CHP MARKET STUDIES

The USCHPA is now collecting market research studies on a state-specific, application-specific, and industry-specific basis. Since 1980, about 50,000 MW of CHP capacity has been built in the United States. CHP accounts for only 7 percent of electricity generation in the U.S., but almost 60 percent in Denmark. Industry growth and certain drivers indicate promising CHP markets in the following market sectors:

• Niche Markets
• Utilities
• Industrial/Manufacturing
• District Energy
• Government
• Commercial/Institutional Buildings
• Residential

Unpublished reports indicate that new CHP project growth across the country has been curtailed because of natural gas and oil prices and price volatility, making spark spread a less reliable CHP potential indicator. Because of the uncertainty in fuel prices and availability, spark spread is a difficult dimension to quantify or qualify at this point in time and industry growth should take precedence over other standard measures of CHP economic feasibility such as spark spread, according to the American Council for an Energy-Efficient Economy.

Federal Reserve Chairman Alan Greenspan has cited the dangerous consequences that the rise in gas prices could have on our economic recovery. In response, USCHPA highlights how CHP represents an important part of the energy-efficiency solution. "CHP: Part of the Solution to the Natural Gas Crisis" brings attention to this issue impacting CHP markets.

UTILITIES

John Jimison, former Executive Director and General Counsel to the USCHPA, says that utilities should themselves appreciate CHP opportunities and consider expanding their conventional view of their businesses to take advantage of the benefits CHP can bring. This could be done by utilities partnering with major energy users or builders who need significant thermal energy for hospitals, shopping centers, with the utility selling thermal energy even as it generates power near that site for its own system purposes as well as local power needs. Downstream power generation can assist utilities in balancing their systems, meeting their need for voltage support, and avoiding more expensive distribution line or transmission line investments at least temporarily. In addition, distributed generation tied into thermal energy supply can help utilities meet air quality objectives in their service territories. By using waste heat, CHP systems can significantly lower power plant emissions of greenhouse gases and other pollutants. CHP has many other benefits as well: it offers affordable incremental power costs, helps optimize natural gas resources, holds gas costs down, and could allow utilities to enter the thermal energy business. Further, CHP systems can often be load-following, in instances where thermal requirements for heating and cooling follow the same load curve as system power requirements.

In many instances, of course, site owners will prefer to own and operate their CHP systems themselves, especially when their primary purpose is to assure the availability of critical steam or other thermal energy, and utilities are then in the position of dealing reasonably with the site owner over the provision of electricity still required from the grid (either on a continuous or stand-by basis) and in purchasing from the site owner any electricity excess to the site’s own requirements. This model, of course, is more problematic for utilities desirous of maintaining an effective monopoly on electricity generation and supply in a given area, but the efficiencies of CHP clearly make it in the public interest to encourage such projects. In addition to the benefits detailed above, such third-party-owned CHP offers an excellent way to move toward a competitive market with numerous new sellers who are not interested in "gaming" the market. If regulators don't permit CHP projects to proceed on an interconnected basis under reasonable terms, end users will increasingly be inclined to install the onsite systems on an "islanded" basis, leaving their electric utilities altogether, and unable to offer back any of the system benefits CHP can so readily provide. Jimison believes that now is an opportune time for utilities to embrace CHP as part of a national energy security campaign and as part of their own strategic business plans.

INDUSTRIAL

This sector represents the largest share of the current installed CHP capacity in the U.S., and is the segment with the greatest potential for near-term growth. To date, CHP has been most successful in large industrial applications that require large amounts of steam. Typically found in "process industries" such as petroleum refining, pulp and paper, and chemicals, these systems have installed electricity capacities greater than 25 MW (often hundreds of MW) and steam generation rates measured in hundreds of thousands of pounds of steam per hour.

Some facilities of this type are merchant power plants using combined cycle configurations. They are owned by an independent power producer that seeks an industrial customer for their waste stream and sells excess electricity on the wholesale market.

Thousands of boilers provide process steam to a broad range of U.S. manufacturing plants. These boilers offer a large potential for adding new electricity generation between 50 kW and 25 MW by either modifying boiler systems to add electricity generation (e.g. repowering existing boilers with a combustion turbine), or replacing the existing boiler with a new CHP system. Small manufacturers represent an important growth segment over the coming decade.

Various industrial markets, including petrochemical, food products, bio-products, and biotech, rank as the highest priority markets for future industry growth. The petrochemical market is the largest CHP market sector nationally, representing about 40% existing CHP capacity. Bulk chemicals are in economic decline domestically though some subsectors (pharmaceuticals, specialty chemicals, and bio-products including ethanol and bio-feedstocks) are continuing to experience significant growth.

Food products manufacturing is a fast growing and stable market with demonstrated opportunity for CHP. ACEEE has identified food products as one of the most geographically dispersed industry groups, with a significant presence in almost all states. In contrast to pulp and paper industry and bulk chemicals that are in economic decline domestically, the food products industry is among the fastest growing industry groups.

The growing biotech industry has overtaken the computer and semiconductor industry as a leader in projected economic growth. Both sectors have similar power reliability and thermal management needs.

MARKET STUDIES

• Assessment of Replicable Innovative Industrial Cogeneration Applications, prepared by Resource Dynamics & CSGI for ORNL (June 2001)
• Assessment of On-Site Power Opportunities in the Industrial Sector, prepared by Onsite Energy (now with EEA, Inc) on behalf of ORNL/DOE (March 2001)
• The Market and Technical Potential for CHP in the Industrial Sector, prepared by Onsite SYCOM Energy (now with EEA, Inc) for EIA (January 2000)

DISTRICT ENERGY

District energy systems may be installed at large, multi-building sites such as universities, hospitals, and government complexes. District energy systems also can serve as merchant thermal systems providing heating (and often cooling) to multiple buildings in urban areas.

District energy systems are a growing market for CHP because these systems significantly expand the amount of thermal loads potentially served by CHP. District energy also has a major added benefit of reducing the requirement for size and capital investment in production equipment due to the "diversity" of consumer loads. In addition, they tend to use larger and more efficient equipment and can take advantage of such things as thermal energy storage that aren't economically effective on a small scale. Moreover, district energy systems aggregate thermal loads, enabling more cost-effective CHP.

According to the International District Energy Association (IDEA), there are three primary markets within district energy:

• colleges and universities,
• downtowns, and
• airports.

The college and university market seems to be the most promising, due to several factors. Colleges and universities are installing CHP in response to campus load growth, asset replacement of aging boiler capacity, and the favorable economics from fuel efficiency improvements with CHP. View the Census of Central Plant District Energy and CHP Systems at Colleges, Universities, Hospitals, Healthcenters, and Airports: Data Collected on U.S. Colleges and Universities, by IDEA with DOE/ORNL (Summer 2002).

Major urban centers are also a very promising market for adding CHP to existing district energy systems. Many district energy steam plants were originally CHP facilities that generated both power and steam when owned by the local electric utility. With a growing need for local grid support and in light of utility divestiture of generating capacity, coupled with solid market growth in downtown district energy systems.

Airports represent another promising opportunity; these facilities are often in NOx nonattainment areas and face significant emissions pressure from both regulators and the community. With large space conditioning and electrical load with long hours of operation, airports are often well suited to add CHP to their district energy systems. View the Census of Central Plant District Energy and CHP Systems at Colleges, Universities, Hospitals, Healthcenters, and Airports: Data Collected on U.S. Airports, by IDEA with DOE/ORNL (Summer 2002).

GOVERNMENT

The Federal government is the largest energy consumer in the United States, with new mandates to meet increased demand, reduce peak operating costs, enhance energy security, and improve the reliability of electric power generation through DG and CHP.

The Federal Energy Management Program (FEMP) was created to reduce the cost of government by advancing energy efficiency, water conservation, and the use of solar and other renewable energies. Executive Order 13123, Greening the Government Through Efficient Energy Management, specifies that Federal facilities shall use combined cooling, heat, and power systems when lifecycle costs indicate that energy reduction goals will be achieved.

• CHP
• FEMP DER/CHP site
• How to Guide for Federal Facility Managers
• Training especially for Federal Facility Managers