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Building with Combined Heat and Power (CHP) Units
Today, two-thirds of the fuel used to generate power escapes as waste heat, usually through cooling towers. We now have the ability to capture that waste heat to create more electricity or to warm nearby buildings with combined heat and power (CHP) systems. CHP units generate electricity and capture the heat that would otherwise be wasted to provide useful thermal energy, such as steam or hot water, that can be used for space heating, domestic hot water, and industrial processes.
CHP systems are known for their energy efficiency and environmental benefits because the heat and power are produced on-site, eliminating efficiency losses from the power plant. They can be located at an individual facility or building or can be a utility resource or part of a district energy system but are typically located at facilities where both electricity and thermal energy are needed.
CHP is used in over 4,400 facilities across the U.S. including factories, hospitals, colleges, and commercial buildings. Because they operate efficiently, CHP systems combust less fuel to provide the same energy services. This efficient energy generation reduces various types of emissions, including greenhouse gasses (GHGs) such as carbon, criteria pollutants, and hazardous air pollutants. In addition, it can complement renewable resources such as solar and wind and allow facilities to utilize these intermittent renewable resources while maintaining reliability.
CHP and Resiliency
A 2022 report from the North American Electric Reliability Corp. (NERC) found that large portions of the country are at risk of blackouts as higher temperatures lead to more demand for energy. 44 percent of commercial and industrial companies report power losses at least monthly. While combined heat and power units are used primarily for their energy-efficiency benefits as replacements for high-efficiency water heaters or boilers, some CHP units are available with black start capabilities that allow them to provide standby power when the electric grid goes down, making them effective upgrades to a building’s power resilience.
They act as a backup source of power for a building’s electrical loads, including electricity, heat, hot water, and cooling for residential, commercial, and industrial applications, depending on the model and setup. During a grid outage, CHP systems function in “island mode,” automatically separating a host facility or microgrid from the utility grid and providing consistent power and thermal energy to the facility or facilities connected to the microgrid.
Tax Credits Under the Inflation Reduction Act (IRA)
Under the Inflation Reduction Act (IRA), the full section 48 Investment Tax Credit (ITC) will be available to qualifying CHP system property that begins construction or safe harbors before January 1, 2025. The IRS allows for three years of carry-back with the section 48 ITC. This means that if the CHP system is placed in service in January of 2025, the taxpayer could apply the ITC to their 2022, 2023, and/or 2024 tax liabilities. Some may have to apply the ITC to multiple tax years to fully monetize its value.
The base credit rate is 6%, which projects can increase to 30% by satisfying or being exempt from prevailing wage and apprenticeship requirements. The IRA provides a bonus credit of up to 10% for meeting requirements for domestic content, and a bonus credit of up to 10% for projects located in “energy communities,” which are areas currently or formerly heavily dependent on fossil energy for jobs and the tax base. These requirements cannot be used towards reaching the 30% bonus rate.
Adoption of more technologies such as combined heat and power could attract new investment to America’s industrial sector and add as many as one million high-skilled jobs. Commercial buildings will also be better prepared for severe weather.
Bacardi
In late 2023, Bacardi opened a new combined heat and power (CHP) system, with plans to cut greenhouse gas (GHG) emissions in half by 2025. This system replaces heavy fuel oil with propane and will generate 100 percent of the energy used at the campus, including for the distillery, offices, and the visitor center. Edwin Zayas, VP of Operations for Bacardi Corp. says, “We are committed to cutting our GHG emissions by reducing our energy consumption and switching to the most sustainable form of energy where we make our beloved brands. We are continuously exploring ways in which we can take more positive steps towards our ultimate goal of net zero across our sites.”
Efficient Electricity at an Affordable Price
The Southeast Propane Alliance Technical Education Center (SEPATEC) is the leading propane industry trade school for North Carolina, South Carolina, and Georgia. It provides concentrated, career-focused, and hands-on propane training to students looking to start a career in the propane industry. SEPATEC’s 10,000-square-foot state-of-the-art facility in Graham, North Carolina has classrooms and a training area called Propane Village. It features equipment and tools like electrical boards, tanks, gauges, and valves for hands-on learning.
A combined heat and power system was recently installed at SEPATEC, providing another opportunity for hands-on training while allowing the facility to generate their own power. Technically, the CHP was installed as a backup power system, but in reality, it is their primary source of electricity. The CHP is tied to a 1,000-gallon propane tank, which provides space and water heating for the entire facility. The exact run-time is dependent on the amount of electricity used, but a 1,000-gallon tank will generally provide about two months of standalone power generation. Going forward SEPATEC’s CHP unit will be a powerful training tool that also provides resilience, reliability, and affordable on-site power generation.
CHP systems have transformative potential in commercial construction. They not only enhance energy efficiency but also significantly cut down on waste heat and emissions, providing both electricity and thermal energy right where it’s needed.
