Benefits, Challenges & Solutions

1. Reduced energy costs for appropriately screened projects.
2. Increased energy efficiencies up to 70 - 90+%.3
3. Lowered emissions, including NOx, SO2, CO2, and heat.
4. Revenue generation through sales of electricity, steam and chilled water.
5. Improved process flexibility.
6. Increased power reliability and quality

CHP increases reliability by hardening your facility against power outages and power quality degradation. For more on this topic see Reliability and Quality.

Visit our Case Studies section to see CHP installations in the Pharmaceuticals Market.

Projects must be carefully screened to determine feasibility.
Solutions: Online tools are available to help you run preliminary screening analyses. This step helps you to determine whether your project is worth a detailed feasibility study. Software screening tools are located on our Evaluation Tools page, or you may Contact Us for guidance.

Budgeting for CHP may be difficult, since energy production is not a core business activity.
Solutions: Various private and public financing options, tax benefits and other incentives may be available for your project. Some options do not require a down payment. Equipment costs may be structured either as an operating expense or as a capital investment depending on your needs. Check out our Finance Options page for details.

High fuel prices diminish return on investment.
Solutions: Power purchase agreements, energy savings performance contracts, opportunity fuels, or duel fuel systems reduce or control your energy costs. In the future synthetic fuels may become important.

• A power purchase agreement is a long-term contract with a power supplier that establishes a fixed cost for fuel. Your business pays the fixed amount regardless of short-term commodity price fluctuations.
• Energy savings performance contracts pay for CHP and other energy efficiency upgrades through energy cost savings. Energy costs tend to decrease under these scenarios, but even if they rise, they do so at a slower rate than without energy efficiency upgrades.
• Opportunity fuels, such as landfill gas, may be substituted for purchased fossil fuel or electricity. (See the ALZA Pharmaceuticals ( 46 KB) case study for one such example)
• Duel fuel systems permit your plant to switch between fuels as economics change.

CHP appears to be more costly than retail electricity.
Solution: Be sure you've performed a life-cycle cost analysis. Cost comparisons done on a first-cost basis may not account for the true costs and benefits. Longer-term operational costs of existing systems can sap profitability, like those associated with aging boilers or unreliable power. Life-cycle cost analyses take these real, but often overlooked costs and benefits into consideration.

CHP may also provide valuable secondary benefits. Based on a series of more than 70 energy efficiency case studies, the commitment to improving energy efficiency tends to foster efficiencies in non-energy operations, such as reducing raw material waste and conserving water.4 In addition, value may be added through customer loyalty or community goodwill when companies improve efficiency, lower emissions, or reduce demand on the public utility grid.

For more on the benefits of creative energy solutions, see Efficiency and Innovation in U.S. Manufacturing Energy Use ( 2.65 MB).

The permitting and interconnection process can be complex and time-consuming.
Solutions:

1. Integrated Service Providers (ISPs). These companies help design the CHP system for your facility, obtain all applicable permits, work with the utility to resolve interconnection and rate issues, and install the equipment. This option allows you to remain focused on your core business, while relying on the expertise and experience of the ISP.
2. Resources for in-house permitting and interconnection. General guidance can be found at the Department of Energy's DER/CHP Project Implementation pages. These include guides to the implementation process, permitting, and interconnection. Or go directly to:
• Regulatory Requirements Database for Small Electric Generators. Database provides updated information about state specific regulatory and permitting requirements for distributed generation projects. Data types include siting, permitting and emissions regulations; utility interconnection agreements/rates and other information.
• DSIRE (Database of State Incentives for Renewable Energy) In addition to incentives, this database provides a partial listing of the rules, regulations and policies for each state. Local code and zoning permits, OSHA permits, endangered species, historic preservation or wetlands permits may also be necessary,2 but are not listed here.
• Texas has standardized interconnection rules that greatly simplify the process for interconnecting with the utility. Louisiana and Oklahoma do not have standardized rules.
• Texas has an output-based standard permit for small generators that gives credit for CHP systems. Louisiana and Oklahoma do not have output based permits.
• Contact Us at Gulf Coast CHP Application Center for more information.