Public Policy Issues

Public Policy Issues

Although a great deal of progress has been made, significant barriers continue to exist that hinder the implementation of CHP in New York State.

Establishing Interconnection Agreements with the Utility Grid

Many CHP customers are still dependent on grid power during times of peak demand because:

  • CHP electrical generation systems are generally designed to meet a customer’s baseload needs and/or
  • Many CHP systems are sized to meet the site’s thermal load.

The sizing of a site’s generating equipment to meet a spike peak demand requirement typically would not be economically viable, as it would result in expensive generating capacity remaining underutilized for the majority of the time. Therefore, many CHP system owners elect to remain connected to the grid.

Interconnection with the local utility continues to be an obstacle that must be overcome.  It involves a number of technical, regulatory, and business practice barriers that must be settled between the owner of the system and the local utility before the system can be connected to the grid.   

When a site owner generates some of the electricity and buys the balance from the local utility grid, the cost structure of the grid-supplied power is calculated using a “standby tariff.”  Balancing the complex formulas of the standby tariff with the economics of operating an on-site generator provides a challenge for selecting the optimum size generator in order to minimize overall costs. 

Appropriate Sizing and Integration of Equipment

Equipment selection and integration dramatically affects the success of a CHP system installation. 

A CHP system typically consists of a prime mover that burns fuel and produces rotary motion connected to an electrical generator, power conditioning electronics, heat recovery components, surplus heat rejection radiators, control systems and numerous other adjuncts.  The lack of factory-integrated packaged CHP systems in a wide range of sizes necessitates extensive system engineering on a project-specific basis, which adds costs and increases the risk that mismatching of equipment could occur. 

Site-specific priorities will determine the design-basis for sizing a CHP system.  When the design objective is maximization of return on investment, sizing the system to match the thermal load may be the best choice.  However, when the design objective is establishing the capacity to carry a mission-critical electric load during a grid outage, sizing the system to match the critical electric load may be the best choice.  Furthermore, some other site-specific priorities may determine a different design basis and its associated approach to sizing the CHP system.

Siting and Permitting Issues

Siting and permitting (including building permits and environmental permits – most notably air emission permits) represent additional obstacles to the implementation of DG-CHP systems.  Air permitting issues may add cost, complexity, delay and uncertainty to the CHP development process.

Natural Gas Efficiency of CHP Should be a Policy Advantage

The predominant use of natural gas in CHP systems has led to a misconception among policy makers that CHP is an inefficient use of a costly resource.  However, a NYSERDA analysis shows that in NYS the grid-supplied electricity that is displaced by on-site generation typically comes from a natural gas fired central power plant that is less efficient than a CHP system.  The improved efficiency of CHP, compared to the central power plant, results in a net savings of natural gas.  Furthermore, the occasional use of opportunity fuels in CHP systems enhances the notion that the development of CHP systems is indeed a natural gas conservation activity.  CHP’s natural gas efficiency should be more widely understood both for clearing up confusion to obtaining an air emission permit and most importantly, to influence policy that encourages CHP integration into the marketplace. 

Societal Benefits of CHP Systems at Sites of Essential Services

Limited experience now shows that CHP systems that can run during grid outages may in fact be more reliable than traditional emergency generators.  Following the August 2003 blackout that affected large portions of the Midwest and Northeast United States and Ontario, Canada, it was reported that in New York City "Hospital patients were moved around like checkerboard pieces yesterday as about half the city's 58 hospitals suffered backup power failures during the blackout".

It can be surmised that traditional emergency generators, typically "out of sight, out of mind", may not get the regular maintenance and exercise needed to ensure their readiness during an emergency.  Or, if they do get their regularly scheduled exercise, it may not be under "heavy-load" conditions and therefore may not adequately detect possible problems.  In contrast, CHP systems, designed to run every day as a money-saving activity, routinely operate under "heavy-load" conditions and typically receive properly-scheduled maintenance routines.

Additional features (and therefore expenses) are necessary to design and install a CHP system that can run every day in parallel with the local electric utility grid (in order to save money) and also have the capability of running stand-alone during a grid outage.  When a grid power outage occurs, the transition from running grid-parallel to running stand-alone can proceed through one of two different formats:

  • the "break-before-make” format involves the CHP system shutting down upon detection of the grid outage, and thus the building goes dark. Then the building's main circuit breaker opens to separate the building from the grid, and finally the CHP system re-starts and powers the building without any chance of exporting electricity to the grid, while utility restoration workers are handling wires. The building may remain dark for a few minutes during this transition; or
  • the "seamless transition/flicker-free" format enables the CHP system to keep running upon detection of the grid outage, and thus the building does not lose power at any time.

The seamless transition format, the more-expensive option, may prove to be of greatest importance to certain mission-critical operations.  Extra equipment, and therefore extra expense, is needed to enable a CHP system to operate in both grid-parallel and stand-alone mode. For example, just like an automobile needs a car battery to help start the engine, a CHP system needs a battery pack to help re-start during a grid outage (referred to as "black-start" capability).

CHP systems providing secure power at sites of essential public services, such as hospitals, police stations, etc. and places of refuge, such as evacuation shelters, have exceptional societal benefits; helping to maintain order and deliver critical services during natural and/or man-made disasters.  Furthermore, CHP systems providing secure power at private buildings also have societal benefits since those building occupants can fend for themselves and not place demands on sparse government services during times of disaster [PDF].

Last Updated: 07/01/2014