Move Over Solar, Time to Welcome Industrial Energy Efficiency: Pew Report

Oct. 27, 2015
‘Industrial energy efficiency’ doesn’t roll off the tongue as nicely as solar. But when it comes to cleaning up the air and keeping the lights on, it’s got a lot to offer. Here what a new report reveals.

‘Industrial energy efficiency’ doesn’t roll off the tongue as nicely as solar. But when it comes to cleaning up the air and keeping the lights on, it’s got a lot to offer.

That’s why industrial energy efficiency is on a growth trajectory in the U.S. — not as fast as some would hope, but expanding nonetheless. Characterized largely by combined heat and power (CHP), it is set to increase 22 percent by 2030, or even more if Congress extends clean energy tax credits.

That’s the word from a report issued today by the Pew Charitable Trusts that looks at the tremendous upheaval created by distributed energy on the electric grid, and what’s to come for heat-related energy tech, such as CHP and waste-heat-to-power (WHP). The technologies use heat — otherwise wasted in production processes — to create useful energy. This leads to fuel savings and emissions reductions.

The report, “Distributed Generation: Cleaner, Cheaper, Stronger – Industrial Efficiency in the Changing Utility Landscape,” offers historical perspective on why the grid revolution is underway.  Hint: It’s about a lot more than green.

Why the Revolution

For the first 100 years after Thomas Edison, the U.S. worked at bringing electricity to everyone. Demand for electricity skyrocketed. But the expansion is over and the U.S. has shifted its focus toward refining the power grid to make it more secure, resilient, clean, flexible and able to offer consumer choice.

More dependent than ever on electricity, the U.S. economy is intolerant of power outages. Yet, the U.S. experiences more outages than any other developed nation. Outages increased six-fold from 2000 to 2014, with disruptions rising from 2.5 to almost 18 times per month, says the report, which was prepared by ICF International.

The cost to the U.S. economy?  About $150 billion per year based on US Department of Energy data.

CHP is generally located onsite and is part of many microgrids, so plays a big role in today’s push for greater grid reliability and storm resiliency.

The US has 83 GW of CHP installed at more than 4,400 facilities, about eight percent of the nation’s installed power capacity, and 12 percent of net generation.  (About 80 percent of the installations are at industrial facilities.)

Most of the CHP facilities use natural gas. Because of their high efficiency — they use far less fuel to produce energy than a conventional power plant — they lower the overall carbon footprint in the U.S. In all, they reduce energy consumption by about two percent nationally, the equivalent of removing 250 million metric tons of carbon dioxide emissions, or shutting down 66 coal-fired plants, according to the report.

A lot of potential exists to develop more industrial energy efficiency. The US could add 60 GW of CHP for industrials; 66 GW of CHP in the commercial sector; and 15 GW of WHP largely in the oil and gas industries.

Cheerleaders Needed for Industrial Energy Efficiency

Without the kind of consumer and policy cheerleaders that the solar industry enjoys, industrial energy efficiency sometimes has a rougher time capturing the attention of lawmakers.

The industry is asking to be placed on equal footing with solar when it comes to federal tax incentives. Solar installations receive a 30 percent tax credit, while CHP receives only 10 percent — and that’s only on the first 15 MW of a project no larger than 50 MW. WHP isn’t eligible for the tax credit at all.

The CHP and WHP industries are pushing for Congressional approval of the Power Act of 2015 (S. 1516, H.R. 2657), which would end the inequity.  CHP and WHP would receive a 30 percent tax credit through 2018, which would apply to the first 25 MW of a project with no cap on project size.

The report finds that the improved tax incentive would lead to more CHP/WHP development. The Clean Power Plan also is boosting CHP/WHP.  The federal rule requires that states come up with plans to reduce carbon dioxide emissions from electric power 32 percent by 2030

Together, the tax incentive and the Clean Power Plan are likely to boost industrial energy efficiency 27 percent for total capacity additions that reach 22.8 GW by 2030. That’s 16.1 GW of CHP and 6.7 GW of WHP, according to the report.

The report also offers insight into other ways regulatory and technology upheaval is changing the electric power indstury.

  • The utility role is shifting.  It is not the utility, but the independent power producer (IPP) that has built most power plants in recent years.  The competitive companies emerged out of restructuring of the electric power industry over the last couple of decades. In all, IPPs built 65 percent of US power plants from 2003 to 2013. This in turn opened the door for development of more non-utility distributed energy.
  • Natural gas and renewable power plants have accounted for 90 percent of the new power capacity built in the U.S. and will continue to dominate new construction through 2020.
  • Net metering, which has helped foster more rooftop solar, has increased by 50 percent annually since 2009, rising from 70,000 to more than 482,000 customers by the end of 2013, an increase of nearly 7,000 percent since 2003.
  • With rising natural gas production and falling prices, consumption of natural gas has grown by 22 percent over the last decade. Use of natural gas to produce electricity has expanded by almost 50 percent over the same period.

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About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is an award-winning writer and editor who specializes in the energy industry. She is chief editor and co-founder of Microgrid Knowledge and serves as co-host of the publication’s popular conference series. She also co-founded, where she continues to lead a team of energy writers who produce content for energy companies and advocacy organizations.

She has been writing about energy for more than two decades and is published widely. Her work can be found in prominent energy business journals as well as mainstream publications. She has been quoted by NPR, the Wall Street Journal and other notable media outlets.

“For an especially readable voice in the industry, the most consistent interpreter across these years has been the energy journalist Elisa Wood, whose Microgrid Knowledge (and conference) has aggregated more stories better than any other feed of its time,” wrote Malcolm McCullough, in the book, Downtime on the Microgrid, published by MIT Press in 2020.

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