Gulf Coast CHP - Benefits & Barriers

Benefits & Barriers

The Benefits of CHP

Owners could benefit from

Improved fuel efficiency
Improved power quality & reliability
Improved energy cost predictability
Business continuity

Society could benefit from

Reduced emissions per unit of useful output
Lower overall capital cost for power per kW
No ratepayer investment required in generating, transmitting or distributing power
Reduces land-use impacts and NIMBY objectives
Reduces fresh water use
Optimizes scarce natural gas, reducing price volatility
Creates new high-tech manufacturing sector in domestic and export markets
Supports competitive electricity market structure

Electric utilities could benefit from

Reduced energy losses in transmission lines
Reduced upstream congestion on transmission lines
Reduced or deferred infrastructure (line and substation) upgrades
Optimal use of existing grid assets, including the potential to free up transmission assets for increased wheeling capacity
Less capital tied up in unproductive assets
Improved grid reliability
Higher energy conversion efficiencies than central generation
Faster permitting than transmission line upgrades
Ancillary benefits including voltage support & stability, contingency reserves and black start capability

Combined Heat and Power in the Gulf Coast Region: Benefits and Challenges (

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By making use of waste heat created through electrical generation, a CHP system can cut a facility's fuel costs by up to two thirds.

A recent report estimates that outages cost the U.S. economy $80 billion annually, with 73% of the loss shouldered by commercial energy consumers and 25% by manufacturers.

CHP can help states achieve air quality goals because the percentage of emissions can be 33% to 50% lower than levels generated by separate heat and power applications.

CHP reduces consumption of natural gas per unit of required energy by about 40% of that used by conventional systems

The estimated costs of modernizing the electrical grid are between $50 billon and $100 billon.

U.S.-wide transmission and distribution losses were about 5% in 1970 and grew to 9.5% in 2001 due to heavier utilization and more frequent congestion.

The Barriers to CHP

Interconnection approval is slow and expensive, often requiring the same processes and studies applying to 500 MW power plants for a 5 MW CHP unit.

Although CHP is widely recognized as the only means by which to increase fossil-fired generation to support economic growth while decreasing overall emissions, CHP units have trouble obtaining emissions permits.

On-site generation systems do not fall into a specific tax depreciation category. CHP systems can qualify for one of several categories depending on configuration and ownership resulting in a depreciation period ranging from 5 to 39 years.

No national interconnection standards and procedures
Standby and backup power charges
Stranded cost-recovery charges and exit fees
Air regulations that do not recognize the environmental benefits of CHP
The process for obtaining environmental permits is not standardized and is therefore time-consuming
Complex local ordinances regarding siting, zoning, fire code, etc...
High natural gas prices
Facility managers unaware of the benefits of on-site power generation