Washington (Platts)--2Dec2008

Combined heat and power technology is "one of the most promising options
in the US energy efficiency portfolio," the Department of Energy said in a new
report released Monday that calls for increased use of the CHP technology to
increase energy security and decrease emissions.

CHP, or the capture of waste heat from power generators for use in
heating and cooling, could significantly reduce carbon emissions, DOE said in
the report, called "Combined Heat and Power, Effective Energy Solutions for a
Sustainable Future."

The technology also could also increase the competitiveness of US
businesses and eventually lead to "non-centralized" power production, the
agency said. DOE in the report proposes that CHP make up 20% of the US
electricity mix by 2030.

Because most US power generation systems do not capture waste heat, the
average efficiency of electricity generation has remained at about 34% since
the 1960s, the report said. The energy lost through waste heat in the US power
generation sector is greater than the total energy use of Japan, DOE said. In
Denmark, captured waste heat accounts for more than half the power produced.

DOE said use of CHP lowers demand, reduces reliance on traditional
utility supplies, makes businesses more competitive by reducing costs, and
reduces emissions. It is 100-year-old technology that has not been widely
used in the US despite its proven track record in increasing efficiency,
the report said.

Right now CHP is deployed at about 3,300 sites around the country,
supplying about 85 GW, or almost 9% of the nation's overall capacity. Twenty
percent CHP use by 2030 could save about half of the energy used annually by
US households, the report says.

"A strategic approach is needed to encourage CHP where it can be applied
today and address the challenges discouraging its deployment," the report
says. "A history of success here and abroad proves that a balanced set of
policies, incentives, and technology investments can bring sustained CHP
growth and realize its enormous potential."

CHP systems include reciprocating internal combustion engines, steam
turbines, gas turbines, microturbines and fuel cells, the report said.

The report suggests several policy goals to support CHP, including
standardizing utility interconnection rules that currently vary between
utility territories and are coregulated by state regulators and the Federal
Energy Regulatory Commission. The report also recommends investment tax
credits to promote CHP, including CHP in renewable portfolio standards and
regulations that include both the thermal and electrical output of CHP
processes that would create an incentive for CHP technologies.

There are barriers to widespread CHP deployment, however, including
market conditions, technical barriers, technology limitations and "regulatory
ambiguity," the report says.
--Jason Fordney, jason_fordney@platts.com