Several opportunities exist to substantially improve the efficiency of how we generate and distribute electricity and thermal energy. The technology used in combined heat and power (CHP)/district energy systems is well established, while the smart grid is a cutting edge application of information and communication technologies. These highly efficient generation and distribution systems reduce our total energy use while providing the same amount of heat and power to the end user. This means fewer greenhouse gases and other air and water pollutants produced by fossil fuel combustion, enhanced energy security by reducing peak load demand, and overall cost savings. Building CHP/district energy infrastructure and grid upgrades require large upfront investments and would be job-intensive.

Combined Heat and Power
Combined heat and power (CHP), also known as cogeneration, is the simultaneous production of electricity and heat from a single fuel source. Approximately two-thirds of the energy used to create electricity in thermal power plants is lost in the conversion process. CHP is a system that reclaims some of this lost energy by using the "waste" heat to provide heating to the power plant facility or to buildings that are connected to the power plant by a steam pipe network known as district energy. CHP increases the energy efficiency of power generation to up to 90 percent and is best suited for urban areas, industrial parks, college campuses, military bases and other communities that are close enough to their power sources to use the cogenerated heat.

CHP is well-established worldwide, particularly in the Scandinavian countries. In Denmark, CHP systems account for over 60 percent of total power production. However, the global penetration of CHP is less than 10 percent. World leaders at the 2007 G8 Summit issued a declaration which calls for nations to “adopt instruments and measures to significantly increase the share of combined heat and power in the generation of electricity.” The International Energy Agency also has recommended CHP, noting that CHP “is an integrative technology that can make significant contributions to reducing emissions of carbon dioxide and air pollution and to increasing energy security.”

District Energy
In a district energy system, a central source produces steam, hot water or cold water, which is pumped through heavily insulated pipes to provide space heating/cooling or hot water for surrounding buildings. This allows individual building operators to save space and money by removing the need for individual heating and air conditioning equipment. District energy systems are often used to distribute the heat generated by combined heat and power systems, although they can be used independently as well.

District energy systems have been used for hundreds of years and today are primarily found in downtown areas, college campuses, and hospitals. As of 2005, there were more than 500 district energy systems in the United States.

Design of a CHP/District Energy System

Smart Grid
The term “smart grid” refers to the application of communication and information technology to the electric transmission and distribution system. As one part of this new network, in-home displays provide real-time information on energy usage and cost, allowing consumers to adjust their habits to save money and reduce peak load demand. In addition, grid monitoring and control devices are used by utilities to anticipate, detect, and resolve problems quickly, minimizing power disruptions and making the grid more reliable and secure. These devices also allow for greater integration of distributed energy (for example, from rooftop solar panels) and intermittent renewable energy sources. And a two-way flow of information and electricity will be necessary for wide scale use of plug-in electric vehicles, which will simultaneously increase demand on the grid and provide opportunities for distributed electricity storage in car batteries.

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