WHITEFISH, MT / July 24, 2014 / Interest in combined heat and power, CHP or cogeneration as its often called, is continuing to grow in the United States, according to market intelligence firm Industrial Info Resources. The researchers are tracking 477 CHP-related projects in Texas and Louisiana alone with a total investment value in excess of $64 billion. There are several drivers behind increased implementation of highly efficient onsite CHP systems, which simultaneously produce electric and thermal energy from a single source, including meeting tightening environmental emission standards, stabilizing natural gas prices (often used as the source fuel) and President Obama’s goal of 40 gigawatts of new CHP by the year 2020. Of course, there’s always the balance sheet too, which benefits from the result of CHP’s 90% efficiency, versus only about 33% for energy from a traditional power station. The breadth of the potential CHP domain is wide, with applications for the scalable systems spanning millions of buildings across the country from multi-unit housing to massive industrial projects.
Companies like U.S. Steel (NYSE: X) have ditched their old natural gas boilers at their steel production factory in Portage, Indiana, opting instead for a CHP system that is run by Portside Energy, a division of Primary Energy (TSX: PRI), to deliver most of the plant’s electricity needs and meet all its steam and hot water requirements. By using CHP, U.S. Steel has reduced costs and slashed its carbon footprint at the plant by 180,000 tons of carbon dioxide annually. They’re not the only steelmaker in the area running CHP. At mills further up the Lake Michigan shoreline, ArcelorMittal (NYSE: MTCN) is also running CHP systems owned by Primary Energy for most of its energy needs.
In addition to the long-term savings on utilities and mitigated emission benefits of CHP, companies can also be rewarded through government incentives, such as the CHP Acceleration Program in New York. Tecogen Inc. (NASDAQ: TGEN) said at the start of the month that it sold three CHP systems comprised of one or more of its InVerde 100 CHP modules, so-named because it is a 100 kilowatt machine, to an unnamed boutique hotel group in New York City in an order worth about $1.76 million. Along with saving an estimated $69,000 to $89,000 each year per unit, the project will qualify for upwards of $1,800 per kilowatt in incentives, meaning that the hotels will get a payback on their investment in just two or three years, according to Tecogen.
Return on investment typically comes quickly with Tecogen products as compared to other leading alternative energy sources, such as fuel cells and microturbines. Using the EPA Catalog of CHP Technologies as a point of reference shows that it takes 27.5 years and 6.03 years for payback on a 200 kW fuel cell and 65 kW microturbine, respectively. This compares to an average of 4.2 years for a Tecogen InVerde unit.
Tecogen, which completed its IPO in mid-May, followed that with more new sales, this time to YMCA facilities in Meriden and Milford, Connecticut. In order for CHP to maximize efficiency, there needs to be a high demand for use of the "waste" heat that is generated in the production of electricity, making athletic facilities, as well as hospitals, hotels, nursing homes and schools, prime candidates for cogeneration systems. The systems going to the YMCAs will supply 60 kilowatts of electricity to each facility, while also providing hot water for building heating, domestic hot water, and pool heating.
The INV-100 unit the newest Tecogen CHP product and features advancements not found in the company’s CM-60 and CM-75 units. The primary change is pairing the engine with a permanent magnet generator and feeding the electrical output from the system through an inverter, making it easily connectable with the local utility grid. In addition to other benefits, the new technology allows the system to serve as a back-up generator, meaning that a facility’s important loads get automatically shifted to the INV-100 system in the event of a utility grid outage. When the grid is back up and running, the system automatically reverts back to its normal load.
In an 8-K filed with the SEC on June 3, Tecogen shows that it has shipped 2,000 units (with prices ranging from $50,000 to $300,000) in its history and booked $15 million in revenue in 2012 through its sales reps covering markets in 11 countries. Half of the company’s revenue is derived from long-term service contracts that accompany system installs.
Tecogen seems to have set itself aside from competitors with its portfolio of technologically advanced turnkey cogeneration systems. This is discernable from the fact that Tecogen products meet strict California emissions standards and are the only engine-driven CHP systems to earn pre-qualified status by NYSERDA (New York State Energy Research and Development Authority). Lending credence to Tecogen innovation are ongoing long-term tests in a Southern California water district evaluating Tecogen’s patented emission system on a large Caterpillar engine. The state that is always a trendsetter for low emissions has a serious problem with erratic control of pollutants coming from engines generating power in more remote locations, which represents a nice opportunity for Tecogen to penetrate a new market with its bolt-on system to consistently and reliably regulate emissions.
Cogeneration systems have been around for more than a century, but are gaining even more traction lately with companies examining their books for long-term cost-saving measures and events like the recent launch of the Orbiting Carbon Observatory this month to measure global concentrations of carbon dioxide. Tecogen looks well aligned for growth both as an onsite utility provider and as a pioneer in the industry. Even as a leader in the space, the company has only established a footprint in 24 states, leaving it plenty of headroom for domestic expansion as it continues its international initiatives as well.
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SOURCE: Emerging Growth LLC