Why utilities are investing in this technology as a way to boost resiliency and reduce consumer costs

Blog | May 18, 2016 - 10:00 am
By Anna Chittum, Visiting Fellow, Industry

What if there was a technology your utility could deploy today that was cheaper and cleaner than most existing power generation, that boosted system resiliency and reliability, and was twice as efficient? Would you want them to use it?

Customers of Duke Energy in North Carolina may soon enjoy these benefits. Duke Energy is just the latest example of utilities around the country that are investing in customer-sited combined heat and power (CHP) plants to bring cleaner, cheaper, and more quickly deployable energy resources to their customers. Duke has proposed to develop, own, and operate a 21 Megawatt (MW) CHP plant located at Duke University.

CHP is different from traditional power generation because the large amount of heat generated during the electric generation process is used, instead of wasted. Whereas traditional power plants dump their excess heat into the air or a nearby river or lake, CHP captures that heat and uses it for a productive purpose. In this case, the heat generated at the Duke plant will serve the university’s need for space heating, water heating, and steam for uses such as cleaning and sterilization at Duke University Hospital. The increased efficiency means the university will reduce its energy-related CO2 emissions by about 25%. And by siting CHP near the point of consumption, the utility reduces losses along transmission and distribution lines, which average over 7% but can climb as high as 20% during times of peak system use.

While the university itself stands to benefit from this arrangement, the project was given the go-ahead by the utility in large part due to the benefits to all users of Duke Energy’s system. The 21 MW of new capacity is more cost-effective than other supply alternatives the utility considered, and can come online faster than most other types of power generation. The power generated by the new plant will serve both the university, as well as the surrounding Durham community.

Duke Energy is not alone in tapping CHP for its near-term energy needs. Other utilities have realized that siting distributed CHP power plants at customer locations can bring benefits to the whole system. In Texas, Austin Energy owns a 4.3 MW CHP system located near Seton’s Dell Children’s Medical Center, providing low-cost and highly reliable power and thermal energy to the hospital and nearby buildings. In Florida, Florida Public Utilities (FPU) is developing a 20 MW CHP system located at a Rayonier Advanced Materials cellulose plant. Rayonier will use the steam in its production process, and the power will serve FPU’s nearby customers on Amelia Island. The plant is expected to save FPU customers $28 million over the 20-year contract period. State regulators were very enthusiastic about the project, and are hoping to see others like it.

In addition to the efficiency and emissions reduction benefits, utilities and customers are increasingly recognizing the reliability benefits of CHP and viewing it as critical infrastructure for staying online in even the worst weather events. Given so many benefits, it is natural to wonder why we don’t see more CHP owned by utilities as supply-side assets. One reason is that utilities do not usually consider CHP in their long-term resource planning efforts. That situation is changing as more and more states identify CHP as an important option to be considered alongside traditional generation. Indeed, Duke Energy has indicated that the CHP plant at Duke University is just one of possibly four additional customer-sited CHP developments it plans in the near future. Stay tuned as ACEEE continues to explore the emerging role of CHP as a distributed utility resource.