Building combined heat and power: a key strategy for GHG reduction in China

This post will describe building combined heat and power (BCHP) and what role it could play in helping China reduce it’s emissions in the near term, and also what role it can play in laying the groundwork for China to significantly reduce it’s emissions in the long term.

BCHP
Building combined heat and power (BCHP) refers to technologies that simultaneously provide both electricity and heating and/or cooling inside buildings. The idea is pretty simple: take all the waste heat that comes from normal power generation processes and use it for something useful, namely heating the building. Using the fuel for two processes really drives efficiency. Most BCHP systems operate between 70% and 90% efficiency, as compared to the mid-50% range for high efficiency natural gas plants and the mid-30% range for a standard coal plant.

Buildings are uniquely well-suited for combined heat and power because they almost always need both electricity and heat and/ or cooling (the thermal heat can be used to drive cooling processes). Generally, BCHP systems are sized to provide enough power to the building to match the building’s electrical or thermal baseload, i.e. the lowest amount of energy that will be used during the day or throughout the year. BCHP will provide the baseload and then the grid or other onsite renewables will provide power to meet peak loads.

CHP is not new to China, although it has primarily been used in larger applications, and not sized down to the building level. According to a recent report led by the US EPA (PDF), China already produces 13.5% of it’s electricity from CHP units. Most of this CHP capacity is coal-fired district heating units. The report notes that although China’s share of CHP electricity generation is growing,

China [still] has a large district heating sector that relies primarily on heat-only boilers, rather than on more efficient and less polluting CHP. Compared to other countries with large district heating sectors and many industrial consumers of heat, China has a relatively low share of CHP in both electricity and heat production.

So although I will focus on BCHP in this post, wider adoption of CHP for district heating would help reduce the energy use and carbon emissions related to the inefficient Chinese space heating system I described last week.

BCHP advantages
BCHP are good sources of carbon reductions for two reasons. First, the high efficiency of BCHP means 25% less fuel is used for the same level of heating and electricity as compared to conventional separated heat and power systems. 25% less fuel means 25% less emissions, both global GHG emissions and locally harmful pollutant emissions. Second, the fuel for BCHP is most often natural gas, which provides even further emission savings. Since natural gas is cleaner than coal, ie produces less CO2 per unit of energy, this “fuel switching” provides additional GHG reductions. As this analysis by the World Alliance for Distributed Energy (WADE) shows, BCHP could save significant amounts of carbon emissions in China:

Importantly, unlike other “clean” fossil fuel technologies like coal CCS, BCHP is a well proven technology, with many units around the world working reliably. The US already gets about 8% of it’s electricity from CHP, most of which is in the form of distributed BCHP units. Transferring this know-how from the US to China could be a key piece of a program of technology transfer that must be expanded as a centerpiece of US-China collaboration on climate change.

Most importantly for China, the economics work for BCHP. As the WADE analysis shows, the cheapest way for China to meet its expected electricity demand in 2020 is through DE, or distributed energy, such as BCHP, thanks to much lower transmission and distribution (T&D) costs:

So as China inevitably gets serious about reducing emissions, BCHP as well as community level CHP will be one of the obvious places to start. Indeed, China’s NDRC has already announced a goal of 200 GW of CHP generation by 2020, which is expected to account for 22% of installed power capacity at that time.

Is CHP a good long-term strategy?
Although BCHP would certainly be a good step forward in the sense that it results in serious emissions reductions in the short-term, one problem is that it might be considered a “second best” solution over the long-term. As Michael Hoexter wrote recently in Green Thoughts,

A carbon pricing system, especially in its first years, will encourage investment in what might be called “local minima” or the currently less expensive carbon reduction technology or practice. In some cases, these local minima may be zero-carbon or potentially part of a net zero carbon emitting economy, but in most cases these choices will entail the more efficient use of fossil resources or switching to “second-best” alternative fuel systems like substituting natural gas for petroleum... However commitments to second-best, long-lived infrastructure with a useful lifetime of 40 or 50 years that commits us to a lot of carbon emissions during that period appear to be ultimately a waste of resources.

The 25% GHG emissions reduction that BCHP provides is certainly a big reduction, but does not get to the 80% below 1990 CO2 emissions levels by 2050 considered necessary by IPCC scientists. Of course, if China were also to switch from coal to natural gas as they move to BCHP, the emissions savings could be even larger and make BCHP look better.

However, widespread fuel switching in China would depend heavily on a serious build out of natural gas infrastructure. According to the US EPA report, natural gas only provides about 3% of China’s current energy needs, although this figure has been growing recently.

China is also pouring lots of money into building out its natural gas infrastructure. But in a zero carbon world, it seems likely that even natural gas will eventually have to be abandoned, making it a “second best” option and ultimately a waste of resources. On the other hand, WADE suggests that since natural gas is limited, China should maximize the value out of it by investing in high-efficiency BCHP:

The fact that gas reserves are located in western China and the biggest demand for gas use in buildings is in the eastern part of the country means that bringing gas to market requires large-scale capital investment. To get the most value from infrastructure investment the Chinese will want to ensure it is burned in a manner which minimizes waste. BCHP is perhaps the best application for optimising the value of the incoming gas supplies.

Biofuels and biodiesel may also soon become low-carbon realities and help displace some of the natural gas requirements. Although given the water difficulties China is facing, I find it hard to believe that biofuels will be anything but a “second best” solution for China.

CHP is a good move forward for China
Despite the serious issues relating to fuel above, I believe BCHP is a key step toward the long-term imperative of a carbon neutral China for three reasons.

First, a build out of BCHP will provide a learning curve for the Chinese to figure out how to make distributed generation work. As I mentioned in my post on the Pearl River Tower, China’s current grid policy does not allow for “running the meter back”, which prevented the installation of CHP at that project. If China starts ramping up BCHP, this policy will likely be changed as more and more building owners will want to have both BCHP and access to the grid. Moreover, China's grid operators do not have much experience integrating distributed and centralized power generation. More grid-connected BCHP would push grid operators and regulatory bodies to create a "smart grid" that can seamlessly take both distributed and centralized power and provide it to customers. A smarter, more interconnected grid is a key part of further development of net zero energy buildings and distributed renewable power generation, which will likely be the centerpieces of a future low carbon society. BCHP would be a good next step toward a smart grid.

Second, wide scale installation of BCHP will help slow the growth of coal plants and avoid “locking in” future CO2 emissions. BCHP technology is a proven, cost-effective way to reduce China’s carbon emissions in the short-term. Given China’s still unresponsive attitude toward climate change, BCHP likely represents one of the few real short-term alternatives to continued growth in Chinese coal power plants.

Third and most importantly, BCHP will spur more systems thinking, particularly a focus on the inherent linkages between power plants and buildings. For most of the modern area, power plants have been built further and further afield. This makes obvious sense for coal plants, since no one wants a coal plant and all the emissions it produces in their backyard and would much rather have it “out of sight and out of mind”. However, with much cleaner burning BCHP power generation, the logic of far flung power starts to disappear and “relocalizing” generation begins to make sense. As power generation becomes relocalized and integrated into buildings, designers will be forced to think about the buildings energy load and how to provide the power for that load. In the extreme, if it becomes the norm for building owners to foot the bill for their power rather than just outsource it to utilities, designers will become much more conscious of the energy impact of their design decisions.

Ultimately, better design will have to be the solution to the climate crisis. Widespread adoption of BCHP and relocalization of power generation are steps China can take right now to help drive better design.