How Now, CHP and DG?


A resurgence of interest is appearing in combined heat and power (CHP) and distributed generation (DG) options in many states, including specific interest from industry and the so-called “MUSH” markets (that is, municipalities, universities, schools and hospitals). Supportive state policies and incentives, technology support by vendors, ESCOs with low capital costs, and environmental incentives are combining to create a more conducive environment for CHP and DG projects. For example, the highly anticipated U.S. EPA rules regulating GHG emissions from existing facilities and supportive state policies will accelerate interest from and implementation by industrials, IT and MUSH market organizations.

CHP and DG projects, when coupled with intelligent energy efficiency from network and system optimization, offer substantial costs savings in industry and commercial uses. Commercial uses could dwarf potential in residential and industrial uses in some states. Smart dollars invested in O&M can finance the replacement of fans, motors, drivers, mechanical and heat needs to maximize CHP and DG efforts. Additionally, as the internet of things evolves, the electricity grid becomes more connected and more powerful with the addition of sensors and IT communications to supply sources. For example, cloud computing vs. server investment can reduce energy costs. Similarly, machine-to-machine (“M2M”) technologies that allow wired and wireless devices to communicate will drive smart manufacturing and innovative supply technologies. If done correctly, this shift will spur capital projects and investments, so long as projects produce quantifiable energy and cost savings over time, on a scale that allows financial pro formas to work and satisfy investors’ return expectations. The net result of these efforts is improved operations and analytical capability to monitor and sustain better system performance.

Common barriers to the implementation of CHP and DG projects have been:

  • Social & knowledge: equipment vs. software and IT involving a lack of technical assistance and better managing the equipment and IT interface;
  • Financial structuring, sources of capital & access: will come with better management, verification, data and protocols;
  • Structural: utilities, public service commissions with policies and regulations that are not modernized to reflect market and technology realities;
  • Traditional & outdated policies represent stale, non-consumer and non-market based thinking that stifle service and economic development;
  • Capital & banking sources with risk management profiles reflect a lack of energy lending experience; and
  • Cash flows that hamper internal hurdle rates of owners or fail to consider available incentives.

The best natural markets with incentives and market inducements based upon collective research and literature review include California, Massachusetts, Oregon, Utah, New York and Connecticut. States to watch as they design/improve incentives include Texas, Washington, Ohio, Michigan, Maryland, New Mexico, Minnesota: Pennsylvania, West Virginia, New Jersey and Illinois.

Current market forces, supportive regulatory and environmental policies, reliability and resilience concerns, and a wider array of fuel supply and technology improvements could represent the best market opportunity for CHP and DG in all sectors in more than 50 years. Here’s why:

  1. Capacity. A coalescence of available fuels, technology and the need for capacity has never been better for MUSH markets, industrials, IT and server loads, and municipal landfill and wastewater treatment facilities. The best regions include New England, the Mid Atlantic, California and Texas.
  2. Utility Business Model. The traditional business model of rate design for utilities is no longer serving its intended purpose, as customers demand better solutions, technology and services than the utility is willing or able to provide. When subject to rate design increases and regulatory attacks, continuing cost pass-throughs, riders and surcharges for declining service get expensive with diminished technology access and limited or no digitalization. The budget to support the old regulatory compact is dead as median income customers in the U.S. experience declining annual disposable income, and industrial and commercial margins are challenged.
  3. New Values for Performance. Power quality, reliability, volatility in price, and service responsibility for customer care and sustainable outcomes now exceed historical electricity market priorities. Industrials seek sustainability and a reduction in or removal of price volatility while seeking reliable and economical energy. Pricing values outweigh tax incentives and net metering reliance as customers realize the best rate to be paying is avoiding the costs of their own retail rate and the volatility, insecurity, and unreliability it poses.
  4. Variable Utility Market Response. The utility market response will vary based on fuel mix, individual utility priorities and recognition that the U.S. marketplace is more appropriately regarded as individual sub-markets with differences in the DOE regions. For example, because the natural gas market is volatile, seasonal in pricing, and considered a backup fuel strategy, it should be weighed as such to preserve the benefits of CHP and DG. For these and other reasons, in some regions utilities will be a friend of CHP and DG and others a foe, so that one blanket policy will not fit all and could be inappropriate.
  5. Financing. Financing models need to be revisited as U.S. banks are no longer lenders in the CHP and DG energy markets. Capital structuring, sourcing and third-party financing will need to evaluate and replace leasing and project finance models because of evolving accounting standards outcomes. The real game changer might be utilities with their cost of capital advantages fostering more joint ventures to develop these projects, and increased mandates on utility billing. New sources of loans are appearing from specialty funds, pension investment funds and high net worth family funding to replace the banks.
  6. Microgrids and T&D Costs. Microgrids, in conjunction with energy storage, energy efficiency and demand management co-strategies, will help accelerate CHP and DG implementation. More and more customers are seeking to avoid T&D costs—which will be rising faster than new generation costs this decade—and also avoid cost surcharges and line losses. To succeed, CHP and DG projects need to be fully integrated with load management efforts, conservation strategies and avoided water costs.
  7. EPA Regulations. Regulations for new SIP implementation for GHGs for existing facilities will accelerate the shift to CHP and DG, along with other requirements for mercury, boiler MACT, ozone, water and rules. (Interested in learning more? Check out CE3’s Energy Webinars Series archives.)
  8. Market Share. Based on our research and literature review, it is likely that 10 states will comprise over 60% of the U.S. market with an energy storage capacity whose share will grow to 25 states and reach to 80%. This would track the collective experience in the past with total energy, cogeneration, power marketing and renewables in the U.S. The whole country would likely not participate in the final market outcome.
  9. Need for Data. Case studies, data, and validation of project performance and operational efficacy will lower CHP and DG project costs—so will insurance and more robust markets for renewable energy credits (RECs) and emissions credits to offset project costs. Third-party financing sources and owners must share their case histories and provide operating data for insurance, financing, resilience, cyber security and weather performance values to be measured, verified and scored.
  10. Big Data Benefits. Big data and energy analytics will accelerate the desirability of CHP and DG alternatives to the customer, vendor, insurer, and technology solutions developer. Data also establishes the benefits of avoiding energy shifts to time-of-day pricing for each hourly or daily energy transaction, i.e. transactive energy with attendant volatility and lack of stability for planning.

Herein lies the best market opportunity in the U.S. in the past 50 years: Through the implementation of the above strategies, market volatility and uncertainty can be reduced or removed. The role of the traditional utility service can evolve to add value via the next-gen, market-ready solutions of CHP and DG, initiatives that differentiate price from value in a complex and changing market. Only then and through CHP and DG can we harmonize the dilemma of using 19th century fuels in a 20th century electric power infrastructure to support the sophisticated demands of a more modern utility service in the 21st century.

For more information about the state of CHP, check out our Energy Webinar from November 5, 2013, archived here:

CE3 Blog by Michael J. Zimmer, Executive in Residence & Senior Fellow, Ohio University; Edited by Elissa E. Welch, Project Manager, CE3


Creating A Waste Economy


The Voinovich School of Leadership and Public Affairs at Ohio University is continuing their invaluable service to the region, this time in partnership with Rural Action. Funded by the Sugar Bush Foundation, the Athens Hocking Zero Waste Initiative (AOZWI) planning process reached a milestone in December with the release of an action plan. The plan “aims to provide a unified vision and path for a robust waste management system that will enable Athens and Hocking counties to work towards becoming a zero waste economy.”

This unified action plan demonstrates the need and economic incentive to reduce landfill waste and better manage resources across waste, recycling and reuse supply chains. To address the original plan set forth by community members in a series of meetings in 2012, AOZWI working groups will soon be established in an effort to make recommendations to modify to current practices, identify priorities and set goals. The working groups include:

  • • Education and Outreach
  • • Access to Recycling
  • • Collection of Hard-to-Recycle Materials
  • • Illegal Dumping and Burning Prevention and Enforcement

Though AOZWI is the poster-child of local waste reduction efforts, there seems to be an increased effort around the Ohio University campus and around our region that deserves notable attention. For example, in January, the Athens City Council decided the city’s efforts to recycle were falling short, and thus signed the city on to the action plan. Reducing waste is all about awareness. Ohio University has been part of this greater awareness for almost two years with the adoption of a sustainability plan in 2011 and a climate action plan set forth in 2012.

Recently, Ohio University entered into an energy performance contract with Constellation New Energy in an effort to improve campus conservation. The Athens News reports that through these efforts, Ohio University will save an estimated 50,145 tons of CO2 emissions and $3.2 million in energy costs annually for 15 years. Reducing wasted energy is a huge part of reaching certain sustainability and climate action benchmarks. By 2016, the University hopes to reduce individual consumption by 5% and to increase recycling rates to 80% by weight.

Robin Stewart, senior project manager for the AOZWI at the Voinovich School, says the biggest challenge to achieving similar goals throughout the Appalachian region is creating a viable model and acquiring greater capacity to handle a new waste-based economy. “We need to localize the supply chain,” said Stewart in an interview. “Creating initiative within communities is the best route to accomplish this in the business community, but education efforts such as the zero waste event guide and planning a zero waste graduation for Ohio University students are just as important.”

ReUse Industries, a local waste diversion non-profit organization, has been in operation for almost 20 years and has funneled 10 million pounds of materials back into the community for reuse. ReUse is bringing small communities together to develop a regional reuse economy. Working on a larger scale, the Ohio By-Product Synergy (BPS) Network works to bring buyers and suppliers of manufacturing and production industries together. “If one company produces a waste product, and it can be used by another company within the region, the BPS Network is there to create the economy, divert the waste product entering the environment and avoid further ground contamination,” said Stewart.

For ReUse and the BPS Network, buying, selling and promoting used goods is the clear option for making the familiar pattern of consumerism sustainable. Reused books, appliances, and furniture purchased from ReUse Industries saves money, supports the local economy, diverts waste, and lowers your cost of living or doing business. By saving so much during the purchase of used materials from ReUse or the BPS Network, we can reduce our reliance on primary material costs and logistics in our manufacturing businesses and increase our understanding for community collaboration.

The AOZWI project can serve as a guideline to how we need to begin organizing the way we manage waste in our businesses and communities. Currently, the state recycling goal is 25%, but we still have a ways to go. According to the U.S. EPA, packaging makes up approximately 30% of the United States waste stream and 34% of all waste can be composted. Imagine a world where individuals, communities and businesses strive to re-use packaging for the long haul, compost at a near 100% rate, and buy unpackaged or only previously used items. AOZWI is changing the way we think about waste and is raising that all-important awareness mentioned earlier.

To learn more about the specific goals of the AOZWI’s long-term action plan, click here.

Mathew Roberts

Handprints and the Green Supply Chain


Over the past month, I have been challenged to re-imagine the “finished product.” The concept of “the handprint” was originally brought to my attention last fall at “A Workshop for Efficiency, Emissions, and Energy in Ohio” hosted by Ohio University Voinovich School’s CE3. Frank O’Brien-Bernini, chief sustainability officer of Owens Corning, gave a presentation on how his company is reducing emissions by improving efficiency efforts on the production line. His emphasis of this perspective focused directly on improving how the production line is formed, what efficient production depends on, and tracking all steps from cradle-to-cradle when possible. Their flagship product for example, fiber-glass insulation, is made with up to 50-65% recycled material.

O’Brien-Bernini explained that handprint analysis is a framework slowly entering the arena of business and manufacturing and it is conceptually connected to creating a green energy supply chain. The Sustainability and Health Initiative for NetPositive Enterprise (SHINE), an initiative of Harvard’s School of Public Health, is helping companies like Owens Corning develop ways to proactively measure positive impacts instead of calculating emissions footprints. While handprint studies are more focused on improving energy usage in-house and measuring positive environmental changes, a green energy supply chain management system emphasizes sourcing. Both concepts are intertwined insofar as the company must take on the responsibility to look at where raw materials are coming from, how they are processed, and how best they can be used to accomplish sustainable handprints.

Stakeholders are increasingly demanding sustainable practices from companies at all levels of production and urging leaders to take steps to adopt long-term solutions to waste. Gale Tedhams, director of sustainability at Owens Corning, has recognized this demand. “We run on a lifestyle-cycle accounting process, looking at the lifetime from supply extraction to disposal, to save energy and create new lines of energy efficient products,” says Tedhams.

The concepts of the handprint and green energy supply chains tell us something very important. If we can re-imagine the finished product as yet unfinished in its life at the moment of purchase, we imagine the next phases of the product when its “useful” life for us is over. We can make products that are responsibly-sourced from extraction of the product to reusability, but it takes great effort.

However, companies incorporating sustainability into their supply chains will last longer, according to Art Dodge, CEO of ECORE International, “not only because of the cost-effective nature of the process and ability to achieve environmental goals, but also through the commercialization of new and innovative products.”

In a recent talk given by Dr. Jason Jolley, assistant professor of rural economic development at the Voinovich School, about environment management systems and the green energy supply chain, I learned that businesses burdened with high dependence on fossil fuels or heavy initial-production resources are developing models and management practices to meet the demands of a changing regulatory landscape.

The great part about the adoption of these management systems is that it encourages a materials “race to the top” and/or a clear passion to maximize the utility of raw materials. Companies are tapping into resources such as the U.S. EPA’s Green Suppliers Network, and others have been certified as actors in sustainability; the ISO 14000 series is an environmental management system (EMS) certification, yet its adoption is slow. By adding a green supply chain management (GSCM) system to this certification, businesses can access suppliers’ environmental performance and track the cost of waste, making for a resilient business model of the future. These two systems are highly complementary: research by Jolley showed that EMS adopters that also utilize GSCM will be more successful in reaching environmental protection requirements.

Dr. Jolley’s case study asked companies around the country about this doubled-up adoption. With a 13 % response rate and most of those responsive in companies holding less than 250 employees, an optimistic insight was revealed: smaller companies are often the first to adopt environmentally sustainable practices.

For many of these local companies, the move makes both environmental and economic sense. Owens Corning, a business built on improving energy efficiency, is the prime international example of stepping up to the standard. We are seeing supply chains today, especially with companies that are employee-owned, that put high value on creating production and supply chain alliances. Future-proof supply chains, as they may be called, are beginning to be adopted, inspired by “handprinting,” green energy supply chains and sustainability measures as necessary components of business.

I have gained a new perspective by changing the way I think about materials sourcing and production. I understand the importance of developing a product for more than profit, with an eye to social and environmental responsibility. When we become aware of our global impact, improvements in the efficiency on our production lines expand and extend to create an optimistic mindset of net-positive gain rather than impact.

Mathew Roberts

Little by Little


To some people, “environmentally-friendly” car manufacturing means electric cars or ethanol-fueled engines—“big ticket” items. Admittedly, I was one of those people, especially concerning cars. It’s easier to think about the “big” things when it comes to evolving technology—an entire car or an entirely different way to make gasoline. I’d always thought of driving a car as an “all or nothing” decision between convenience and environmental responsibility. I was very impressed, then, how Honda of North America has streamlined their manufacturing processes to take the little steps towards greater energy efficiency, those that are incorporated before they complete a finished product.

Honda changed its process of painting cars by thinking outside the box. Shubho Bhattacharya, senior staff engineer for Honda, featured in a video shown at CE3’s energy workshop in September 2013, created an algorithm for a system that completely changed Honda’s painting processes and has helped Honda to reduce its emissions targets. Bhattacharya’s work has created huge economic and environmental gains for the company.

In the same way that Bhattacharya was able to translate the abstract idea of changing the world into a tangible outcome, every day companies worldwide make small changes to their operations, creating positive impacts for the environment. Often their effect cannot be immediately seen, but their impact can be immediately felt. Oftentimes, impact is noticed in accolades and public recognition.

Honda has continued to gain industry, national and international recognition for their efforts to reduce some of the byproducts associated with their operations. In 2011, Honda achieved its goal of sending zero waste to landfills from its manufacturing operations in North America. In January 2014, the U.S. EPA recognized two of Honda’s Ohio plants with Energy Star Certifications for the eighth year in a row. Energy Star certified companies perform in the top 25 percent of all companies in their industries in energy efficiency.

Not only does Honda efficiently use its energy, it also generates industry-leading solutions to reduce CO2 emissions. The company began 2014 with a new wind turbine farm used in the company’s Russell’s Point Transmission Plant in Logan, Ohio. Honda is now the first major auto manufacturer with a plant that gains the majority of its electricity from on-site wind power. This is just another “small” step for Honda making an impact through its operations and on industry standards.

CE3 engages companies like Honda to build networks of peers to share the ways in which they have incorporated energy or environmental practices into their operations and remained profitable. During CE3’s “Workshop for Efficiency, Emissions and Energy Choices in Ohio” in September 2013, businesses from industries as diverse as paper production to home insulation showed how such small changes can have large impacts on the environment—little by little. Many organizations discussed the steps they believed would yield the best results for their company to while complying with U.S. EPA requirements and maintaining profitability. Here are a few takeaways from the workshop:

  • Include everyone’s input. Ask for and incorporate ideas from employees ranging from the CEO to those on the shop floor. Each and every position brings a different perspective and fresh insight to an issue. Communication, cooperation and coordination are key to cutting-edge innovation.
  • Think small steps with a big impact. Gradual changes can still lead to large benefits over time without excessive costs. Each small step represents movement toward the goal of improved energy efficiency for a better environment.
  • Use federal regulations to your advantage. Federal regulations can be an opportunity for the company to set new goals and engage in new projects. Instead of thinking of regulations as restrictions, use them as a chance to be innovative and grow the company’s sustainability message.
  • Share your successes. Forums like CE3’s energy workshops and webinars are a great opportunity to share your progress and exchange ideas with a diverse group of energy efficiency leaders—your peers. Watch for strategies from different industries that can be fine-tuned and applied to your own.


Following all those steps may not lead to emissions reductions as big as Honda’s right away, but each small step can make large impacts in bettering the environment. Corporations, groups of people, and individuals can make a collective effort to improve our natural environment. In the words of renowned anthropologist Margaret Meade: “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it’s the only thing that ever has.

By Seaira Christian-Daniels, CE3 Undergraduate Research Scholar


Microgrids: An Integrated 21st-Century Solution


In 2012, Pike Research estimated that the global microgrid market would grow to US $17.3 billion by 2017. An impressive figure for certain. Even more impressive is the updated estimate released in early November by Navigant Research: by 2020, revenue from deployments of microgrids will be more than US $40 billion. They attribute this upward estimate in part to a recognition that the projects (new and retrofits) require a greater level of investment than previously thought.

North America continues to be a hotbed for microgrid development. The Navigant report finds that North America has a total planned, proposed and deployed microgrid capacity of 2.7 megawatts, a little more than half of which is currently online. This figure represents 65% of microgrid capacity worldwide. Commercial and industrial applications, currently estimated at 30 across the U.S., could climb to 300 in the next two years as the high-profile likes of Oracle Corp., EBay, University of California at San Diego, Lockheed Martin Corp., the U.S. Department of Defense and others champion their use. Green Energy Corp., a U.S. builder of commercial-scale microgrids, estimates that 24,000 U.S. commercial and industrial sites could be developed with large-scale microgrid conversions. And that doesn’t even include the other types of microgrids such as institutional/campus, community/utility, military and remote applications. For example, New York City and other East Coast communities are quickly reviewing microgrids to increase grid resiliency against extreme weather events. As we see time and time again, having power in times of crisis is invaluable for emergency response, healthcare facilities and rapid recovery.

So then, just how do we go from 300 to 24,000? Or even more?

First, let’s review the basics. A “microgrid” is defined as an integrated energy system of distributed energy resources and multiple electrical loads operating a signaled, autonomous grid – either in parallel to or islanded from the existing utility power grid. The types of technologies that can be integrated into a microgrid system are even more numerous than the applications themselves: distributed generation (DG), renewable energy and storage, energy infrastructure, demand-side management (DSM), and other energy-efficiency strategies. This bodes well for manufacturers of these applied technologies at home and abroad, such as Siemens, General Electric, ABB and more.

With increasing customer-owned distributed energy resource loads, it is essential to consider how these new resources will operate within the current wholesale market. Certainly, the entire notion of microgrids challenges the traditional business model of utility-based infrastructure and the system in use today. But considering that power outages cost business and government an estimated US $104 to $164 billion annually, there is ample reason for change. Other reasons are more application specific: the military seeks more reliability in the electric grid to circumvent vulnerabilities in their missions. Threats of cyber-attacks on critical infrastructure are partially driving the U.S. military interest. Disturbances in electric supply also impact industry and commerce causing significant losses of information, efficiency and productivity. If the trend for microgrid deployment continues, utilities will have to adapt to a new model of generation, transmission and distribution, and be open to the benefits that can result. Kevin Sullivan, business director at DNV KEMA, finds the following benefits for microgrid deployment:

  • Improves energy reliability and security of supply especially critical in healthcare and military operations
  • Net excess energy revenues and efficiencies (in the near future) will support funding of new grid investments
  • Ability to self-optimize assets with full self-control of energy operations where the microgrid operator has both supply and demand control and responsibility
  • Defers infrastructure investments to better match a visible and controllable load profile making peak load choices and longer-term investments more accurate
  • Enables emissions reductions that support sustainability targets when renewable energy assets are deployed and balanced
  • Supports a net zero strategy and the Microgrid Optimization Model
  • Increases reliability and back-up capability when storage options are deployed  
  • Allows management of generation variability with renewable energy sources

But 24,000? Rethinking the policies and promoting a supportive market environment are still necessary.

The Policies
Understanding how and when microgrids draw from and sell back to the grid is essential to the evolving energy paradigm in the U.S. Policies that tackle interconnection, pricing, net metering and standby rates will help microgrids to succeed in integrating into the existing business model and move it forward. Public policy leadership for successful grid modernization must provide:

  1. External funding from both public and private sources to promote realistic and cost-effective solutions, starting with pilot projects as necessary.
  2. Utility rate design that takes into account avoided costs for generation, transmission and distribution which are avoided by the microgrid and DG choice. The rate subsidies now in place subsidize the utility, and not the customer, through net metering.
  3. Tougher air conditioning, TV and appliance standards to ease summer peak challenges, and state-based policies that promote on-site power technologies and storage, increased energy-efficiency standards, cost-effective renewable resources, merchant transmission and enhanced building codes.
  4. Updated standby/back-up power rates that consider alternative rate designs without gouging customers.
  5. Amended franchise laws and “public utility” definitions that exempt DG and microgrids.
  6. Assurance that microgrids qualify for incentives in grant, tax code and public policy systems along with traditional generation, fuels and T&D to receive equal rewards and avoided cost recognition.
  7. Updated infrastructure considerations for utilizing public rights of way for grid connections.
  8. Ending state regulation as a “public utility” which is no longer necessary for steam, cooling and hot water sales from a microgrid or DG project.
  9. Ways to promote and leverage microgrid development partnerships between utilities, financiers, vendors, IT and telecom companies.
  10. Model rules and standards for shared energy and community development programs in rural and/or underdeveloped areas where density and customers offer a different scale and value proposition.

The Market Environment
Understanding the detailed economics of developing and operating a microgrid is critical for its success—all aspects must be considered. Different sizes, classes and locations of microgrid development targets will respond to different price signals—diversity in a microgrid portfolio optimizes its potential to effectively price products and offer services to its customers. Sophisticated tools can assess the economic, operational and emissions impacts of particular microgrid developments across various investment and deployment scenarios for the end-user’s benefit. For more on this topic, check out this IEEE report. Wholesale and retail electricity markets will need to adapt and harness the opportunities that microgrids represent for improved reliability, power quality, less price volatility, better control and smarter forecasts.

A thorough review and understanding of these issues by policymakers and project developers will help position microgrids as the “missing link” in leveraging energy security, state-based renewable portfolio standards and energy efficiency standards (such as Ohio’s Senate Bill 221 and those across the U.S.)—and could pave the way for the creation of a modernized, integrated North American grid based on electric stability, reliability, resiliency and security. For now at least, the piecemeal approach is gaining traction that cannot be ignored.

By Michael J. Zimmer, Executive in Residence, Energy and the Environment with Elissa E. Welch, Project Manager, CE3