The Future of Power Generation is This On-Site Solution: How to Know When to Make the Switch to "Combined Heat and Power"

Combined heat and power (CHP) has long been a potent energy generation solution for industry and manufacturing. Today, new technology, fuel source availability and affordability, and a growing demand for sustainability are driving a greater interest in CHP. More organizations, from those that operate hospitals to universities and plenty of others in between, are giving CHP a closer look.

CHP, also known as cogeneration, allows facilities to generate their own electric power on-site, rather than purchasing it from a local utility or a competitive electricity supplier. When “waste heat” is produced, it can be recaptured and used for heating or cooling the facility and can be sold to utilities. Under a traditional approach, an organization would purchase electricity from the grid and obtain boiler fuel to heat and cool a given facility. CHP integrates these functions using low-cost natural gas or other fuels to power an engine and create electricity for the facility. It uses heat recovery units and water to create thermal energy (steam or hot water) to heat and cool the facility.

With CHP, there’s tremendous potential for greater efficiency. Where traditional power generation processes result in around 50 percent energy efficiency, CHP can deliver up to 75 percent efficiency, according to the US Office of Energy Efficiency & Renewable Energy. This efficiency, combined with other benefits, makes CHP systems a tempting option for many types of facilities. Here’s a closer look at four signs showing that CHP or cogeneration is right for you.

You’re Due for an Upgrade

For organizations that will need to upgrade, expand or replace their existing boiler, generator or heating and cooling infrastructure in the next five years, it’s the right time to consider whether CHP is a worthwhile option. Often, the largest hurdle to CHP systems is the initial capital investment. While CHP typically comes with construction and administrative costs, so too would any infrastructure upgrade. That said, navigating new partnerships, regulatory concerns and cost projections can be complex.

According to Department of Energy estimates, CHP costs can be recovered within 10 years of a 20 or 30 year equipment lifespan, and often significantly sooner. There are opportunities to create long-term partnerships with organizations to cover upfront costs, and a number of incentives and rebates may be available. The right partner can help facilities explore those options, and facilities on the cusp of upgrades are often best suited to take a step back and explore other options such as CHP.

You’re Eager to Cut Energy Costs

Whether you are contemplating upgrades or not, every organization wants to pay less to keep the lights on. CHP is worth considering for any organization looking to reduce its facility’s energy costs. Nearly 20 percent of the average office building’s expenditures go toward energy costs, and those costs can vary. With CHP, you can predict your energy costs over the long-term and avoid market-price fluctuations.

CHP also offers the opportunity to use low-cost fuels in an efficient system that can actually become a revenue source. Excess power generated can be sold to utilities through net metering, with the added benefit of reducing or eliminating utility demand charges. Currently more than 40 states mandate net-metering, and many credit excess generation at the full retail rate.

Your Operations Depend on Reliable Power

At many facilities, from hospitals to senior living facilities, a power outage doesn’t just disrupt business as usual, it puts lives at risk. By operating on a microgrid, CHP facilities have greater resiliency against natural disasters and other risks that create grid-level blackouts and brownouts. Underground natural gas pipelines that fuel CHP systems, for example, are less at risk of damage from heavy winds and extreme weather. It’s also a consideration for sites in remote areas with limited points of grid access or aging infrastructure.

You Want to Reduce Your Carbon Footprint

As organizations and the energy industry at large put a greater emphasis on cutting greenhouse gas emissions, CHP offers a meaningful step toward greater sustainability. Rather than pulling energy from the grid, which can include sources like coal, CHP enables running a microgrid on natural gas or biogas. There’s also an opportunity to integrate renewable energy sources including solar power into CHP systems. A recently published a guide on combining fossil fuels and renewables in CHP is aimed at a wide range of facilities including retirement communities, multi-family buildings, hospitals, food processors and any large users of steam or hot water; commercial, institutional and industrial parks and campuses; and municipalities and rural co-op organizations.

The increased efficiency that comes with CHP is good for the environment, and it’s already having a positive impact on emissions. The Department of Energy estimates that CHPs can avoid 60 percent of carbon dioxide emissions between 2006 and 2030. It’s an opportunity for companies to achieve sustainability goals and pass those accomplishments on when selling excess power to the grid.

Finding the Right Approach to CHP

For organizations that have reached one or more of these CHP tipping points, there are more options than ever in developing and executing a plan for cogeneration. Facilities can do the design and build themselves, contract with a third-party developer, work with a utility or combine with other likeminded organizations to create a microgrid.

Buchanan Ingersoll & Rooney has extensive experience helping companies and facilities navigate the ins and outs and achieving greater savings, sustainability and reliability with CHP. From selecting the right partners, and securing regulatory approval, to laying out the plans for developing the systems, our team has helped clients in a wide range of industries realize the benefits of cogeneration and take part in the ongoing CHP renaissance.