Global Developments Giving CHP a Much-Needed Boost
According to the International Energy Agency (IEA), global power production from combined-heat-and-power (CHP) technologies has stagnated since 2000, lagging far behind growth in conventional power technologies and commercial heat generation. Despite having an average efficiency of 59%, CHP's share of global generation in 2013 stood at just 9% (Figure 1), the bulk of it at industrial sites in the chemicals, metal, oil refining, pulp and paper, and food processing sectors (see this issue's cover stories).
1. Co-generation trends. Source: International Energy Agency (2016), Tracking Clean Energy Progress 2016, OECD/IEA, Paris
That may be poised to change, however: Along with the Paris agreement and a renewed drive for increased energy efficiency, a number of countries have of late implemented policy initiatives that could spur growth for CHP.
U.S.In the U.S., where CHP has a long history in the industrial sector, several market drivers are emerging, the Department of Energy noted in an April 2016 report. These include lower energy operating costs, environmental regulations, resiliency initiatives, utility support, and project replicability (for more, see "CHP Update: Policies, Partnerships, and Challenges" in POWER's February 2016 issue). Recent policy initiatives on a federal level include a 10% investment tax credit for CHP. In August 2012, meanwhile, President Obama issued an executive order creating a goal to add 40 GW of new CHP capacity. Many states have also issued policies to encourage CHP growth. The long list of measures (which can be found in a database curated by the Environmental Protection Agency at http://bit.ly/2iLnszC) include electric rates, feed-in-tariffs, grants/rebates, loans, portfolio standards, production incentives, energy plans, and tax incentives.
European Union (EU). CHP thrives in the EU, generating about 10.5% of electricity and 15% of heating in Europe. But according to the European Commission (EC), increased cogeneration could lower greenhouse gas emissions within the EU by up to 250 million metric tons by 2020, and small cogeneration facilities could easily supply energy to remote areas without the need for expensive grid infrastructure. The executive body for the EU in November 2016 issued a pivotal package that renews the bloc's commitment to energy efficiency and introduces provisions that could enable member states to create new opportunities for the CHP sector or reward the added value of cogeneration. Yet, according to the European Association for the Promotion of Cogeneration, the EC could do even more to encourage CHP, such as tackling lengthy grid connection times for CHP installations, which "remains a barrier in many member states," it said in November. Incentives should also reach biomass CHP plants smaller than the proposed 20-MW threshold. In addition, it urged, "It is" important that the security of heat supply is one of the main criteria when grid access rules for industrial CHP (i.e. priority of dispatch and priority access to the grid/curtailment) are decided."
China. China, which has struggled to manage endemic air pollution in major cities, is pursuing active programs and strict regulations to lower emission levels and increase energy efficiency. A specific rule calling for companies in industrial capitals to switch off and replace coal-fired boilers before 2018 has prompted a number of companies to replace coal plants with gas-fired CHP systems. In January 2016, for example, MAN Diesel & Turbo put online a CHP system for the SAIC Volkswagen Automotive Co. in Shanghai. Beijing's recently shuttered coal plants have also reportedly been partly replaced by four CHP plants.
Japan. Interest in cogeneration in Japan kicked up in the wake of the 2011 Tohoku earthquake and tsunami under stricter government energy-efficiency mandates and proposed carbon dioxide reduction goals. Japan's CHP sector is gaining ground because it provides distributed energy resources that can help prevent and mitigate disasters. In 2015, the Japanese government set goals to raise CHP generation to 119 billion kWh by 2030.
Canada. In 2015, Canada had about 9.5 GW of installed cogeneration electric capacity, nearly half (4.5 GW) of which was installed in Alberta for use in oil sands and petrochemical operations. Cogeneration expansion has increased in tandem with oil sands production, and Alberta's Electric System Operator expects it will continue to do so, rising to 5.3 GW by 2022. Cogeneration in other provinces is commonly produced by utilities and paper and wood product makers.
Mexico. Mexico's launch of a wholesale market with retail competition as part of a wide-scale reform of its power sector is also provoking interest in CHP projects (for more, see "Mexico Makes Rapid Progress on Energy Reform" in the January 2017 issue).
Other Countries. Increasing renewable energy projects along with falling gas prices and supportive government policies to incentivize projects and replace aging infrastructure in Asia Pacific and Latin America are expected to drive CHP equipment demand in the near future.
-Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)
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