We of a certain age remember the black-and-white television advertisements for Wonder Bread, which "builds strong bodies 12 ways." That slogan frequently comes to mind as the United States Combined Heat & Power Association (USCHPA) has begun to explain, during recent months, the many benefits of clean distributed generation (DG) and particularly of combined heat and power (CHP) to members of Congress, state and federal regulators, and other decision-makers.

No, we don't call it "Wonder Power." But we do go through a baker's dozen of the important benefits offered uniquely by DG and CHP:

• Power quality and reliability rise to the standards of a computerized economy where often even momentary outages—inevitable with any central grid—impose intolerable costs on users.
• In the case of CHP, fuel-efficiency gains effectively cut the amount and cost of fuel to half or a third of that required to achieve the same generation and thermal energy separately.
• CHP, by the same token, reduces by half or a third the pollutants and greenhouse gases emitted per unit of useful energy output.
• Transmission and distribution line losses are eliminated—avoiding loss of up to 20% of the power generated on a peak day on congested central power systems.
• Active grid support—generation and reactive power downstream from constraint points—effectively creates new capacity on upstream transmission lines and distribution circuits.
• The need for new transmission lines, which are almost impossible to build when landowners object in any event and which require years to clear permitting obstacles, is lessened. New transmission and distribution costs are several times the cost of generation capacity, so avoiding them avoids massive rate-base increases and consumer-rate hikes.
• Responsiveness to unpredictable demand growth, based on short lead-times and on modular technologies already on the shelf in proven forms for many size classes and prime mover technologies, is better and still is improving through ongoing innovation.
• New generation capacity without ratepayer cost obligations, built through the private investment of owners and operators, effectively reduces the cost of power on the grid.
• In contrast with the equipment replaced, there is little or no siting impact—often located innocuously inside existing factories or buildings, with smaller footprints or effects on the local environment.
• Wide dispersal of power generation provides security benefits in an era when central power systems potentially are vulnerable to terrorists and to weather.
• Because they require thermal energy or power for their own purposes and not merely to deal onto the grid, these power generators support competitive markets rather than speculate in them.
• In cases where natural gas is the fuel of choice for CHP, the natural-gas supply and infrastructure is optimized, achieving useful power output where already thermal energy from gas often was being required.
• The development of a new industry will support thousands of high-value manufacturing and maintenance jobs and has the potential to be a major export industry for the US over time.

Reciting these potent attributes to decision-makers has a positive effect. A typically skeptical local, state, or federal politician or regulator, however, is usually quick to ask the $64,000 question (or, respectively, the $64 million question or the $64 billion question): If DG and CHP have so many compelling advantages, why aren't they taking off on their own? Why do you need legal or regulatory changes or other help from me?

Here's the answer: Of the benefits listed previously, only the first two accrue to the benefit of the developer or owner of the DG/CHP unit. The other 11 offer huge benefits to the broader public interest—the community at large—but do not improve the bottom line of the company or individual making the financial investment and taking the risk on the project. Unless the regulatory and policy structure acknowledges these benefits and seeks them deliberately in a manner that has economic meaning to private actors, these public benefits are unlikely to be achieved fully.

As altruistic as DG and CHP developers and operators are, we nonetheless cannot build into our financial calculations the value of benefits that do not come back to us in dollars and cents. At least if we try, our bankers tend to tune us out. As a result, if society wants the social and system benefits of DG and CHP, policy-makers and regulators must make decisions that will allow the ability to monetize these benefits. Many a project that failed "to pencil" would be operating today if there had been a meaningful financial reward for its beneficial effects on the air, the landscape, the grid, the broader economy, or national security.

Hence comes the mission of USCHPA: not only to demonstrate the benefits that are achievable through DG and CHP technologies but also to achieve recognition by policy-makers and regulators that these critical public benefits warrant meaningful incentives that can go through to the bottom line for those who achieve them.

At a minimum, supporters of DG and CHP should not be punished, but unfortunately at this writing, those who would offer to build a strong electrical system in these 13 benefits too often are impeded by deliberate policy rather than assisted by it. They may face punitive utility rates for standby capacity or backup power to be interconnected in parallel with the very grids they would free from massive incremental investments and unreliability. They may be denied a reasonable or prompt interconnection from the very utilities whose systems they would strengthen at zero ratepayer cost. They may be assigned higher utility rates based on accusations by ratepayer advocates of avoiding system costs that they are in fact helping to control, postpone, or eliminate. They might not be able to afford to proceed in the face of requirements of egregiously expensive, best-possible emission controls on technologies that would—if completed even without additional controls—dramatically reduce pollution from the status quo, much less in the face of the conventional alternative.

So much must be done to spotlight the public benefits of DG and CHP for those who determine the policy environment in which DG and CHP are struggling to fulfill their promising destiny. USCHPA, as the leading advocacy group working for clean DG and CHP at the national level—as well as through a group of regional coalitions at the state and regional levels—is vastly outstaffed and outspent by those with a vested interest in the status quo. Fortunately it helps to have such an arsenal of understandable, factual, and compelling advantages to talk about. It helps even more as the many participants in this diverse sector increasingly understand the merits of united action and decide to play their own part in the efforts by joining USCHPA and its regional coalitions. The more the emerging DG/CHP industry can marshal its disparate members to spread the good news about these benefits, the more likely policy and regulations will allow them to be recognized in a manner that can be accounted for on the bottom line of new projects.

JOHN W. JIMISON is executive director and general counsel for the US Combined Heat & Power Association.

DE - Jan/Feb 2004