Combined heat and power systems make sense: Capture the thermal energy from electricity production and use it for space heating, cooling and hot water. The concept’s simplicity has long made it a staple in institutional power and heat generation.
Now, in the midst of low natural gas prices, sustainability missions, surging superstorms and technology improvements, gas utilities are leveraging CHP to get into offices, homes and other markets that are demanding cost savings, energy efficiency and resiliency.
“When you get that correct load profile of electric and thermal use, the economic value proposition of combined heat and power is outstanding,” said Robert R. Stoyko, vice president, customer relations, UGI Utilities. “The icing on the cake is the sustainability and the reliability.”
Gas utilities are finding that CHP folds naturally into their current roles as energy facilitators. CHP systems utilize natural gas or other fuels to power engines or boilers that turn generators and, in turn, produce electricity. The resulting thermal energy doesn’t dissipate but, instead, converts to provide heating, cooling and hot water. Efficiencies can reach 80 percent, compared to 50 percent for traditional technologies, according to the U.S. Environmental Protection Agency.
“Our CEO recognized that natural gas is only a small piece of an energy equation for a homeowner or business,” said Jeffrey S. Nehr, vice president of development at Peoples Gas. “How do we become more involved with customers in providing energy solutions?”
A combination of forces is driving the CHP upsurge, say gas company officials:
Sustainability: At Pennsylvania-based UGI, a three-pronged sustainability goal strives to lessen climate impact, reduce customers’ energy usage and invest in environmentally friendly alternatives. “When you think about CHP, it can impact all three of those strategies,” said Stoyko.
National Grid is pursuing a strategy to reduce greenhouse gas emissions 80 percent below 1990 levels by 2050. A micro-CHP strategy targeting numerous small buildings “supports climate-change policies and also tries to do something that is good for customers because, ultimately, customers pay the bill,” said Principal Program Manager Christopher A. Cavanagh.
Resiliency and redundancy: With lessons learned from such obliterative forces as Hurricane Sandy, resiliency joins the list of CHP’s benefits. For customers seeking the assurance of backup power, CHP can provide designated kilowatts “indefinitely, as long as there’s gas there,” said Cavanagh.
Some commercial customers “specifically choose CHP because they need reliability 24/7,” said Stoyko. “It’s part of an outage-management strategy.” One UGI customer, a casino, chose CHP to prevent losses from flash outages that would, without backup power, force its machines to reset.
Financial institutions also need uninterrupted delivery of essential services, noted Peoples’ Nehr, and for hospitals caring for patients, it’s a necessity.
With stability that’s “much, much greater than the electric grid,” some cities are also applying CHP toward “pockets of energy as an anti-terrorism measure,” added Peoples Manager of Community Affairs Barry Kukovich.
Cost savings: Harnessing the energy efficiency of CHP with low natural gas prices delivers measurable savings—enticing to existing and new customers alike.
UGI turned those cost savings to its own advantage with a CHP system in its new headquarters. “When looking at current and projected energy prices, CHP creates great economic value propositions for customers and, frankly, for us in our own facilities,” said Stoyko.
At National Grid, some micro-CHP models predict residential energy cost savings of $2,000 to $3,000 a year. The gentler energy usage is also good for utilities, helping manage peak electric load and flatten gas load. “This is the ideal convergence,” said Cavanagh.
Then there’s the fact that when businesses are hit with blackouts, that disruption hits their bottom line. “Put a value on it,” said Nehr. “Are you willing to accept that loss of commerce on an annual basis? Or is this technology too affordable to not afford?”
Pittsburgh-based Peoples, in the heart of the Marcellus and Utica shale fields, found itself with an appealing story to tell of low, stable natural gas prices. How could the utility leverage those low prices to attract businesses to the region and support natural gas usage in their operations?
Initially, Peoples focused on hospitals, universities and government offices—“low-hanging fruit” due to such factors as aging and obsolete facilities, CHP success in their sectors, and institutional commitment to environmental benefits.
“There’s an infinite amount of opportunities here, but the core foundation is that without good natural gas prices, this is an old story that’s just being retold,” said Nehr. “With the good gas prices, the favorable spark spreads of electricity, and the fact that folks are in need of replacing their energy assets, it’s a perfect storm for business growth.”
Peoples started by weaving together networks of equipment and installation providers, said Nehr, “and then we went back to the customer and said, ‘How can we package this up to make it work for you?’
“A lot of folks don’t want to do the legwork, so we do the legwork for them and come up with packaged solutions,” he said. “We bring in engineering firms, construction firms, equipment firms and operators, so we can offer turnkey service to customers.”
Peoples finds a receptive audience for offers to “package the system in a way that we could be investor, owner and operator of the plant,” said Nehr. Customers agree to gas purchases and can hold options to carve out Peoples’ involvement or buy their plants.
Moving steam, hot and chilled water, and electricity into operations and maintenance budgets frees customers’ capital budgets for other purposes, Nehr added. “Return on investment for capital costs around the plant is the key driver for us. If we hadn’t done that, it wouldn’t have existed. You’re not going to get in their capital queue to put in plants like these.”
Peoples is now “pretty busy in this space,” with about 10 new CHP projects, ranging from 10 kW to 20 megawatts, Nehr said.
Meanwhile, at UGI, about half of its stable of 26 CHP customers have been added since around 2013. Three to five come on board annually. The key to growth is “identifying the right application,” said Stoyko.
UGI’s marketing team pores over customer data, scrutinizing load profiles and estimating electric usage. Certain types of businesses and institutions, such as hospitals and breweries, align well with CHP, said Director of Marketing Programs and Strategy Becky Eshbach. UGI’s relationship managers offer expert energy consulting, teaming with vendors to create CHP systems that deliver custom-tailored value. The company’s energy efficiency rebates provide further incentive, and Pennsylvania alternative and clean energy grants could layer on more savings.
When veteran UGI Relationship Manager Joseph Bauman met with officials from D.G. Yuengling & Son Inc.—the Pottsville, Pennsylvania-based business known as “America’s Oldest Brewery”—it was for a “pulse check on their contract and energy efficiencies,” he said. Those officials mentioned the disappointing performance of a bottling-plant CHP system they had installed.
Bauman sought data on daily operations and discovered inconsistent quality and Btu value from the methane created in the plant.
He suggested that a blended burner that would introduce natural gas into the methane would allow for continual burn. The fix was “very, very inexpensive” for the customer and didn’t sell much additional gas for UGI. But it produced “a happy cogen,” and, perhaps more importantly, a happy customer. Goodwill, Bauman said, “is what my job is.”
“My main charge is to save energy while cleaning up the environment,” he said. “The major lesson to learn is to make sure you listen to your customer carefully and ask questions.”
That includes when the customer is a little closer to home. In April 2019, UGI opened its new headquarters in bucolic Lancaster County, Pennsylvania. The office building housing 350 employees features a signature CHP system providing electricity generation and much of the building’s heating and cooling.
The plant was designed not as a utility’s dream of a facility, but as a realistic demonstration of CHP’s potential for small to mid-sized office buildings. “Just because you don’t have a swimming pool or laundry or are a huge user of thermal load, it doesn’t preclude you from building a viable business case around CHP,” said Stoyko. “We wanted to show to architects and engineers developing similar buildings the real-world application that wouldn’t have jumped out otherwise.”
Every technology improvement—current efforts to improve chilling, for instance—makes “the pie bigger and bigger as to the potential set of customers that can derive benefits,” he added.
If sprawling institutions are CHP’s “low-hanging fruit,” residences constitute a higher reach—but a vastly more abundant market.
Micro-CHP has potential because “the idea of generating heat and electricity in a house sequentially is not really a new idea,” said National Grid’s Cavanagh. “It’s been around for a while, but there’s never been a good technology for retail customers until now.”
National Grid started the process by researching available products, with help from the Energy Solutions Center. The search settled on four market-ready systems that the companies viewed as best suited for the Northeast. Partnerships were forged with Con Edison and NYSERDA. Customers were recruited. Systems were installed or queued up, and test data is being collected:
Cavanagh credited the New York City Buildings Department for recognizing the need for appropriate permitting for units in its territory, eliminating unnecessary costs. “This is an appliance, just like a dryer, just like a washing machine, just like a stove,” he said. “If you treat it like a power plant, the chance of it being economically viable is gone.”
National Grid sees a mass-market opportunity for micro-CHP. When Cavanagh took officials from Aisin on a site visit, he told them to look down the street. “As far as the eye can see, there are buildings that looked exactly like the building they just walked out of, so there’s your market,” he said.
Gas utilities see a bright future for CHP. In fact, Peoples has initiated a partnership with WATT Fuel Cell, a Pittsburgh-area manufacturer, to begin installing and testing residential fuel cells.
The utility is also “in the infancy” of exploring energy plants providing electricity, hot and cold water, and emergency generators for self-contained areas, such as new mixed-use developments. Developers approached so far hesitate to become permanent owners of central plants, but with strong savings on initial construction costs, “sooner or later, a developer will come up with a solution,” said Nehr.
Some challenges remain. Peoples, for instance, is working with potential industrial users, trying to bring the spark spreads that measure efficiency of gas-to-electric conversions into advantageous ranges.
Still, in a world focused on energy efficiency, cost savings and resiliency, CHP is finding its place. “It’s pretty straightforward technology, and it’s not something to be afraid of,” said UGI’s Stoyko. “It might be different from the standard, but the standard is an evolving thing.”
The Right Niche for CHP
While there might be many instances of “low-hanging fruit,” utilities can also look for areas of unique needs where CHP can provide a solution.
One of Peoples Gas’ latest initiatives is Food21, which connects energy resources to the Pittsburgh-region food economy in order to reduce dependence on imported food, expand the local food-business sector and strengthen the agricultural economy.
During the fourth quarter of 2019, Peoples expects to break ground on a CHP-equipped Controlled Environment Agriculture greenhouse—a type of year-round facility pioneered in the Netherlands that extracts more yield from smaller spaces but traditionally consumes large amounts of energy. CHP systems provide the low cost and flexibility needed to make CEA projects profitable and sustainable.
The agricultural application of CHP is especially symbiotic because under many growing configurations, the carbon dioxide that is created can be pumped into the greenhouse to stimulate plant growth, leading to greater production.
“We feel this project is significant not only for local job growth, but because it addresses a growing need for healthy, sustainably produced food,” said Kukovich.
Meanwhile, at UGI, Bauman knew that PepsiCo’s Gatorade plant in his territory used warm water to make product—a beverage-business rarity that ramped up hot-water needs. He connected plant officials with a company that was offering a CHP proposal, while PepsiCo’s own evaluation team “determined that CHP was a great fit for the facility.”
The two-boiler CHP plant’s 2-megawatt motor recovers hot water and generates saturated steam. The recovered hot water heats process water before pasteurization, while the steam enters the general plant steam grid.
Several factors contributed to the nearly $3.5 million project’s viability and five-year payback:
The project produced wins all around, including a significant contribution to PepsiCo’s goal of reducing greenhouse gas emissions 20 percent by 2030. “We maximized their efficiency while allowing them to maximize their savings, and at the same time we increased our own margin,” said Bauman.