On December 8, 2005, a 43-page report "Combined Heat and Power White Paper" was presented to, and accepted for further consideration by, the Clean and Diversified Energy Advisory Committee of the Western Governors' Association (WGA).

Combined Heat & Power (CHP) refers to any system that simultaneously or sequentially generates electric energy and utilizes the thermal energy that is normally wasted. CHP is sometimes called “recycled energy” because the same energy is used twice. The recovered thermal energy can be used for space heating, hot water, steam, air conditioning, water cooling, product drying, or for nearly any other thermal energy need. The end result is significantly more efficient than generating electric and thermal energy separately. In the private sector, economically motivated investments in CHP by unregulated businesses now generate almost 9 percent of all power consumed in the United States at a total fuel efficiency nearly twice that of the rest of the U.S. power grid. In fact, many CHP systems are capable of an overall efficiency of more than 80 percent - double that of conventional systems.

CHP, using proven and affordable technologies, significantly improves every key outcome from power generation. In addition to tremendous efficiency gains, increased adoption of CHP in the West would save literally billions in new capital investment, reduce power costs, reduce security vulnerabilities, improve reliability and power quality, avoid transmission losses, reduce water used by power plants, cut fossil fuel use, cut greenhouse gas emissions, and cut other pollutants. One generalized estimate is that CO2 emissions associated with CHP systems are 49 percent lower than centralized power generation.

Furthermore, by increasing energy efficiency, CHP reduces annual emissions of criteria pollutants, such as nitrogen oxides (NOx), sulfur dioxide (SO2), and particulate matter, compared to separate heat and power systems. The level of reduction depends on the CHP system (i.e., the primate mover and fuel used) and what electrical and thermal sources it is displacing.

Thus, CHP is an affordable, efficient, clean, and reliable piece of the puzzle for meeting the Western region’s energy needs.

Compared to central station resources, CHP can be installed far more quickly and on an as-needed basis, better matching the resources to the load. CHP project developers estimate that a typical CHP project in most Western states takes 2-3 years. This includes 1-2 years for the sales process, site surveys, and engineering and design studies, and another 8 months to a year for construction, installation, interconnection procedures, and commissioning of the CHP system. Furthermore, CHP systems do not have to wait for adequate transmission capacity to be installed, since most CHP owners use all or most of the power they produce for their own facilities.

Notwithstanding the multiple economic and environmental benefits of CHP, the report finds that the existing CHP capacity in the 18-state (plus three territories) WGA region is still far below its technical and economic potential. As of 2005, the WGA states had approximately 33,304 MW of CHP at 1,262 sites with 78 percent of the existing installed capacity concentrated in just two states - Texas and California. The additional technical potential in the WGA states is estimated to be 42,864 MW. (It should be noted, however, that this is a first-cut estimate that does not reflect further economic screening.)

The WGA has set a goal of adding 30,000 MW of new, clean, and efficient capacity by 2015. Consequently, CHP has the technical potential to exceed the entire WGA goal of 30,000 MW all by itself.

Compared to the existing installed CHP base, about half of the additional potential capacity in in applications that are 5 MW or smaller. Commercial and institutional sectors such as hotels, hospitals, colleges, schools, office buildings, prisons, and nursing homes all have strong market potential for adoption of CHP in Western states. Since CHP facilities are relatively small, distributed widely, and do not offer high-profile targets to potential terrorists, they represent an ideal form of energy from an energy security point of view.

Unfortunately significant CHP development opportunities have been lost of the past 15 years due to major policy and regulatory barriers. In spite of supportive federal policy directives and guidance, many state utility commissions lack the resources to incorporate CHP policy objectives into the diminutive of utility rate filings, docketed hearings, and other tasks that necessarily shape their day-to-day agenda. Their mandate is typically to interpret and enforce existing law rather than the consider larger issues of energy and environmental policy.

Compounding this resource limitation is the fact that electricity utilities typically perceive CHP as a competitive threat, to the extent that it reduces their electricity sales and hence, their revenue. Unreasonable interconnection policies, standby rates, and demand charges often stem from this conflict. This combination has slowed, and in some cases, prevented deployment of CHP in most Western states, in spite of its beneficial impact on the grid, environment, and economy.

The report concludes that long-term, stable CHP policy and regulatory changes are needed to increase deployment of CHP systems. Among the recommendations it puts forth are the following:

* Each state should understate a thorough review of policies affecting CHP and incorporate policies that will appropriately promote CHP in state utility plans for Least Cost Planning and Integrated Resources

* Give fair credit for CHP emissions reductions by adopting output-based emission standards and greenhouse gas market-trading networks

* Undertake a review of electricity rates, including standby rates, to make sure they are not discriminatory toward CHP

* Ensure renewable portfolio standards, environmental portfolio standards, advanced energy portfolio standards and other renewable energy laws include the full range of renewable CHP options, including waste heat recovery and spent pulping liquor.

The full report can be found at:

http://www.westgov.org/wga/initiatives/cdeac/CHP-full.pdf