2015 building energy trend – Combined Heat and Power (CHP) systems

7Jan2015
BY Burns Mechanical IN Construction, Energy, Philadelphia Benchmarking

This U.S. Energy Information Administration chart shows how far energy commodities, including natural gas, have plummeted during 2014. (Click image to enlarge.)

This U.S. Energy Information Administration chart shows how far energy commodities, including natural gas, have plummeted during 2014. (Click image to enlarge.)

A confluence of economic factors, including low natural gas prices (see chart), government and utility incentives, and low interest rates, are causing an upsurge in the use of Combined Heat and Power (CHP) / Cogeneration applications. As an outcome, facilities with a year-round continuous requirement for electricity and heat that have deployed CHP technology are benefitting from a net positive cash flow while simultaneously improving their power reliability and power quality and reducing regional harmful air emissions. Rarely have I seen such a clear-cut example of Triple Bottom Line achievement – that is economic, social, and environmental improvement – through investment in energy technology.

What is CHP?

CHP, also known as cogeneration, is the simultaneous production of electricity and heat from a single fuel source, typically natural or waste gas. Facilities with CHP produce a portion of their own electrical power from one of a variety of technologies and use the waste heat to assist with heating, cooling, dehumidification, or process applications. By reducing reliance on the electricity grid, these facilities relieve our aging, constrained electricity infrastructure while enhancing their own power reliability. Power-producing related air emissions are reduced thanks to improving the net efficiency of the generation process.

CHP application case study

A long-time hospital client recently decided to invest in CHP technology. One of a dying breed of stand-alone 501c3 community hospitals, our client entertained the concept of CHP for their facility for more than a decade. But it wasn’t until recently, with the confluence of economic factors described above, that CHP became a sure-fire economic winner.

Current and future emissions calculations for our hospital client  (before and after the CHP project) are shown in this chart.

Current and future emissions calculations for our hospital client — before and after the CHP project — are compared in this chart. (Click image to enlarge.)

Our client will have more than 20% of their project funded through outside sources – a Pennsylvania Department of Community and Economic Development (DCED) grant and an electric utility rebate offered through Pennsylvania’s Act 129 program. The funding along with a stable supply of low-priced natural gas and low cost financing will result in the hospital’s experiencing a net positive cash flow from the day their CHP system is energized. By lowering their annual energy spend by nearly 40%, the system is predicted to generate more than $7 million in positive cash flow for the hospital over the life span of the equipment. Actual savings will be measured and verified through the first year of operation.

While driven by economics, our client’s executives and board of directors were additionally compelled by the operational, environmental, and social benefits of deploying CHP.

Operationally, the CHP system will allow the hospital to remain fully functional – as a community area of refuge – in the event of a sustained power outage, such as during a Hurricane Sandy type of event. Environmentally, the boost in regional power producing efficiency will have a similar effect on air emissions as would permanently removing 1,500 automobiles from the road. This leads to the positive social effect of CHP, which is a lessening of respiratory related illnesses as a result of poor air quality. All of these secondary benefits directly relate to the hospital’s core mission of improving community health.

While many factors are in place for a continued upsurge in CHP systems, continued growth of new installations will depend on the skill of our engineering community to convert a technical improvement presentation into the financial vernacular of clients’ executive leadership. In the case of CHP for hospitals, we’ll need to demonstrate how CHP investments compare to investments in new medical equipment or talent and then have the wherewithal to demonstrate long-term performance after installation.