water -- and its electrical energy needs at a
lower collective heat rate than when compared to rates from separate processes.
This more economical heat rate equates to
lower emissions and operating costs. Additionally, the on-site electrical capacity
can reinforce reliability, mitigating damaging losses from compromised power
quality or sustained power outages.
In exchange for these benefits, the CHP
facility owner must divert its capital to
build a potentially complex thermal and
electrical system, which is sometimes
tangential to its core business. It must operate and maintain this system over the
long term, taking on new forms of risks,
such as embedded fuel purchase contract
arrangements, emissions abatement controls, and fuel quality considerations.
Because CHP can deliver electrical
services to the grid in the form of ca-
pacity, energy and/or ancillary services,
(DER)-dominated future. Regulators
aiming to recast distribution utility mar-
ket functions want to ensure that CHP is
afforded the full benefit of the services
that it can provide to the grid. For exam-
ple, a well-placed CHP facility might al-
leviate a local distribution system power
flow constraint, or alleviate the need for
upstream incremental generation.
CHP is also gaining traction for its potential role in improving the resilience of
critical infrastructure, particularly if part
of a well-designed microgrid. The need to
bolster resilience has grown due in part to
major outages caused by natural disasters, such as those following Hurricane
Sandy on the U.S. east coast in 2012.
Those looking to expand DER opportu-nities,including CHP, are attempting to
find ways to incorporate benefits such
as resilience into the monetary benefit stream, further incentivizing these
largely private investments.
Despite the promise of these benefits,
CHP often represents challenges for the
host interconnecting utility if not planned
well. Most pressing is the fact that the
CHP operation may reduce utility revenues. This, in turn, could reduce anticipated fixed cost recovery, and introduce the
need to spread uncollected costs across
the remaining distribution system customers. However, this change in cost recovery is not guaranteed, and under most
recovery mechanisms and rate structures
there is a time lapse before it can be conceivably achieved. Additionally, the utility may also incur unrecoverable costs to
interconnect and accommodate the CHP
Another aspect of the challenge is the
reality of how the CHP operates as compared to forecasts and plans - there are no
guarantees that once interconnected, the
CHP will operate indefinitely, or as forecasted. It may not provide the net energy
dispatch that was anticipated, and it may
require additional service from the utility
to serve additional load or support facility
reliability. There could also be changes to
voltage and power quality on the local circuit (if not served off the primary system).
In the case of the Reforming the Energy
Ajay Kasarabada is a CHP Solutions
Manager and Project Manager in the
Distributed Generation Service Area
within Black & Veatch’s Power Division. Andrew Trump is a Director in
Black & Veatch’s management consulting business.
Black & Veatch designed, built and maintains an
award-winning microgrid installation at its World Headquarters in Overland Park, Kansas. The microgrid’s combined
heat and power system employs two natural-gas-powered
microturbines that produce a total of 130k W of electricity.