Federal Government Should Fund CHP Energy Systems
By Robert Henry Weaver '13
Amherst has reduced its greenhouse-gas footprint by about 20 percent with the construction of a new cogeneration plant, which is expected to save $500,000 a year. The plant generates about 67 percent of our electricity and supplies 30 percent of our heating. More than the napkin dispensers in the dining hall or the fragrant soy-based salt substitute on the sidewalks, this investment represents a significant commitment on the part of the College to a more sustainable campus. But what is cogeneration? And why will it make a difference?

In a district energy system that uses cogeneration, or combined heat and power (CHP), one or more central plants provide the heating, cooling and even electricity needs of a community or institution. Over two-thirds of the energy consumed in the United States for generating electricity is wasted, mostly as unused heat going into the atmosphere. A district energy CHP system uses these large quantities of waste heat to produce steam or hot water that is then transported through a network of pipes to individual buildings, increasing efficiency to as high as 80 percent.

Today in the United States, about nine percent of total electricity production is from CHP systems. If we increased that figure to 20 percent by 2030, we would block the release into the atmosphere of more than 848 million metric tons of carbon dioxide annually and create 936,000 jobs in communities across the nation.

The United States already has about 2,500 operating district energy schemes, but they are mostly limited to institutions such as our fair College and downtown areas. (Have you ever seen steam floating out of a manhole cover in a big city?) Communities lack credit, and banks remain reluctant to lend money, especially for a project that could take up to a decade to pay for itself. In order to encourage the expansion of district energy into local communities, the federal government should create a loan fund that offers low-interest financing for the construction of district energy CHP systems.

Denmark provides an excellent example of the technical and economic viability of cogeneration. During the 1990s, the Danish government completely overhauled the country’s energy system, establishing local energy districts that incorporated CHP along with solar thermal and wind power. Over the past 30 years, Denmark’s gross domestic product has doubled while its energy use has remained stable. And Amherst is by no means the only example of a successful project in the United States. MIT has reduced its emission by 45 percent with the construction of a 21-megawatt CHP plant.

Congress has already created some incentives for cogeneration. The Energy Improvement and Extension Act of 2008 added CHP to the list of alternative energy sources that receive a 10 percent tax credit, and the American Recovery and Reinvestment Act provided a limited amount of funding for new projects. A loan program could build on the success of previous efforts to accelerate dramatically the development of district energy systems in the United States.

A pool of money to finance these projects is not without precedent. Such a fund could be modeled on the Advanced Technology Vehicles Manufacturing (ATVM) Loan Program, which the Energy Independence and Security Act of 2007 created to promote the development and production of new, cleaner automobile technology. The Department of Energy solicits applications and selects recipients based on the potential of the technology and the financial viability of the company. The loan must be repaid within the projected life of the project or 25 years, with the possibility of deferring payment for up to five years and a fairly low interest rate. Congress originally appropriated 25 billion dollars for the program, and a continuing resolution in late 2008 has allowed lending to continue.

The price tag for district energy projects ranges from under a million dollars for very small systems to 150 million for the most extensive. An appropriation comparable to that for the ATVM program could finance hundreds of new projects, allowing communities across America to move quickly in implementing new systems. The benefits will be numerous. Economically, district energy CHP is, in the long run, a dependable investment that will save money, especially as the economy recovers and fuel costs begin to rise again. Environmentally, district energy CHP is a simple and easy way to reduce energy consumption and consequently greenhouse gas emission. Socially, a new surge in district energy construction could create hundreds of thousands of well-paying jobs. Indeed, the American Clean Energy and Security Act of 2009 lists CHP technology as one way to increase the flow of capital into low-income communities.

Many parties must come together to realize a new district energy system. The major discussions between stakeholders — customers, local government, utility companies and developers — must take place on a local level. One of the strengths of district energy solutions is that they can be tailored to the needs and assets of a particular community. By extending loans targeted to district energy, the federal government can ease the credit crunch and realize the potential of a practical, feasible energy solution.

Issue 13, Submitted 2010-02-02 23:51:11