Recap: If I Install Cogen, Can I Take My Cardigan Off?

Cogen Roundtable Recap

You could say the story of modern cogeneration starts with a cardigan. In February 1977, President Jimmy Carter famously donned a sweater1 and asked Americans to conserve energy by turning their thermostats down in winter (though in retrospect air sealing and insulation would have offered greater results than grinning and bearing it). However, by 1978 the President had pivoted from a conservation focus to a supply-side approach, signing the landmark energy policy law2 that, as Tom Smith (Blue Earth Generator) told us at Cogeneration: Powering Up for a Sustainable Future, paved the way for cogeneration.

The 1978 law forced utilities to buy power from independent producers if they were more efficient than the utility itself. Since using the spare heat from onsite electricity generation can cut energy waste in half, making it much more efficient, this allowed cogen to grow rapidly—to the point where it now supplies 12% of U.S. electricity3. It takes three to five years to design and build a cogen plant and bring it on line, and the chart below shows the cogen explosion starting just about that long after the law was passed. Smith said that high gas prices after Hurricane Katrina caused a marked contraction in new cogen; he expects stabilized (and low) gas prices to drive near-term growth.

Cogen Through The Decades
Cogen added each year since 1960. Source: Source: ICF CHP Installation Database, March 2014

Cogen offers other benefits like power reliability and reducing peak loads on New York City’s overtaxed grid. NYSERDA continues to supply money to cogen projects, with $100M available through 2016.

But not everyone is as enthusiastic about the technology: roundtable participants got an interesting point-counterpoint from Don Winston (Donald J. Winston PE PC), who stood up to, as he put it, “Throw a cold bucket of water on Tom’s rosy optimism.” Technical and financial success are different things, said Winston, and projects can achieve one without the other. “There are enough buildings for which cogen is a good fit that technical issues aren’t the problem,” said Winston. “But the incredibly low market penetration, far below what Smith and others have hoped for through the years, are because of other barriers.”

Some obstacles are inherent in the technology: owners who install cogen commit to higher up-front costs, ongoing maintenance, and a loss of rentable square footage. And as gas prices drop, the utility savings from cogen decrease while installation and maintenance costs stay the same, delaying economic return.

Other issues are unique to New York, especially Manhattan. A cogen turbine may have been originally designed for delivery to a parking lot behind an industrial facility; it can take hundreds of thousands of dollars to shoehorn it into a Midtown building. Another is Con Ed’s standby tariff: a “cogen killer,” according to Winston, with annual fees in the millions for a large plant. Finally, the city requirement for round-the-clock supervision of any installation operating at pressures above 15psi may be a good source of well-paying green jobs, but adds costs to projects. Overall, buildings using expensive Con Ed steam  may benefit. “Just on the utility savings, getting off of Con Ed steam and adding a boiler can pay back in less than three years.” That can help finance cogen, with its increased efficiency but longer financial returns.

For smaller projects, Winston notes that “Small turbines have efficiency and carbon savings, but the cost of maintenance and fuel means the economics may not be there.” Small turbines are less efficient than big ones, and fixed costs may be higher relative to the total project cost.

If using cogen in retrofits presents challenges, moderator Chris Cayten (CodeGreen) asked whether the technology a “no brainer” for new construction “Maybe,” said Winston. While it’s easier to construct cogen in a new project, owners don’t see savings until buildings are fully occupied, but the additional costs remain regardless of vacancy. “It needs tremendous owner commitment” to see it through, he said.

Smith got the last word: “But the glass is becoming more full!” He may be right in the short- or medium-term. But the carbon reductions demanded by the Mayor, City Council, and Urban Green’s 90 by 50 study mean that fossil-fuel-based cogen isn’t a long-term solution. Unless biomass-based cogen or carbon capture and storage pan out at scale, NYC buildings will need to go all electric in the next 35 years. Since cogen plants don’t last that long, today’s installations may serve a useful purpose to increase efficiency for now. But buildings must eventually move to deep energy reductions, all-electric energy use, and a clean grid. It’s been 35 years since Jimmy Carter sparked a cogen revolution. They may not have much more time than that left.

1 Okay, technically not a cardigan—that appears to be a myth. He wore a cardigan at other times but not during an energy policy speech.

2 The Public Utility Regulatory Policies Act, or PURPA.

3 According to Oak Ridge National Laboratory in 2008.