014 POWER Top Plant).
Yet Spiritwood's revival highlights a problem
for CHP projects. They often depend on
government sponsors and government subsidies
to move forward and provide markets
for their electricity, although less-regulated
steam sales to industry are not as difficult.
Industrial CHP projects also frequently enFebruary
2015 | POWER
counter obstacles in getting connected to
conventional private-sector electric utility
markets, both in organized wholesale markets
such as the PJM Interconnection and in
legacy regulated markets that characterize
much of the South. Such plants are typically
not dispatchable and thus have had difficulty
bidding into competitive wholesale markets.
In regulated markets, conventional utilities
have traditionally looked askance at customer-owned
generation that they can't control
but for which they have to provide interconnection
and ancillary services.
That means that the most attractive markets
for CHP projects often are public power
systems, such as Great River Energy and
municipal electric systems, and the federal
government. In those cases, the CHP projects
don't represent a threat to conventional regulated
utilities. Again, though, a major complication
is how these plants fit into the bidding
processes for the wholesale competitive markets.
Issues of dispatchability and interconnection
also become obstacles to CHP.
A November policy conference of the Combined
Heat and Power Association in Washington
highlighted the dependence of the CHP
producers on government markets. The morning
keynote speaker for the one-day meeting
at the posh Park Hyatt in Washington's West
End was Kate Brandt. She is the executive
branch's " federal environmental executive, "
a White House position created by executive
order. She described herself as the federal govwww.powermag.com
Shifting
Support
Though the concept of generating both power
and steam from one plant has been around for
a long time, in the U.S. it first appeared on the
policy horizon in the midst of the energy crisis
in the 1970s, when a variety of factors drove
up oil prices by an order of magnitude. In
1978, along with many other pieces of energy
legislation, Congress passed the Public Utility
Regulatory Policies Act (PURPA). Among
other provisions, PURPA created a major incentive
for cogeneration, which then launched
the competitive wholesale electric markets
that dominate most of the U.S. today.
Under PURPA, a power plant that used at
least 5% of its steam output in a non-power
application qualified for high prices for the
power it sold-which the local utility was obligated
to buy. Conventional investor-owned
utilities had long resisted paying for power
produced by industrial facilities that were
making process steam with electricity as a
byproduct, but PURPA changed the rules of
the game. It required the utilities to buy power
from a qualifying facility (QF) at the " avoided
cost " of new utility generation, costs that were
generally higher than the costs to the cogeneration
plants to produce electricity. In short,
it was a bonanza for the cogen plants.
While there was much controversy and litigation,
the law and its avoided cost provision
kicked off a major boom in CHP projects.
New and successful firms arose to become
non-utility generators, such as AES and NRG
(which have evolved and survived) and Cogen
Technologies (which did not). Many of
the early plants were located in areas such as
Texas and Louisiana where natural gas was
23
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POWER February 2015

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