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Why Add CHP to Your Energy Management Strategy?

As today’s facility managers know, the energy landscape is constantly changing.  We function in a marketplace characterized by volatile electricity prices, an increased frequency of severe weather events exposing grid vulnerabilities, and an emerging focus on reducing the environmental impact of our energy sources.

In this environment, property managers are increasingly on the lookout for the best available energy management techniques. These marketplace conditions present opportunities to tap the benefits of “Combined Heat and Power” (CHP) projects – also commonly known as co-generation -- for an array of commercial building types. Co-generation is an integrated system of power production that harvests heat generated during the production of electricity.  The process then utilizes this heat, which would have otherwise been wasted, to efficiently deliver such benefits as space heating and domestic hot water.

CHP offers building owners, operators and developers a capital investment opportunity that can help shield their buildings from unpredictable energy costs, reduce carbon emissions, and provide the benefit of energy security and resiliency in the event of grid disruption.  Incentives to introduce CHP – which come as part of “demand response” and their related programs -- are offered in a number of states, including New York, Texas and Massachusetts, to name only a few.

To better understand the potential savings available through CHP, consider a hypothetical example of an approximately 1.2-million-square-foot, Class-A office building in New York City.  Let’s say the owner had invested about $3 million in upfront costs for a CHP system, plus a backup generator to provide energy security and resiliency in the case of potential grid disruptions.  This hypothetical owner would achieve annual cost savings from CHP and incentive-related income from demand response programs of approximately $250,000-$450,000. Additionally, more incentives may also be available from regulated utilities and other energy providers. Learn more about CHP options in your area with this resource from the EPA.

Once activated, co-generation delivers the means to lessen overall demand.  As a result, energy providers are in a superior position to reduce stress on the state’s grid.  Reduced demand lowers the need for system-wide expansion that might otherwise be required to serve the ever-growing peak usage levels that would be required by end-users.

Investments in CHP have the potential to quickly pay for themselves.  Based on traditional fuel price forecasts, the payback period for an upfront investment in a CHP plus back-up generator system can be in the range of four years, a short payback period in the world of energy investment.  Once an owner reaches that point, all energy savings would help directly reduce the property’s bottom-line operating costs for a virtually unlimited period going forward.  Plus, the building would benefit in multiple ways from having back-up generation capabilities it didn’t possess before. An array of low-interest financing options and a growing trend towards rewarding efficiency in the energy marketplace make CHP and backup generation a promising investment for building owners and operators and the benefits rise significantly in regions offering demand response and related incentives.

CHP is a sensible investment for mid-size to large commercial property owners.  Business owners interested in implementing such a strategy are able to work with a qualified energy service company – particularly one accredited by the National Association of Energy Service Companies (NAESCO) -- to devise a CHP initiative best suited and individualized for their specific property.

Robert Torre is Director of Operations for ConEdison Solutions - an energy services company serving commercial, industrial, residential and government customers.

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