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Big benefits and rapid returns with combined heat and power

By McKenzie Roberts and Deborah Nabaloga
Shopping Mall At Night

Improving asset value, lowering operating costs, and increasing tenant satisfaction is the trifecta of property management goals. Maintaining optimal building operations is not only key to tenant comfort and productivity, but it also improves energy efficiency, reduces utility costs, and decreases carbon emissions. Combined heat and power (CHP), or cogeneration, is one form of technology that is able to hit the mark on all of these needs. For decades, property managers have been privy to the benefits of utilizing CHP to provide electric and thermal energy to buildings. The ability to simultaneously and efficiently produce electric and thermal energy from a single on-site fuel source can provide myriad energy efficiency, operational, and resilience benefits by keeping the lights and the air conditioning (or heating) on when/if the power grid goes down.

How CHP works

CHP systems can achieve efficiency gains of around 75% over conventional production methods, which translates to lower operating costs and reduced emissions.
The power used by most commercial buildings comes from the public grid, with an on-site water heater and a boiler or furnace providing heat. CHP is a type of distributed generation that provides a way to meet the same needs with greater efficiency, using less overall energy and reducing peak demand. CHP technologies can produce both electricity and heat (used for facility heating and cooling) from a single source at the point of consumption through a single process (Figure 1). This single source is a prime mover, such as a reciprocating engine or turbine, which then drives a generator. Capturing the waste heat to provide useful thermal services consumes less fuel than producing power and heat separately, and, on average, CHP systems can achieve efficiency gains of around 75% over conventional production methods, which translates to lower operating costs and reduced emissions. Heat from the prime mover is recovered by a heat exchanger to be used for cooling with an absorption- or steam-driven chiller, or thermal applications such as high-pressure steam, domestic hot water, or sterilization.

CHP systems vary by size and type, from large industrial and utility-scale systems to smaller package systems that are more applicable to residential uses. Traditionally, this technology has been thought of as appropriate only for very large applications. In recent years, however, a broad range of designs have come online, making CHP a viable application for a range of commercial facilities. The high efficiency and low operating costs coupled with competitive fuel prices are also influencing the adoption of CHP, and these systems currently make up about 8% of generating capacity in the U.S. The primary fuel used in CHP systems is natural gas; however, a wide range of energy sources, including biomass and biogas, can also be used to operate the systems. CHP also supports the deployment of solar and wind resources. Optimizing renewables with CHP ensures low-carbon, reliable, resilient on-site energy.

Why CHP?

The many positive facets of CHP, including enhancing resilience, reliability, and energy savings, are resulting in renewed market and policy interest. Much of the recent CHP installation growth can be found along the eastern and western coastlines of the U.S. and may be attributed to the adoption of CHP and distributed energy incentives and grant programs. This includes a federal investment tax credit, an increase in local utility and state financial incentive programs, and intrastate system interconnection standards. In addition, a variety of mechanisms leveraging private financing, including loans, leases, and specialty financing programs such as Property Assessed Clean Energy (PACE), are available to improve the value proposition of CHP and overcome barriers to investment and access to capital. The Department of Energy (DOE) has developed an online tool, the Better Buildings Financing Navigator, to help organizations find financing solutions for energy efficiency projects, including CHP. This tool also allows users to search for regionally available CHP policies and incentives and can help match end users with solution providers.

Weathering the storms

As extreme weather events are becoming more common, the frequency and cost of grid outages are also increasing. The U.S. has experienced 16 weather/climate disaster events with losses exceeding $1 billion as of October 2020, and the average number of such annual events continues to climb. CHP technologies are designed to operate 24/7 and can help buildings weather the storms by running in parallel with the primary grid and providing uninterrupted electricity to critical infrastructure during power outages. As a reliable source of energy before, during, and after these times of need, CHP decreases the threat of costly financial, health, and safety risks associated with a power outage, often meeting payback thresholds during the first outage event. Comparatively, some on-site generators are not tested on a regular basis and may have limited fuel supplies that need to be replenished.

The Matosantos food processing facility in Puerto Rico, which operates a 2-megawatt CHP plant in Vega Baja, is a recent example of such benefits. Using propane gas and, more recently, methane from an anaerobic digester, the plant has operated without interruption since 2015, even when Puerto Rico’s entire power grid went down in 2017 during Hurricane Maria.

CHP provides a unique value proposition for commercial buildings, as the technology supports sustainability and greenhouse gas emission reduction goals, improves resilience with shelter-in-place benefits, and reduces costs. For example, hospitality and multifamily facilities are attractive CHP candidates because of the combination of constant thermal and electricity loads, power reliability needs, and higher energy costs. Additionally, CHP systems on these sites will not need to be limited to match on-site power needs because the thermal load will rarely exceed electric demands. These sites will not typically export power, but rather, during hours of operation, often require supplemental electricity.

For example, take the Michelangelo Hotel, a 178-room facility located in a historic building in the heart of Manhattan. Funding from the New York State Energy Research and Development Agency combined with energy cost-savings resulted in an attractive economic payback for the 265-kilowatt (kW) CHP installation. Installed in 2017, the CHP plant will also reduce the carbon footprint of the facility and keep the hotel online during brownouts, blackouts, and extreme weather.

Schmidt Artist Lofts in St. Paul, Minnesota

Another example of investing in CHP for cost savings and resilience is the Schmidt Artist Lofts in St. Paul, Minnesota. This project was an adaptive reuse of the historic Schmidt Brewery, converting the building to 247 apartments and retail space. Heating the apartments is a small-scale, 65kW natural-gas-fueled microturbine that also produces electricity. In use since 2014, this compact unit was easily installed and has improved power quality through inverter-based generation, keeping the building’s residential tenants warm during the cold St. Paul winters. Many of these package systems are advantageous to commercial facilities because they provide a higher return on investment for smaller sites, and several even come with standardized maintenance contracts, which reduces the risk for end users.

Future opportunities

Commercial facilities have a number of qualities that make them ideal candidates and are part of a fast- growing market for new CHP installations. But, although scalable, it may not the best fit for all properties. The DOE has been leading the effort to assist with the adoption of CHP in order to improve facility resilience and reduce operating costs through the Combined Heat and Power Technical Assistance Partnership (CHPTAP) regions. CHPTAPs are available across the country to work with end users to provide no-cost technical assistance to property managers and determine if CHP is a good fit for their facility, all in addition to providing tools, resources and lessons learned for property managers. As businesses look to reduce greenhouse gas emissions and improve energy reliability, efficiency, and safety, the versatility of CHP systems can play a major role in helping meet those energy challenges.

the Journal of Property Management staff

McKenzie Roberts is an energy and environment research assistant with the Houston Advanced Research Center (HARC). She is also a key member of the U.S. Department of Energy’s CHPTAP program.
Deborah Nabaloga

Deborah Nabaloga is an energy, climate, and policy practicum associate with HARC, through which she is a member of the U.S. Department of Energy’s CHPTAP program, providing regulatory analysis and qualitative research.

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