By Mackinnon Lawrence
During the lull between the Republican and Democratic conventions, President Obama issued an Executive Order designed to spur investment in energy efficiency at industrial facilities. Seeking to expand the use of industrial combined heat and power (CHP) technologies at food processing, pulp and paper, chemicals, metals, and oil refining operations to 40 gigawatts (GW) by 2020, or by 50 percent over current usage, the announcement is one component in a larger set of efforts aimed at improving energy efficiency and reducing carbon emissions in the industrial sector.
Beyond improving energy and environmental performance, CHP can deliver a range of financial and operational benefits to facility operations. At its core a distributed generation (DG) technology — meaning it generates onsite energy rather than generating it centrally at a power plant and then transmitting it across power lines — CHP can reduce dependence on fossil fuels and utility-supplied electricity for a range of processes.
Still a nascent industry and a relatively minor player in industrial CHP, industrial biorefining is not explicitly mentioned in the “Executive Order on Accelerating Investment in Industrial Energy Efficiency”, as Obama’s September order is officially called. The U.S. EPA’s Combined Heat and Power (CHP) Partnership, however, has identified industrial biorefining as a strategic market for expanding CHP, identifying a strong technical fit for CHP with dry mill corn ethanol refineries.
EPA’s estimates show a potential reduction of approximately 15 percent in the energy intensity of dry mill ethanol production. Energy is the second highest cost of ethanol production. Taking into account coincident electric and steam demands and near round-the-clock operations, CHP technologies have significant potential to scale alongside biofuel and bio-based chemical production.
The Challenge of Integration
While plans for future integrated biorefineries typically include CHP, the biofuels industry in the United States has been slow to adopt such technologies at scale. Just 15 percent of the current ethanol refinery fleet across the country utilizes CHP.
In Brazil, bagasse — the fibrous waste product remaining after sugar is extracted from the cane — is routinely burned onsite to provide heat and power for the production of ethanol from sugarcane. At most facilities, it produces sufficient heat energy to supply all the needs of a typical sugar mill, with energy to spare. At least 7 GW of cogeneration capacity was produced in 2011 at sugar processing mills in 13 countries throughout Latin America, Africa, and Asia Pacific, with significant expansion expected over the next decade.
With spark spreads improving due to the recent flood of cheap natural gas in the United States — spark spreads measure the difference in the price of electricity compared to natural gas — CHP’s recent boost coincides with a likely expansion in advanced biorefinery facilities. In Pike Research’s recently published Industrial Biorefineries report, we predicted that installed global biorefining capacity would expand 9.5 percent annually, reaching 81 billion gallons a year (BGY) by 2022.
Assuming CHP’s market share holds at 15 percent of global biorefining capacity over the next decade, global CHP capacity at biorefineries could reach approximately 20 GW. In the United States, that represents roughly 4.4 GW of installed CHP capacity at biorefineries, or more than 10 percent of the target set out under the Obama Administration’s Executive Order.
Of course, technology and process integration within industrial facilities is no small feat. Advanced biorefineries already face the challenge of integrating multi-feedstock sourcing, handling, and storage as well as sometimes several emerging biomass conversion technology platforms. With high capital costs already a challenge for first-of-kind facilities, integrating CHP technology with a multi-year payback is not high on the agenda for operators of these facilities. A profitable CHP sector will require favorable policies, cooperative utilities, and mechanisms to pay for the costly transmission lines needed to carry excess power to end users. Cogeneration in Brazil’s sugarcane ethanol complex was made possible by such factors converging in recent years.
At INEOS Bio’s Vero Beach, Florida biorefinery, the sale of power to the grid alongside ethanol production from waste is a key component of the project’s projected profitability and may provide a model for future expansion. The use of CHP helps optimize the onsite use of power and heat, thereby maximizing the potential sale of power back to the grid. Ultimately, this results in additional revenue, a scarce resource in today’s immature advanced biorefining sector.
Industrial CHP expansion could accelerate if integrated biorefineries are able to scale rapidly over the next decade. Ideally, cogeneration technologies integrating bio-digesters, microturbines, and fuel cells would be baked into conversion platforms, but given the many feedstocks and CHP configurations that exist, itís difficult to apply a one-size-fits-all approach to replicate projects across the industry. Standardizing configurations of integrated biorefineries will be a key driver of future CHP expansion across the industry.
Mackinnon Lawrence is a Senior Research Analyst at Pike Research, a part of Navigant’s global energy practice. He contributes to the firm’s Smart Energy practice, with a focus on advanced biofuels and bioenergy.
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