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40 GW CHP Would Save $10bn a Year, Report Finds – But Barriers Remain

Achieving 40 GW of new combined heat and power by 2020 would save energy users $10 billion a year compared to current energy use and reduce emissions by 150 million metric tons of CO2 annually, according to a report by the Department of Energy and EPA.

Combined Heat and Power: A Clean Energy Solution, released to coincide with the Obama administration’s announcement of a national 40 GW target for CHP capacity, says meeting the target would raise capacity by 50 percent in less than a decade and would save 1 quadrillion Btus of energy compared to current use.

To date, the US has an installed capacity of 82 GW of CHP, the report says. Of this amount, 87 percent is in manufacturing plants (see chart).

Natural gas is the most common fuel of installed CHP (72 percent), with biomass, process wastes and coal making up the remaining 28 percent.

The US is experiencing a “shale gas revolution,” according to the report, which says this is a key driver for CHP. Recovering natural gas from shale formations through horizontal drilling and hydraulic fracturing began in the early 2002, with the Barnett shale formation in Texas. Other large shale formations include the Haynesville shale in Louisiana, the Fayetteville shale in Arkansas, and the Marcellus shale that extends southward from New York State, through Pennsylvania and into the Appalachian Mountains.

Through tapping these resources, the amount of shale gas supplied to the US market has grown by a factor of 14 since 2005, the report says, pushing natural gas prices down. They averaged about $7.50/MMBtu in the five years prior to the recession, the report says, but since 2008, have averaged about $4/MMBtu.

Policy makers at the state level are also increasingly supporting CHP, according to the report. Twenty-three states recognize CHP as part of their Renewable Portfolio Standards or Energy Efficiency Resource Standards, and California, New York, Massachusetts, New Jersey and North Carolina have incentive programs for CHP.

Still, to meet President Obama’s goal, the US must overcome several barriers such as investor-owned electric utilities that view CHP as “revenue erosion,” a limited CHP supply infrastructure and various market uncertainties: fuel and electricity prices, regional and national economic conditions, market sector growth, utility and power market regulation and environmental policy.

Given these barriers, the report says partnership between utilities, their industrial customers, project developers, and other stakeholders is a solution for increased CHP deployment, along with supportive state policies. State should standardize permitting and siting procedures, and streamline the process for CHP projects, it says.

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