At MES, we talk a lot about cogeneration. That’s because it is an extremely green heat and energy technology that is a win-win-win for commercial building developers, owners, managers, tenants, and the environment.
For those whose business is commercial properties, cogeneration can help save millions in annual energy costs, enable you to sell electricity directly to tenants, and possibly generate revenue streams by selling excess energy to a local utility, where allowed by law. Tenants of cogeneration-powered buildings can rely on uninterrupted power throughout the year and possibly lower costs for using electricity and HVAC systems. Properties that are energy efficient and have a small carbon footprint are also more attractive to those interested in living, working, renting, or buying.
The environment benefits from greatly reduced CO2 and NOx emissions from properties that use cogen for energy, heating, and cooling. Cogen is the simplest example of recycling energy and plants are fueled by cleaner sources of energy, such as natural gas, rather than the oil or coal used by many electric power plants that supply the power grid.
Here is a closer look at what cogeneration is, how it works, how it’s used in commercial properties, and why it is a cost-effective choice for new construction or upgrade projects.
What is Cogeneration?
The simplest definition of cogeneration is the production of both heat and power using only one source of energy. Combined heat and power (CHP) systems are one of the most common types of cogeneration systems. Though there are many types and variations of CHP cogen systems available, the basic principles of converting a single energy source into two sources of power remain the same.
CHP plants often use natural gas to power an engine or turbine within the system (we’ll use turbines for this discussion). The mechanical energy generated from the turbine is channeled into producing electricity that is used to power all kinds of things. Heat or thermal energy is produced as a result of the motion within the turbine.
CHP systems are designed to recover thermal energy throughout the system and use that energy to provide heating and cooling. In traditional energy plants, heat is considered waste energy, as there is no means to harness its power and direct it for further use. In a way, CHP systems recycle wasted thermal energy and use it to create an additional source of power that is used to provide other essential functions.
By using one fuel source to directly produce electricity and recover thermal energy for heating and cooling functions, a CHP cogeneration system is an incredibly energy-efficient way to power all kinds of commercial properties. All around the world, you can find industrial complexes, pharmaceutical labs, schools and universities, government buildings, skyscrapers, apartment and condo complexes, and mixed-use properties that use CHP cogen for their primary source of energy.
Who is Using Cogeneration?
Commercial and industrial properties are currently the most-used application for cogeneration systems. According to a 2016 report from the U.S. Department of Energy, countries like Denmark, Finland, and the Netherlands have adopted cogeneration to the point where CHP technology accounts for up to 30% of their generating capacity. However, 4,400 industrial and commercial facilities in the U.S. use cogeneration, which only accounts for 8% of the country’s generating capacity as of 2016.
Despite cogeneration’s slow adoption in the U.S., the CHP market continues to grow. Many developers of commercial and industrial properties are finding that CHP systems open doors to incentives from government agencies and utility companies. Some of the drivers for this include more awareness and demand from the public for efficient energy sources, environmental legislation mandating lower levels of emissions and consumption of resources, and a greater awareness of the financial benefits of cogeneration.
How is Cogeneration Beneficial to Commercial and Industrial Properties?
CHP cogeneration systems offer numerous benefits for commercial and industrial properties that are slated for new construction, upgrades, or renovations.
Energy Cost Savings
The most obvious benefit of using cogeneration to power a property is a reduction in energy costs. CHP systems are self-contained mini-power plants, which means a building can use the onsite cogeneration plant or plants for all of its power needs. There is no need to draw power from an electric utility and that cost is eliminated.
You do, however, need a fuel source. Natural gas is a common choice for CHP systems and the cost of using this type of fuel in your cogeneration system is significantly lower than purchasing electricity from a utility.
For example, an MES client who owns a building in the middle of Manhattan was paying about $4.3 million in electric and steam expenses. By integrating a 1500 kW CHP cogeneration system for the building’s mechanical and electrical needs, their energy costs dropped to around $2.5 million per year, only $700,000 of which was spent on natural gas.
Energy Use Savings
Cogeneration systems are highly efficient because of their ability to maximize the use of the energy it creates. Traditional forms of electricity production and on-site boilers typically lose up to 66% of their thermal energy by letting the heat they produce dissipate into the atmosphere. These kinds of generation have an efficiency of about 50%.
CHP systems can deliver efficiencies at 90% or more because they use the existing thermal energy instead of letting it go to waste. The thermal energy can be used to provide heat, hot water, and even cooling to a commercial or industrial property without having to draw additional fuel or energy from another source.
Lower Emissions
CHP cogeneration systems emit three types of gases as a byproduct of using fuel: CO2, SO2, and NOx. These are considered air pollutants that various types of legislation have set limits on for commercial and industrial businesses. Cogeneration systems can greatly reduce the amount of these emissions from a property as opposed to using traditional power sources.
With lower emissions and reduced use of energy to provide the same level of power, heating, and cooling that a traditional system would, CHP cogeneration systems can help achieve a smaller carbon footprint and comply with environmental standards for emissions. All of this makes cogeneration a renewable, greener energy source than what currently dominates in the U.S. and many other countries worldwide.
Potential Revenue Streams
Since CHP cogeneration systems are self-contained power plants, they offer the opportunity for property owners to capitalize on the energy they produce. One option is to have the tenants of your building pay you directly for the use of electricity. You could offer them rates that are lower than the local utility charges, which would make renting space on your property more appealing to prospective tenants. In exchange, you get a steady stream of revenue from not only providing power, but also from a high likelihood of gaining and keeping tenants long-term because of their cost savings.
Your CHP cogeneration systems may generate more electricity than is needed, which creates a surplus of energy. Utilities in many areas of the country would be interested in purchasing that excess energy from you, resulting in another revenue stream.
Energy Security
Another advantage of having a self-contained source of energy powering your commercial or industrial property is knowing you’re not dependant on the national power grid for electricity. Local, regional, and large-scale blackouts are all-too-common, whether from deficiencies within the grid itself, inclement weather, or natural or man-made disasters.
When such events happen, critical operations within your properties abruptly stop for an indeterminate amount of time. Aside from being a hassle for those who live and work in those buildings, lapses in power can lead to great financial losses, from food rotting in warehouse refrigerators and freezers, to delays in the production of pharmaceutical lots that need to be manufactured by specific dates, to having to refund hundreds of tickets to a high-profile event.
Cogeneration power ensures that your properties continue to function normally during times of high demand for energy and when the power grid fails. This is a powerful selling point if you plan to sell your property or rent space to tenants.
Is Cogeneration Right for My Property?
Cogeneration is a good fit for all kinds of commercial and industrial properties, whether they are already built or are in the process of new construction. Thousands of manufacturing facilities, leisure centers, hotels, utility sectors, supermarkets, warehouses, distribution centers, hospitals, universities, schools, commercial and government properties worldwide are reaping the benefits of cogeneration systems.
But figuring out if adopting CHP cogeneration is right for your property depends on a lot of factors. We suggest thinking on these questions:
- Do you use heat and power in your property?
- Does the cost of your energy use keep increasing year over year?
- Do you want to reduce your carbon emissions?
- Are you looking for a stable on-site source of energy?
- Are you interested in benefiting from federal, state, and utility incentives?
- Are you open to the idea of adding revenue streams to your business model?
- Are government guidelines for environmental standards in your area changing?
If your answer to any one of these questions is yes, then it may be worth the time to start exploring cogeneration options for your property.
