Excerpt from Chapter 12: Less is More

November 03, 2009

The experience of those who have focused on (energy efficiency) demonstrates that it is virtually inexhaustible, because innovation in efficiency is, in a very real sense, inherently renewable. …

One of the largest opportunities for efficiency gains – an opportunity that is present in electricity generation and in many industrial sectors – involves the capture of waste heat. Indeed, many industrial facilities using large amounts of heat can profitably capture their wasted thermal energy and reuse it in their own processes – or sell it for use in nearby buildings for space heating and cooling. They can also simultaneously use their waste heat to generate electricity on-site thereby significantly reducing their purchases of electricity from utilities, and thus sharply reducing CO2 emissions. …

There are generous investment tax credits and production tax credits for renewable energy, but until 2009, no credits for (combined heat and power) CHP. Put another way, governments provide the power industry with almost no incentives to deploy efficient CHP. Most states do not recognize CHP as part of the Renewable Portfolio Standards that many states have adopted. …
Entrepreneurs like Tom Casten, chairman of Recycled Energy Development, have demonstrated time and again how industrial companies that are willing to invest in cogeneration technologies can become more efficient and more profitable in a short period of time. …

The Oak Ridge National Laboratory (ORNL) concluded in a major study that CHP is “a proven and effective energy option, deployable in the near term, that can help address current and future U.S. energy needs,” adding, “Energy efficiency, including CHP, is the least expensive and most rapidly deployable energy resource available today.” …

But a wide variety of experts agree that the principal barrier to the wider use of CHP in the United States is that electric utilities actively block its use through a variety of discriminatory practices designed to maximize their profits and avoid competition from lower-cost energy generated by their customers on-site. …

Electric utilities in most states are using a variety of techniques to block CHP use by their largest customers. Often, they petition regulators to require industrial facilities desiring to use CHP to pay for expensive backup generating capacity to protect the utility against a sudden surge in demand in case the CHP system fails. Although this sounds reasonable in principle, the tactic is routinely used in ways that raise the price of CHP to cover wildly improbable contingencies. …

The volume of energy wasted is enormous. … Unfortunately, most utility regulators continue to use outdated approaches that make it more profitable for utilities selling electricity to waste two thirds of the energy in the fuel they burn. The regulatory barriers preventing the avoidance of this inefficiency have held improvements in the efficiency to power generation of less than 1 percent in the past 50 years-since Dwight David Eisenhower was president.

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