Blue Sky Power

Combined Heat and Power (continued)

A combined heat and power (CHP) system employs multiple technologies to maximize the capture of energy produced by an engine or turbine, also known as the “prime mover.” Much of that energy is transferred into a generator and becomes electricity. Other energy given off by the engine or turbine is heat that’s captured by a recovery unit. It is then used to heat water or for building air temperature control.

Examples of commercially available CHP systems:

  • Gas turbine
  • Microturbine
  • Reciprocating engine (diesel or natural gas)
  • Steam turbine
  • Fuel cells

Each kind of CHP system has particular advantages and disadvantages, including the costs to install, operation and maintenance costs, production capacity, efficiency, noise and base fuels that can be used. A CHP system can be fueled by traditional fossil fuels such as natural gas or oil. It can also be fueled by biomass feedstocks, including digester gas from wastewater treatment systems, landfill methane, crop and manure biogas and even food processing residues.

The energy efficiency of all five types of these systems far outpaces the efficiency of any traditional, stand-alone heat or power system. By capturing more of the energy that’s created by the fuel being harnessed, less fuel is used. Institutions that install a CHP system can see their total energy costs cut by a third or more because while their energy needs haven’t decreased, less fuel is required to satisfy those energy demands.


The blackout that struck parts of six Northeast and Midwest states and Canada in August 2003 offers evidence of how CHP systems can allow institutions and businesses to continue operations for hours and even days while surrounding facilities that rely solely on the local electric utility grid remain shut down.

Depending on the fuel source and capacity of the CHP system in place, some facilities were able to continue full operations in the midst of the blackout, which lasted four days in some of the affected areas. Facilities that had CHP systems and retained power through the mass blackout included hospitals, residential towers, pharmaceutical plants, chemical manufacturers, stores, hotels, colleges, mines, water treatment plants, transportation hubs, museums and a range of other sites.

While traditional backup generators can provide partial or full power for a short time, a CHP system that can operate independently of the local electricity grid using another fuel source and is designed to handle all of the baseload power needs for a facility can offer virtually 100 percent protection against any extended blackout.

Economic and tax benefits

In areas where electricity prices exceed $0.09 per kilowatt hour, which includes the Mid-Atlantic region and New England, depending on your institution’s energy demands, installing a combined heat and power system can cut energy costs by a third and even in half.

In addition to lower utility bills, there are government incentives that make installing a CHP system all the more financially attractive. The federal government offers a CHP Investment Tax Credit (ITC) for the costs of the first 15 megawatts of a CHP system.

Through the Energy Improvement and Extension Act of 2008, Production Tax Credits (PTCs) are available for systems, including combined heat and power, which harness geothermal, biomass, hydropower, landfill gas, waste-to-energy and other forms of renewable energy. Through the American Recovery and Reinvestment Act, these federal tax credits have been extended through 2013.

For 2012, CHP systems placed in service between 2008 and 2012 can qualify for federal depreciation deductions to recover investments. The bonus deductions, at 50 percent value, run through the Modified Accelerated Cost-Recovery System and are available just through the end of this year.

To learn more about these and other federal tax incentives and credits that apply to CHP projects, visit the EPA website. In addition to the federal incentives, several states offer grants, rebates and other financial incentives for businesses, governments and institutions considering CHP as a means to reduce their utility spend and contribute to the use of cleaner and more efficient energy generation.

Environmental benefits

Combined heat and power (CHP) systems require less fuel than traditional separate heat and power systems yet produce the same amount of energy. As such, CHP systems that rely on fossil fuel combustion produce less greenhouse gas emissions and other air pollutants than the generation facilities whose power they offset. For example, a 5 megawatt CHP system running on a natural gas turbine can emit less than half the tonnage of greenhouses gases in a year as compared to a conventional generation system relying on separate heat and power production for the same amount of energy.

In 2011, the University of Massachusetts Amherst was one of six national winners of a prestigious federal ENERGY STAR CHP award. The university built a 14-megawatt CHP system that meets nearly all of the electricity and steam demand for a campus with more than 200 buildings constituting 10 million gross square feet of building space. With an operating efficiency of nearly 75 percent, the CHP system requires 18 percent less fuel than was needed for the separate production of electricity and heat.

This CHP system prevents an estimated 26,600 tons per year of carbon dioxide emissions at the university. That’s the equivalent of taking 4,600 passenger vehicles off the road.

More information

Blue Sky Power can guide your business or organization through the process of installing CHP at your facility. Furthermore, Blue Sky will structure financing that allows you to take advantage of CHP’s benefits with minimal or no capital outlay. And, if your facility has CHP incorporated already, Blue Sky may be able to purchase and optimize the CHP plant to allow you to better focus on your organization’s core competencies ad realize a capital infusion.

To learn more about how CHP systems work, environmental and economic benefits, tax credits and the reliability of these systems, visit the EPA Combined Heat and Power Partnership website.


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