Economic Benefits of CHP

ECONOMIC BENEFITS OF CHP

CHP offers a superb mechanism for Economic Stimulus.

High energy costs and inadequate energy systems are a key part of the reason the economy has lost its forward momentum. Because of their implicit efficiency, CHP investments deal effectively with nagging energy cost problems for industrial plants, commercial businesses, institutions, and large residential facilities.

Inadequate power supply, particularly in California, was a major factor in slowing economic growth. Our fully electrified economy requires incremental power supply as it grows. CHP plants can come on faster, in smaller more flexible increments, with direct linkage between the generation and the consumption, to meet the power supply needs that always accompany economic growth.

Our economy is driven by market competition, and works best where competition is most vigorous. The proliferation of CHP systems has the potential to bring new and vigorous competition into the electric power sector and thermal energy sectors alike.

Much CHP equipment and expertise is of domestic U.S. origin, promising to focus the economic benefits at home.

CHP systems can help avoid needless and economically inefficient investment in new transmission capacity, as well the waste of the transmission line losses of power, because of their location at the site of the demand.

Only distributed power such as CHP can meet the reliability needs of the computerized 21st century. As we reinvigorate the economy, we must be sure to do it in accordance with the new century’s “specs”, not the last century’s.

At times of economic downturn, it is tempting to diminish attention to environmental values, but with CHP systems we can achieve optimized energy economics and minimized energy emissions at the same time, as the EPA has recognized.

There are a myriad of economic benefits to CHP, although some of the economic value is overlooked by end-users, utilities, T&D companies, and policymakers.

CHP saves fuel/energy costs - getting up to 2-3 times the useful energy products from the fuel, users could effectively cut fuel costs by up to two thirds and provides affordable cooling and dehumidification.
CHP optimizes natural gas use - using gas for power generation and thermal purposes together, rather than separately, CHP reduces gas costs, gas infrastructure requirements, and gas resource concerns.
CHP reduces T&D constraints - because CHP is sited at the load, it is downstream from constraints on transmission and distribution lines, easing constraints and freeing capacity.
Distributed energy expert and CEO of Private Power, Tom Casten, cites industry forecasts that estimate the U.S. will need 137,000 MW of new capacity by 2010. According to Casten, meeting this demand will require $84 billion for new power plants and $220 billion for new T&D, for a total of $304 billion. Meeting the same demand with distributed energy will require $168 billion for new plants, but $0 for T&D.
CHP reduces need for new transmission lines - avoids the need to build costly, hazardous new high-voltage lines over landowner, environmental opposition. A distributed energy future would save $136 billion of capital investment and reduce the cost of new power by about three cents per kW," says Casten. With CHP systems located at or near its point of use, line losses are eliminated. This ranges from 5% to as much as 20% (during peak periods) of conventional power lost to transmission resistance, compared to none for CHP.

CHP increases competition -New CHP installations add many competitive players to the power market, for whom power is a byproduct, so they do not "game" the market.

MORE RESOURCES

Visit USCHPA's Market Studies page for additional materials.

California Energy Commission Guide to the Economics of Owning and Operating DER Technologies

Optimizing Future Heat and Power Generation by Tom Casten and Martin Collins has information on the economic costs associated with a variety of different scenarios for DG penetration. There is also a spreadsheet model that the authors make available so that others can test the assumptions and build in their own logic.



ECONOMIC BENEFITS OF CHP CHP offers a superb mechanism for Economic Stimulus. High energy costs and inadequate energy systems are a key part of the reason the economy has lost its forward momentum. Because of their implicit efficiency, CHP investments deal effectively with nagging energy cost problems for industrial plants, commercial businesses, institutions, and large residential facilities. Inadequate power supply, particularly in California, was a major factor in slowing economic growth. Our fully electrified economy requires incremental power supply as it grows. CHP plants can come on faster, in smaller more flexible increments, with direct linkage between the generation and the consumption, to meet the power supply needs that always accompany economic growth. Our economy is driven by market competition, and works best where competition is most vigorous. The proliferation of CHP systems has the potential to bring new and vigorous competition into the electric power sector and thermal energy sectors alike. Much CHP equipment and expertise is of domestic U.S. origin, promising to focus the economic benefits at home. CHP systems can help avoid needless and economically inefficient investment in new transmission capacity, as well the waste of the transmission line losses of power, because of their location at the site of the demand. Only distributed power such as CHP can meet the reliability needs of the computerized 21st century. As we reinvigorate the economy, we must be sure to do it in accordance with the new century’s “specs”, not the last century’s. At times of economic downturn, it is tempting to diminish attention to environmental values, but with CHP systems we can achieve optimized energy economics and minimized energy emissions at the same time, as the EPA has recognized. There are a myriad of economic benefits to CHP, although some of the economic value is overlooked by end-users, utilities, T&D companies, and policymakers. CHP saves fuel/energy costs - getting up to 2-3 times the useful energy products from the fuel, users could effectively cut fuel costs by up to two thirds and provides affordable cooling and dehumidification. CHP optimizes natural gas use - using gas for power generation and thermal purposes together, rather than separately, CHP reduces gas costs, gas infrastructure requirements, and gas resource concerns. CHP reduces T&D constraints - because CHP is sited at the load, it is downstream from constraints on transmission and distribution lines, easing constraints and freeing capacity. Distributed energy expert and CEO of Private Power, Tom Casten, cites industry forecasts that estimate the U.S. will need 137,000 MW of new capacity by 2010. According to Casten, meeting this demand will require $84 billion for new power plants and $220 billion for new T&D, for a total of $304 billion. Meeting the same demand with distributed energy will require $168 billion for new plants, but $0 for T&D. CHP reduces need for new transmission lines - avoids the need to build costly, hazardous new high-voltage lines over landowner, environmental opposition. A distributed energy future would save $136 billion of capital investment and reduce the cost of new power by about three cents per kW," says Casten. With CHP systems located at or near its point of use, line losses are eliminated. This ranges from 5% to as much as 20% (during peak periods) of conventional power lost to transmission resistance, compared to none for CHP. CHP increases competition -New CHP installations add many competitive players to the power market, for whom power is a byproduct, so they do not "game" the market.			MORE RESOURCES Visit USCHPA's Market Studies page for additional materials. California Energy Commission Guide to the Economics of Owning and Operating DER Technologies Optimizing Future Heat and Power Generation by Tom Casten and Martin Collins has information on the economic costs associated with a variety of different scenarios for DG penetration. There is also a spreadsheet model that the authors make available so that others can test the assumptions and build in their own logic.