HEC Report Encourages Cogeneration To Save Environment, Money

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December 17.2014 —  Indiana can cushion the sting of projected higher electric prices and adequately prepare for stronger environmental regulations over the next decade by creating a pro-business climate that encourages investment in Combined Heat and Power (CHP), according to a white paper released Wednesday by the Hoosier Environmental Council.

CHP — also known as cogeneration —  is the term for a suite of technologies that essentially recycles waste energy, rather than discard it into the atmosphere. CHP combines waste energy with a fuel source, such as natural gas or biomass, to produce additional output. It produces additional energy, adding as much as 2300 megawatts (MW) to Indiana’s energy capacity at a competitive price, while increasing the competitiveness and efficiency of state manufacturers.

Where a traditional coal plant is only about 33% efficient, CHP increases that productivity to 75% or more, making the process much more environmentally compatible.

Indiana already has about 2300 MW of CHP capacity deployed in a number of industrial, manufacturing and institutional settings, but at least that much remains “locked in” by antiquated regulatory prohibitions that prevent its robust development, the HEC study found.  That is enough to meet much or all the state’s projected additional energy needs in 2030, according to the latest forecast of the State Utility Forecasting Group.

“Technology is outpacing our regulatory model, and Indiana is behind the times in allowing energy markets to respond,” said Robert K. Johnson, HEC Energy Counsel and CHP report author. “We have the ability to make our energy production more efficient, lower bills and make Indiana manufacturing more lean at the same time that we lower carbon emissions. The key is to create the proper economic signals to allow full development of CHP as an essential component of Indiana’s energy future.”

To do that, the study recommends nine steps to alleviate regulatory and economic barriers preventing Hoosiers from seeing the full benefit of CHP, including:

Net metering, interconnection and standby rate policies that fairly allow development and deployment by sending the correct price signals to Indiana businesses and consumers with CHP potential;

Feed-in tariffs that allow CHP producers to export their production, rather than utilize it entirely onsite;

Financial incentives for CHP projects that contribute to the state’s emission-reduction goals;

Feasibility studies for both public and private facilities to better identify potential resources;

Portfolio and Integrated Resource Plan standards that explicitly identify and account for CHP development; and

Reform of franchise laws that needlessly tie energy production to the whims of incumbent utilities.

Through the aggressive adoption of policies and regulations to support CHP development, Indiana can lower energy costs, lower emissions, and create jobs – well beyond a business-as-usual scenario, the study finds.  That capability is especially key today, as Indiana tackles growing energy challenges, including:

Rising electricity prices due to aging power plant and the rising cost of coal;

The need for new generation in the face of the upcoming wave of coal plant retirements;

Increasing concern about the resiliency and security of our electricity infrastructure given increased extreme weather events and the rise of cyber-terrorism, which poses a real threat to the grid; and

The need to lower greenhouse gas emissions to comply with federal legislation and to mitigate climate change in the long term.

Governor Mike Pence is expected to release his State Energy Plan before the 2015 Indiana General Assembly convenes. HEC has encouraged the Administration to include robust deployment of CHP, as well as renewables and conservation.

The complete HEC study, “Combined Heat and Power: Creating Energy Solutions for Indiana,” can be found at


[Photo of CHP plant courtesy Cornell University]

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