Four Ways to Foster CHP Growth - Combined Heat and Power
In the last quarter of 2014, the International Energy Agency issued its United States country scorecard for combined heat and power (CHP). The rankings also encompass district heating and cooling (DHC). The U.S. scored a 3 on a scale of 5. The Scorecard defines the ranking of 3 as:
There is recognition of the benefits of efficient CHP/DHC, accompanied by the introduction of some measures to accelerate the development of CHP/DHC, but these technologies are not effectively prioritized compared to other energy solutions. In addition, the country lacks an integrated CHP/DHC strategy. As a result, realized CHP/DHC potentials are likely to be modest.
Significant improvement in the CHP landscape lies within our grasp. We just need to adjust some policies to rev up the CHP engine and achieve the additional 40 GW (yes, GW) of CHP capacity targeted in President Obama’s August 2012 Executive Order. The Scorecard reports 4 ways we can adjust our policies to encourage and foster the growth of CHP:
1. Reform Tariff Rates. Because CHP users typically need or at least want to be interconnected with the electric utility’s grid, they will need to pay supplemental rates, standby rates or backup power rates. (The CHP user also may be able to sell power back to the utility at a buyback rate). Many retail electric utilities have archaic supplemental power and standby rates that act as a barrier to CHP adoption. Table 4 of the Scorecard gives most states below average ratings for their standby rate policy (citing a 2011 research report (subscription required) by American Council for an Energy-Efficient Economy).
The Regulatory Assistance Project (RAP) prepared a terrific report titled Standby Rates for Combined Heat and Power Systems, which made specific, targeted suggestions for improving standby rate structures. In making its recommendations, the report used analyzed and made suggested improvements to the standby rates of electric utilities in a number of states. You can read the report here. A sampling of the recommended reforms include unbundling generation, transmission and distribution charges, basing generation reservation demand charges on utility costs and forced outage rates on the utility’s system, and assuming coordinated maintenance outages. Many more terrific suggestions appear in the RAP’s report.
2. Establish Interconnection Standards. Obviously, if a CHP user needs or wants to be interconnected to the electric grid, that user will have to interconnect. In order to facilitate the interconnection process, consistent procedures and technical requirements need to be in place. The Scorecard indicates that 25 states have interconnection standards in place. Interconnection standards need to be promulgated in the remaining states in order to further promote CHP. Existing interconnection standards should also be reviewed to ensure that they do not act as a barrier to CHP interconnection.
3. Portfolio Standard Inclusivity. A number of states have adopted a renewable portfolio standard, a renewable energy standard or some other form of resource standard. CHP needs to be included in the range of options that satisfy the standard. Explicit inclusion remains the best option, but as the Scorecard notes, even when not explicitly identified, many state standards imply or otherwise allow CHP to count towards satisfaction of the standard. CHP inclusivity for these standards simply needs to be assured.
4. Enact Output-Based Regulations. Because CHP operates at a higher efficiency than traditional power generation, output-based regulations make sense. Less fuel, and therefore fewer emissions, is required for the same power output. Accordingly, emission standards that focus on output-based regulation make CHP more attractive. The Scorecard specifically mentions several New Source Performance Standards (NSPS; specifically, NOx and combustion turbine NSPS regulations) and Boiler Maximum Available Control Technology regulations as examples of output-based regulation that can promote CHP.
CHP has constantly grown in the United States, and its prospects are bright. By tweaking these 4 areas, regulators could unleash even greater adoption of CHP and usher in an era of greater energy efficiency and greater energy resiliency. It’s easier said than done, but the Scorecard makes a number of terrific points on how the United States can improve upon its grade of 3 out of 5 in the CHP/DHC sector.