With the approaching retirement of many aging, inefficient, polluting, coal-fired power plants, utilities are wondering what to replace them with. Biomass combined heat and power can be a smart long-term investment in many regions.

In a recent blog post at GreenBiz.com , Neal Elliott of the American Council for an Energy-Efficient Economy asks: “Is combined heat and power finally ready for prime time?”

Combined heat and power (CHP) systems capture far more energy value from the fuel that is burned (e.g., coal, oil, natural gas, or biomass) than is typically captured in a conventional power plant. CHP plants can achieve energy conversion efficiencies of 85 percent or more, compared to only about 30-35 percent efficiency for a conventional coal-fired power plant. The difference is in the fact that the conventional power plant wastes much of the energy from burning fuel up the chimney. The upfront costs of CHP systems can be relatively high compared to building a conventional power plant, but the payback over the long term can be significant.

One would think CHP would be a no-brainer for business and utility executives planning for their future energy needs, but according to Elliott, it is not. Today’s energy investors seem to be looking for bigger returns, sooner, on smaller up-front investments. The institutional market for CHP (e.g., universities, hospitals, and district energy systems), which tends to have a longer term investment horizon, seems to be the biggest market for CHP with significant activity today.

From our vantage point here at EESI, this seems to be true for biomass CHP systems, as well. A number of biomass CHP projects are under way on university campuses, including Eastern Illinois University and the University of Missouri . Other examples of institutional biomass CHP projects in development or in operation include a new district energy biomass CHP system in Montpelier, VT , a landfill gas CHP system at the University of New Hampshire , and a waste-to-energy CHP district energy system in Detroit . Many urban sewage treatment plants have deployed or are developing biomass CHP systems, as well.

More than seven gigawatts (GW) of biomass CHP capacity were on line in the United States in 2009, according to a presentation by Bruce Hedman, at ICF International . For decades, forest products industries, such as pulp and paper mills, have used woody biomass residues – by-products of their production processes – to provide electric power and thermal energy for their operations. Other biomass feedstocks can include residues from agriculture, livestock manure, urban sewage, and biogenic portions of urban waste streams. Biomass CHP systems can be installed in many types of buildings – from residential complexes, to commercial buildings and institutions, district energy, and industrial scale.

In a 2008 white paper entitled Initial Market Assessment for Small-Scale Biomass-Based CHP , E. Brown and M. Mann of the National Renewable Energy Laboratory predicted that the best opportunities for developing biomass CHP in the future will be in urban areas where there are significant biogenic waste streams and concentrated heat and power demand, and in small- to medium-sized agricultural, food processing, and forest industries, which are located near biomass feedstock supplies, and which have sufficient year-round on-site heat and power demand. For example, locally-produced biomass CHP will become a more competitive source of renewable energy for ethanol plants and integrated next generation biorefineries when natural gas and electricity prices start rising again.