Benefits & Barriers

The Benefits of CHP

Owners could benefit from Improved fuel efficiency Improved power quality & reliability Improved energy cost predictability Business continuity Society could benefit from Reduced emissions per unit of useful output Lower overall capital cost for power per kW No ratepayer investment required in generating, transmitting or distributing power Reduces land-use impacts and NIMBY objectives Reduces fresh water use Optimizes scarce natural gas, reducing price volatility Creates new high-tech manufacturing sector in domestic and export markets Supports competitive electricity market structure Electric utilities could benefit from Reduced energy losses in transmission lines Reduced upstream congestion on transmission lines Reduced or deferred infrastructure (line and substation) upgrades Optimal use of existing grid assets, including the potential to free up transmission assets for increased wheeling capacity Less capital tied up in unproductive assets Improved grid reliability Higher energy conversion efficiencies than central generation Faster permitting than transmission line upgrades Ancillary benefits including voltage support & stability, contingency reserves and black start capability

Combined Heat and Power in the Gulf Coast Region: Benefits and Challenges (1.06 MB PDF) By making use of waste heat created through electrical generation, a CHP system can cut a facility's fuel costs by up to two thirds. A recent report estimates that outages cost the U.S. economy $80 billion annually, with 73% of the loss shouldered by commercial energy consumers and 25% by manufacturers. CHP can help states achieve air quality goals because the percentage of emissions can be 33% to 50% lower than levels generated by separate heat and power applications. CHP reduces consumption of natural gas per unit of required energy by about 40% of that used by conventional systems The estimated costs of modernizing the electrical grid are between $50 billon and $100 billon. U.S.-wide transmission and distribution losses were about 5% in 1970 and grew to 9.5% in 2001 due to heavier utilization and more frequent congestion.

The Barriers to CHP

• No national interconnection standards and procedures
• Standby and backup power charges
• Stranded cost-recovery charges and exit fees
• Air regulations that do not recognize the environmental benefits of CHP
• The process for obtaining environmental permits is not standardized and is therefore time-consuming
• Complex local ordinances regarding siting, zoning, fire code, etc...
• High natural gas prices
• Facility managers unaware of the benefits of on-site power generation