Combined Heat and Power Plants Killed by Gratuitous Delays

Michael Giberson

An article on the barriers to combined heat and power plants from Forbes:

Utilities that want to can often hit projects with repeated delays. [Neal Elliott of the American Council for an Energy-Efficient Economy] describes the sort of scenarios he’s seen. “Require an interconnection study, takes 60 days, present the study, 60 days to do that, the utility takes 90 days to review that, then if they have any questions, you have another 30 days. … When it adds up, it may take a year or two or three. And time is money.”

Some time and money are, of course, needed to ensure that the system integrates properly, Elliott says, but gratuitous delays have “killed more CHP projects than anything else,” he says.

A spokesman for the electric power industry notes that not all electric utilities oppose CHP projects, saying “Every utility is regulated mostly by its state… Whether it can recover costs for efficiency programs is regulated by the states.”

True, but curious. It does raise a question as to why the state regulator must toss a carrot to the utility in order for the utility not to use its monopoly control over the distribution grid to frustrate small time competition by hospitals, universities, airports or other users with concentrated needs for power and heat in the same area.

(HT to Sean Casten at Gristmill. Casten is President & CEO of Recycled Energy Development and was 2007 president of the U.S. Combined Heat and Power Association.)

2 thoughts on “Combined Heat and Power Plants Killed by Gratuitous Delays

  1. One wonders if most of the utility concerns could be dealt with through a “Hold Harmless and Indemnification” provision in the interconnection agreement. If the CHP advocates are convinced that their interconnection would not damage or destabilize the utility’s distribution grid and would not endanger utility employees in the event of a grid outage, they should have little concern about such a provision. 🙂

  2. Ed,

    I think you misrepresent the issue. CHP developers have a very strong interest in not compromising the reliability of the grid (after all, many of us have long term contracts with our local hosts, and if our projects compromise the reliability of customer supply, it’s bad for business!)

    The issue as it arises on CHP interconnection though is that the utility gets to specify the equipment but the CHP owner must pay the cost. Even with the best of intentions on all parts, this creates a significant misalignment of interests between the utility, who has no fiscal reason not to pursue the most reliable, most gold-plated solution and the CHP owner who must foot the bill (but not be accountable for any future system reliability problems). The easy way to fix this is not through a hold-harmless provision, but simply to treat CHP like any other utility-owned generation asset: let the utility stipulate the interconnection, but require them to pay for it and let them recover those costs through rate base.

    All that said, interconnection is only one of the many ways that utilities have blocked CHP and other efficient generation, and far from the most pernicious. (Standby rates, exit fees, below-market buyback rates, etc. do much more to kill projects that interconnect now that so many jurisdictions have developed standard technical and commercial guidance on that particular subject.)

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