Roll over photos for details of energy recycling projects.
Three facts motivate our work. First, to increase industrial productivity and cut manufacturing costs, we need to stop wasting energy. Second, to effectively tackle climate change we must improve the way we generate heat and power since they account for two-thirds of U.S. greenhouse-gas emissions. Third, energy waste is pervasive, as evidenced by the average U.S. electricity plant throwing away two-thirds of the fuel it burns.
Capturing waste energy is a fairly simple concept. In fact, Thomas Edison recycled energy at his early power plants, using waste heat to warm nearby buildings and unknowingly reduce greenhouse-gas emissions. Today’s potential for energy recycling is staggering, as evidenced by government studies showing the country has enough recoverable waste energy to generate 20 percent of our electricity, without burning fuel or emitting pollution. Yet as the video below explains, several policy barriers stand in the way of capturing this clean and efficient energy.
Probably the biggest barrier to clean energy development is the lack of markets. Utility monopolies traditionally blocked independent generators from competing with their own power plants, even if the utilities’ facilities were more expensive and polluting. Congress tackled this problem in 1978 with the passage of the Public Utility Regulatory Policies Act (PURPA) and many states responded with policies that launched aggressive growth of renewables and cogeneration. The concept was simple – clean energy projects should be able to compete with traditional generators and receive power purchase contracts equal to what a utility would pay to generate and deliver its own electricity.
PURPA’s influence, unfortunately, waned in the 1990s, largely because of continued utility opposition and the growth of wholesale-power suppliers not focused on renewables or cogeneration. Yet the challenge of creating markets for clean power remains. Without such markets, opportunities to cut costs and lower pollution are being lost.
An alternative approach is a Clean Energy Standard Offer Program – or CESOP – that would encourage private investment in clean energy projects and ensure energy consumers can access clean, cheap power. Ontario recently adopted a CESOP, and California is taking a similar approach with its Waste Heat and Carbon Emissions Reduction Act (AB 1613), which provides standardized contracts (or feed-in tariffs) for efficient cogeneration projects. Utilities lobbied hard against the provision, but the Federal Energy Regulatory Commission (FERC) in 2010 endorsed California’s feed-in tariff and encouraged other states to provide technology-specific long-term contracts for clean power.
Rather than tackle climate change by government picking technology winners (nuclear reactors for some, wind turbines for others), a more efficient approach would set a single standard for emissions and have clean power producer sell their allowances directly to polluters. Over time, polluters would go away and clean energy providers of all kinds prosper. All the government needs to do is lower the emission targets each year.
Critically, an effective market regime should measure emissions by output, tracking the amount of pollution that’s emitted for every unit of energy that’s produced. Efficiency would be rewarded, inefficiency penalized. Today’s pollution measurements, unfortunately, are based on inputs – the amount of pollution per unit of fuel burned. Strangely enough, the more fuel you burn, the easier it is to meet the government’s standards. As a result, efficiency is actually penalized. Switching to output-based measurements would change the incentives to which energy producers respond.
Utility monopolies traditionally have viewed independent CHP developers as taking away their customers and sales, prompting these power companies to impose an array of barriers to cogeneration. Most regulatory systems, in fact, reward utilities for building their own facilities and discourage sales from independent generators. Having been frustrated for years by utility opposition, a few CHP developers and a few utility executives have been negotiating an alternative approach that would provide a win-win for both parties.
CHP projects tend to be located near where their electricity is used, thereby avoiding the line losses associated with distant coal-fired units or nuclear reactors. Cogeneration projects also tend to operate continuously, thereby avoiding the need for backup power supplies associated with intermittent solar collectors or wind turbines. At the same time, CHP units enhance the power grid’s reliability, providing what is known as frequency regulation. Unfortunately, these cogeneration projects receive no reward for such benefits. That’s beginning to change as RED and others encourage the Federal Energy Regulatory Commission (FERC) to create a robust market for these ancillary services.
Dirty power plants have avoided most of the costs associated with their pollution, placing those clean-up and health-care expenses on the general public. Yet the Clean Air Act and recent court rulings have pushed the Environmental Protection Agency to change the rules and require polluters to internalize some of their costs. Because of comments by RED and others, EPA is beginning to recognize efficient CHP and clean waste energy recovery as pollution prevention mechanisms, allowing them to be paid for the environmental benefits they provide.