Combined Heat and Power Microgrids: Ready for a Renaissance?

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combined heat and power

Bob Fesmire, ABB

ABB’s Bob Fesmire describes a coming renaissance in combined heat and power microgrids — one that utilities may find it’s better to join than oppose.

Most microgrids operating today—the commercial variety at least—began life under a different name, ‘combined heat and power’ or CHP. This was for the simple reason that a generator, typically a gas turbine, was used to generate power and the waste heat was captured either for an industrial process or to warm the offices. ‘District heat’ systems work on the same principle but spread their warmth across entire city blocks.

In all the hoopla surrounding the extension of the investment tax credit for solar and what it might do to microgrid development going forward, it’s easy to forget that CHP systems already had a business case that didn’t involve government subsidies. With gas prices at historic lows—and no sign of an increase in sight—CHP becomes even more attractive.

CHP systems are highly efficient, often converting over 80 percent of the input energy to either heat or electricity. Anything that involves burning hydrocarbons is going to produce greenhouse gas emissions (among other things), but at efficiencies like that CHP is downright green compared to traditional coal- or gas-fired generation.

As utilities grapple with reducing emissions and increasing the share of renewables on their networks, they may find that it’s better to join the microgrid trend than to oppose it. Residential markets aside, utilities typically have a good grasp of their industrial customers’ concerns since they account for an outsized share of company revenues. They could use their incumbent position to market microgrid-related services (design, engineering, installation, even operation) to those customers.

This may seem like cannibalization, but if the choice is ultimately between building a steel plant’s microgrid or watching someone else do it, clearly the former is preferable. The revenue from commodity power sales is going away in either case.

Obviously there’s more to the story, particularly with regard to regulation, but the convergence of low fuel prices, advancing control technology, declining energy storage costs and a renewed emphasis on reliability could mark the beginning of a CHP renaissance.

Bob Fesmire is a strategic communications manager at ABB in North America, based in Cary, North Carolina. He’s written more than 100 articles and white papers on a variety of topics including smart grid technology, energy efficiency and industrial automation. He is the co-author of Energy Explained, a non-technical introduction to all aspects of the energy industry, and currently working on an introduction to power generation for the lay reader.

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  1. Mr. Bob Fesmire I would like to expand our CHP opportunities in the Wabash Valley, Indiana, and Illinois, however we have run in to a little opposition, It seems that our local G&T operator Hoosier Energy has NO room for a interconnection, We are in the pre-planning stages and thought it might it may be helpful to get someone else involved, do you have any ides ?
    Maverick Energy is a small family owned mom-and-pop company we are trying to make the transition into a cleaner energy production environment. Keep up the good work your articles are very helpful.