Federal Funds Seek to Boost Penetration of Combined Heat and Power in the United States
Mechanical insulation is often overlooked in search of a single solution to clean, affordable energy, but for those pioneering energy solutions, mechanical insulation remains fundamental to nearly every thermal application.
Volatile fuel prices, a battered economy, a woeful environmental outlook, and a concerted thrust for enhanced national security have created a domestic energy climate that is reconsidering conventional power production and promoting energy efficiency. As policy makers reach for capable, market-proven technologies that can immediately contribute to enhanced energy efficiency across the commercial and industrial sectors, legislators and energy experts tout combined heat and power (CHP) as a crucial element of the near-term energy efficiency equation.
While configured in various ways, CHP consists of a combustion-based system that generates electricity as well as usable quantities of heat. Similarly, waste energy recovery systems use existing combustion systems to capture and reuse waste thermal energy for electric generation or usable thermal applications. Thermal energy—used for space heating, domestic hot water, or even process heat in industrial applications—and electricity are universal throughout the built environment across all sectors of the economy. Another aspect of CHP that makes the technology attractive to potential customers is that CHP introduces a distributed generation model to provide both thermal and electric energy from facility- to district-wide.
An expansion in the application of CHP systems offers a significant opportunity for mechanical insulation. CHP systems universally require the retention of useable quantities of heat in power generation, thermal recovery, and distribution. Minimizing heat loss with sound mechanical insulation is crucial to effective CHP solutions. Insulation becomes even more critical as CHP systems scale up to provide district heating and hot water, as piping and duct work require insulation throughout the distribution system.
CHP has been validated by successful deployments among heavy energy users in industrial, commercial, municipal, and institutional applications over the past couple of decades; however, recognition and support from federal policy makers has only come in the past few years. To illuminate the traction CHP has experienced among federal legislators, one can follow a clear trail of incentives and funding opportunities in nearly every significant piece of energy legislation over the past half-decade.
The Energy Independence and Security Act of 2007 authorized a number of programs and incentives to spur adoption of CHP and waste energy projects. However, these authorizations were not backed up by appropriations from the U.S. Congress, so many of these initiatives are still largely unfunded. Under Section 451 of EISA 2007, the U.S. Environmental Protection Agency (EPA) was tasked to initiate a nationwide survey of all major industrial and commercial combustion sources and sites within the United States and document the quantity and quality of waste energy available by site. Recommendations will then be made by EPA, in collaboration with the U.S. Department of Energy (DOE), to each entry in the registry to optimize combustion systems and recycle waste energy for electricity generation or useful thermal energy. Additionally, funding will be made available (up to 50 percent cost-share) by DOE to conduct feasibility studies to determine those projects offering a simple payback of 5 years or less.
To further support the deployment of waste energy recovery systems, Section 451 under EISA 2007 authorizes a Waste Energy Recovery Incentive Grant Program, which offers $10 per MWh of electricity generated from recovered thermal energy. Similarly, $10 per 3,412,000 Btu is authorized for thermal applications employing recycled thermal waste.
Emergency Economic Stabilization Act of 2008
The Stabilization Act of 2008 offered a number of key tax provisions to promote the deployment of CHP systems. An investment tax credit was introduced to cover 10 percent of the costs for the first 15 MWh of CHP or waste energy systems that achieve energy efficiency of 60 percent or higher. This tax credit remains valid through 2016.
Three other preexisting tax provisions were extended, including an accelerated 5-year depreciation schedule for eligible CHP systems, a 10 percent investment tax credit for the purchase of eligible microturbines, and an extension of renewable energy tax credits. To qualify for the renewable energy tax credit, CHP systems must burn biomass or solid waste as a primary fuel.
American Recovery and
Reinvestment Act of 2009
Stimulus funding under the American Recovery and Reinvestment Act of 2009 (ARRA 2009) provides additional incentives for CHP, some of which are layered over provisions of the Stabilization Act of 2008. Under ARRA 2009, the Internal Revenue Code declares the 10 percent investment tax credit for CHP “refundable.” Refundability is most significant to small companies, institutions, or non-profit organizations. Refundability allows tax credit owners to reduce their tax liability below zero—in other words, authorizes eligibility for a tax refund.
ARRA 2009 also provides “bonus depreciation” for CHP systems through 2010, allowing property owners to not only depreciate according to the accelerated 5-year schedule, but also depreciate new systems 50 percent over the first year.
The most significant action under ARRA 2009 was the stimulus funding appropriations. ARRA 2009 provided a total of $16.8 billion to the DOE’s Energy Efficiency and Renewable Energy (EERE) program. Funding announcements for research and development, as well as deployment of efficient CHP and waste energy recovery systems, have recently been released by the DOE’s Industrial Technologies Program (ITP) under EERE. The research and development solicitation totaled $40 million, while the deployment solicitation will be capped at approximately $156 million. Awards will be structured as cost-share agreements with funding recipients. Both solicitations were received with great interest from both the commercial and industrial sectors, demonstrating a hearty appetite for increased CHP and waste energy recovery deployment.
Today, Congress is tasked with tackling transformative energy legislation to usher in a new era of clean, reliable energy on which the United States can build a prosperous economy and healthy environment. It is unclear exactly how the legislation will look and when it can be expected, although it is virtually certain efficiency will be a critical component. Federal agencies, the private sector, and state energy programs have all taken a supportive stance on CHP technologies, which continue to indicate promise for mechanical insulation in the coming age of energy efficiency.