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Is Combined Heat and Power Part of Your Vision for the Modern Grid?

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American Council for an Energy-Efficient Economy

The American Council for an Energy-Efficient Economy is a nonprofit, 501(c)(3) organization dedicated to advancing energy efficiency as a means of promoting economic prosperity, energy security...

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  • Jun 2, 2017
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More states are undertaking new approaches to utility planning that prioritize clean, distributed energy resources, but few are considering combined heat and power (CHP) for meeting the demands of the modern grid. In many ways, CHP provides exactly what they need.

ACEEE is doing some of the first research to evaluate CHP as a grid resource.

We are looking at CHP’s role as an alternative to traditional utility investments and as a support for broader adoption of distributed energy resources. Why now? Policymakers and planners are seeking efficient, low-cost resources that are highly reliable and flexible enough to support more distributed grid resources.

Why CHP can deliver what systems planners need

CHP is more than just an energy-efficient method of generating electricity and thermal energy. It has the potential to deliver lower overall system costs, stronger critical infrastructure, and improved grid reliability. It can also yield significantly fewer emissions than conventional power plants and support state-level economic development.

The benefits can be even greater depending on where CHP is located and how it is deployed. Most people typically think of CHP as providing baseload capacity, generating electricity and thermal energy consistently throughout the day. In addition to providing an always-on source of power, modern CHP systems are capable of acting as a more flexible resource, offering key grid-supporting services needed to maintain operations and help balance distribution. States and utilities that carefully consider these attributes of CHP in their resource plans are likely to find it’s a useful solution that minimizes system costs and maximizes customer benefits.

What’s the problem?

So far, CHP’s benefits remain undervalued. This situation partly explains why we have not come close to realizing CHP’s potential for new deployment in the United States. For one, CHP has historically been at odds with the electric utility’s business model, because customers buy less electricity after it’s installed. Plus, most existing policies and utility regulations are not designed to allow utilities to monetize all of CHP’s value streams, such as increased reliability and reduced emissions. But the electricity industry is changing, and utilities and policymakers are beginning to broaden their view on how to meet future energy needs.

New research exploring CHP as a grid resource

Prior ACEEE research has documented the value CHP could bring to electric utilities if policies and regulations encouraged utility investments. This year, ACEEE is undertaking a new research project to explore how policymakers and system planners can better integrate CHP as a resource into future system planning. We’re exploring how utilities can have a stake in financing, building, and operating CHP themselves, using it to support greater integration of distributed energy resources in their service territories. Our goal is to highlight a vision for how to incorporate CHP into integrated resource planning or other long-term strategies, and to demonstrate CHP’s capabilities for meeting modern grid needs through real-world examples.

When I imagine the future grid, I see CHP systems meeting onsite energy needs at universities, hospitals, multifamily buildings, and industrial facilities. I envision them replacing and upgrading old grid infrastructure, minimizing big investments in central power plants, and supporting more distributed energy resources that provide clean power.

What do you see? We’re interested in hearing from you and welcome your input by email or in person at ACEEE’s Industrial Summer Study, where we’ll discuss this topic and present early research findings. We invite you to join the conversation.

By Meegan Kelly, Senior Research Analyst, Industry Program

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Roger Arnold's picture
Roger Arnold on Jun 2, 2017

This article strikes me as borderline silly. Not because CHP isn’t a good way to improve overall energy efficiency, but because no consideration is given to the technical and institutional realities that limit its adoption.

To be effective, use of CHP really needs to be architected into buildings when they’re designed. That’s not something over which utilities have any control. If one wants to advocate for increased use of CHP, well and good. But the appropriate target is state legislators, utility commissions, and building departments, not the hapless utilities. And one had best have specific, well thought-out policy proposals that can realistically be implemented. A mere message that “CHP is good” won’t cut it.

In some cases, CHP systems can be retrofitted into existing buildings for a net savings in energy consumption. But if it’s to be of any use for stabilizing the grid and enabling integration of renewables, the retrofit must provide for thermal storage and a protocol that gives the utility or transmission system operator partial control over when power is generated. Otherwise, CHP is just adding one more intermittent source of power for the grid to absorb — keyed in this case to the local need for heat. But thermal energy storage isn’t an easy sell. It’s extra cost for the building owner, with no direct benefit except to the system as a whole.

One should also be aware that the cheapest implementations of CHP are less efficient than central power generation with ground-source heat pumps for local heating. The thermal efficiency for low cost combustion turbines is only about 28%, vs. 60% for a large combined cycle gas turbine. So CHP will deliver net energy savings compared to direct furnace heating, but is less efficient than central power and a good heat pumping system. To match the efficiency of central power generation with current technology, the “power” portion of CHP must be high temperature methane fuel cells, of the sort sold by Bloom Energy. But Bloom Boxes are decidedly not cheap.

One of the strongest arguments for transitioning to a hydrogen economy is that natural gas can be converted to hydrogen at reasonably high efficiency, with easy capture and sequestration of CO2. Distribution of hydrogen in place of natural gas then enables distributed power generation from low temperature PEM fuel cells — which are now substantially cheaper and more durable than high temperature SOFCs for natural gas. CHP is then easy to add, and carbon free to boot.

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Roger Arnold on Jun 5, 2017

I tried to post this a couple of days ago, but it seems to have fallen into limbo. It’s in the system, because when I tried to repost it, I got a pop-up telling me it was a duplicate of what I’d already posted. The first part of the comment also show in the “recent comments” section of my profile. But nothing here. Hmm, maybe this preface will circumvent the “duplicate posting” bot.

The article strikes me as borderline silly. Yes, CHP can be efficient, but the article ignores the technical and institutional realities that limit its use.

To be most effective, use of CHP needs to be architected into buildings when they’re designed. That’s not something over which utilities have any control. If one wants to advocate for increased use of CHP, fine. But the appropriate target is state legislators, utility commissions, and building departments, not the hapless utilities. And one had best have specific, well thought-out policy proposals that can realistically be implemented.

In some cases, CHP systems can be retrofitted into existing buildings for a net savings in energy consumption. But if it’s to be of any use for stabilizing the grid and facilitating integration of renewables, the retrofit must provide for thermal storage and a protocol that cedes to the utility or transmission system operator partial control over when power is generated. Otherwise, CHP is just adding one more intermittent source of power the grid to absorb — keyed in this case to the local need for heat. But ceding even partial control can be a tough sell.

One should also be aware that the cheaper implementations of CHP are less efficient than central power and local ground-source heat pumps. The thermal efficiency for low cost combustion turbines is only about 28%, vs. 60% for a large combined cycle gas turbine. CHP is more efficient than direct furnace heating, but less efficient than central power and a good heat pumping system.

One of the strongest arguments for transitioning to a hydrogen economy is that natural gas can be centrally converted to hydrogen at reasonably high efficiency, with easy capture and sequestration of CO2. Distribution of hydrogen in place of natural gas then enables efficient distributed power generation from low temperature PEM fuel cells, CHP then comes for free, with no loss of efficiency for power generation.

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