Figure 4. District Energy Fuel Sources, United States, 2006.
Sources: Energy and Environmental Analysis Inc. and IDEA, District Energy
Services: Commercial Data Analysis for EIA’s National Energy Modeling System,
August 2007; unpublished surveys by IDEA, 2003-2009.
Natural gas 77%
5% Oil
3% Biomass & other
15% Coal
Figure 5. Current Sources of District Heat, United States, 2006.
Source: Energy and Environmental Analysis Inc. and IDEA, District Energy
Services: Commercial Data Analysis for EIA’s National Energy Modeling System,
August 2007; unpublished surveys by IDEA, 2003-2009.
77% Heat-only fossil fuel boilers
Renewable energy 3%
CHP 20%
Figure 6. Potential Sources of District Heat in the United States in 2020 With Supportive Policies.
producing only heat) are only 0.25 metric
tons of CO2 per MWh of electricity generated. In contrast, a coal-fired merchant
power plant emits about 1. 11 metric tons
CO2 per MWh. The additional cost of
allowances for the CHP system would
equal 15 percent of the average 2007
wholesale power price ($57 per MWh) at
the $16 per metric ton allowance price
projected by EPA for 2020. In contrast,
the merchant coal plant will have a greenhouse gas allowance cost of only 5 percent
of the average 2007 wholesale power
price because allowances will be allocated
for nearly all (83 percent) of its emissions.
Faced with this significant competitive
disadvantage in the marginal cost of power
generation, some existing CHP facilities
will shut down, and construction of new
CHP systems will be choked off.
The exemption threshold for CHP should
be raised to at least 90 MW with efficiency
standards but no restrictions relative to
sales. This will help enable almost all campus CHP potential to be realized and cover
an estimated 60 percent of commercial
utility CHP potential. Commercial district
heating systems, especially those without
integrated district cooling systems, typically
have very little internal power demand, but
their heating load can support a substantial high-efficiency CHP power generation
capacity.
Source: FVB Energy Inc. analysis.
Heat-only fossil
fuel boilers 31%
percent of commercial utility CHP production.
Policy makers must remember that the
environmental benefits of CHP are unrelated to size; in fact, the larger CHP systems
generally provide relatively more greenhouse
gas reduction. Nor does the particular
contractual arrangement for electricity sales
have any relationship to greenhouse gas
reductions. Further, the exemption provision
does not address efficiency, which is the
key driver for achieving the goals of the
41% CHP
28% Renewable
energy
overall legislation: greenhouse gas emission reductions.
Except for “qualified cogeneration
facilities,” as narrowly defined in the Federal
Power Act, CHP plants that have a direct
compliance obligation but do not receive
allowances will be placed at a significant
competitive disadvantage.
For example, the marginal emissions
of a combined-cycle gas turbine CHP (i.e.,
the additional emissions compared with
The exemption threshold for
CHP should be raised to at
least 90 MW with efficiency
standards but no restrictions
relative to sales.
Renewable Electricity Standard
In addition, other pending legislative
provisions for a Renewable Electricity
Standard should ensure appropriate recognition for energy savings from CHP. Both
the climate bill passed by the House, the
American Clean Energy Security Act (the
Waxman-Markey bill), and the American
Clean Energy Leadership Act (ACELA)
introduced in the Senate recognize the
ability of CHP to contribute to energy savings by identifying CHP as a means of
compliance with the Renewable Electricity
Standard. However, the Waxman-Markey
