Doubling Industrial Energy Efficiency

Organization: Pew Environment Group

An Opportunity for America's Manufacturers and Power Generators

Each year, America’s utilities and factories send enough heat up their chimneys to power all of Japan annually. But with proven technologies, we can harness that waste energy and put it to work heating buildings and generating additional electricity—dramatically reducing electricity costs, making our industries more competitive, keeping people employed, and creating skilled jobs.

Industrial energy efficiency technologies such as combined heat and power (CHP), waste heat recovery, and district energy have been used in one form or another for more than 100 years. These technologies capture energy produced during electricity generation to heat additional buildings and use industrial waste heat as a fuel source to generate more electricity. Using these technologies allows a business to achieve energy efficiencies of up to 80 percent.

Generating more power for less

The United States has the capacity to generate 82 gigawatts (GW) of electricity—about 8 percent of total U.S. production—from facilities using efficient technologies. Other nations have much higher percentages of electricity generation from such systems, including global leader Denmark, which generates more than 50 percent of its electricity from CHP. Italy, Germany, China, Austria, the Czech Republic, Poland, Hungary, the Netherlands, Latvia, Russia, and Finland all produce more electricity from CHP than does the United States currently.

According to the Oak Ridge National Laboratory, doubling our current power generation from industrial energy efficiency technologies can be done in a cost-effective manner over 10 years and could reduce annual U.S. energy consumption by 3 percent.

The United States began to emphasize industrial energy efficiency in the aftermath of the oil price spikes of the 1970s and enactment of the Public Utility Regulatory Policies Act of 1978. After waning in the late 1980s, industrial energy efficiency came into favor again in the 1990s, when the Clinton administration aggressively encouraged the use of these technologies. New CHP peaked in 2001, when 6 GW was added. This aggressive increase in capacity was due in part to the CHP challenge—a goal of doubling CHP capacity from the 1998 level by 2010. However, the pace of adding capacity has slowed. In 2009, less than 0.1 GW of industrial energy efficiency capacity was added.

Increasing efficiency creates jobs, private investment, cost savings

Significantly increasing our industrial energy efficiency could create as many as 1 million highly skilled jobs, according to Oak Ridge National Laboratory. Further, improving the efficiency of our power generation could result in more than $200 billion in private investment over 10 years, according to a study by the Industrial Energy Consumers of America, which represents many of the country’s largest manufacturers. With rising energy prices affecting companies of all sizes, using heat that’s currently wasted and recycling energy can reduce costs and give businesses the flexibility to invest that money elsewhere.

Distributed power generation increases grid stability

In addition to saving companies money from reduced energy costs, industrial energy efficiency systems such as CHP or waste heat recovery can protect installations from unexpected power outages caused by disasters or other disruptions. When Hurricane Katrina struck in 2005, Mississippi Baptist Medical Center in Jackson, Miss., was the only functioning hospital in the Jackson area on the first night of the disaster, thanks to its gas turbine CHP system. The hospital was able to remain open and operational despite the loss of grid power, and it provided electricity, hot water, and cooling services to residents in need.

During the August 2003 blackout that affected areas in the Midwest and Northeast, many manufacturers, food processors, and other facilities with CHP systems remained open while the rest of the area was without power for as many as 10 days—resulting in a nationwide economic loss of $4 billion to $10 billion.

Policy matters

In February 2012, Reps. Charles Bass (R-N.H.), Jim Matheson (D-Utah), Peter Welch (D-Vt.), John Barrow (D-Ga.), Robert Dold (R-Ill.), and Michael Fitzpatrick (R-Pa.) proposed the Smart Energy Act (H.R. 4017). In Title II, Section 203, the measure proposes to require the secretary of energy to develop a strategic plan to double the U.S. production of electricity from CHP and waste heat recovery to at least 170 GW by 2020. The U.S. Chamber of Commerce, the world’s largest business federation, supports the Smart Energy Act. The bill has also been well-received by groups active in industrial efficiency such as the Alliance to Save Energy, the Alliance for Industrial Efficiency, and the Information Technology Industry Council.

An investment tax credit (ITC) also exists for companies that choose to invest in industrial energy efficiency technologies. However, the credit is limited to 10 percent for the first 15 megawatts (MW) of a project that is up to 50 MW in total size. These limits prevent large industrial users from accessing the tax incentive to install energy-efficient technologies such as CHP. Additionally, the credit does not extend to waste heat recovery systems, a technology that uses relatively low temperature heat to make electricity. Several bills in Congress address these issues: H.R. 2784 and H.R. 2750 call for an increase in the size of the projects eligible for the tax credit, and H.R. 2812 and H.R. 2750 expand the ITC to include waste heat recovery systems.

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