Industrial Onsite Energy Production Concentrated

IndustrialMore than 90 percent of the industrial generation capacity is concentrated in five industries: chemicals, paper, and petroleum and coal industries account for more than 80 percent of onsite industrial generation; primary metals and food industries represent the remaining 20 percent.

According to the US Energy Information Administration, onsite industrial generation accounts for about 3 percent of current US generating capacity. About 4 percent of total MWh of electricity was generated from these sources in 2012, the latest year for which final data are available.

Combined heat and power (CHP) facilities tend to be built with certain industries that have heat or steam demands that directly affect their economic potential and profitability. Continuous operations with fairly constant heat or steam demands, coupled with meeting partial electricity demands, bolster the technical potential for adoption of an industrial CHP, or cogeneration.

There is potential for more industrial cogeneration, which offers potential energy saving and cost reductions compared to the separate production of electricity and heat. Federal, state, and local policies promote CHP. However the number of manufacturing facilities suggests that CHP still faces significant challenges.

In addition to the price sensitivities to the future cost of electricity and fuels prices, there are other notable concerns particular to CHP investments identified by industry:

  • High or higher back-up changes or stand-by rates offered to industrial plants that want to pursue cogeneration while still maintaining a connection to the electric grid
  • Possible changes in CHP-related tax issues
  • State environmental policies
  • State siting and permitting requirements
  • Various federal standards
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