Energetics webinar: The case for CHP, Industrial energy as a grid flexibility asset
A recap of the second CLEAResult Energetics webinar from our flexible grid technologies series, featuring David Gardiner (CHP Alliance), Bob Gemmer (CLEAResult Energetics), and Sam Gage (CLEAResult Energetics), moderated by Kiran Srivastava.
Quick summary
CHP is a century-old, highly efficient, dispatchable power technology that supplies only about 8% of U.S. generation today, despite an estimated 130 GW of untapped potential at facilities with the right heat and power profile. Our second webinar explained why CHP hasn't historically been treated as a grid asset and what could help unlock its value. Read the recap below – you don't need to have watched the webinar to follow along.
Why choose CHP now?
The panel opened by framing the pressure the U.S. grid is under, since that pressure is what makes CHP relevant again:
- U.S. electricity demand is rising fast after two decades of mostly flat growth, driven by AI-driven data center expansion, vehicle and building electrification, and industrial growth.
- NERC projects summer peak demand will grow 224 GW over the next decade, the fastest rate on record since 1995.
- Retiring generation is often being replaced by weather-dependent resources that can't always deliver when needed.
- Rising demand plus less dispatchable supply is exactly the gap CHP can fill.
What is CHP, and why is it different?
Before getting into barriers and fixes, the panel established a shared baseline on what CHP actually is:
- CHP has powered facilities for over a century by capturing waste heat that would otherwise be lost.
- That helps CHP reach 60–80%+ efficiency, versus roughly 45% for conventional generation.
- It's also dispatchable: it runs on demand rather than depending on wind or sun.
- About 81 GW is installed nationwide today, but it was built to serve individual facilities, not the grid, which is the gap the rest of this recap digs into.
Flexible CHP: The concept that changes things
That gap is exactly what "flexible CHP" was designed to close.
A decade ago, Bob Gemmer developed "flexible CHP": systems that serve a facility's own needs while also linking to the grid on demand, using advanced power electronics.
A 2020 Oak Ridge National Laboratory study found shifting CHP to flexible operation could make several thousand additional megawatts economically attractive for site owners while delivering real grid value.
The opportunity and what the grid gains
With flexible CHP established as a concept, the panel sized the opportunity and spelled out what a grid operator actually gets from it:
- About 8% of U.S. power generation today, despite roughly 130 GW of untapped potential at facilities with the right load profile
- Voltage support, frequency regulation, and black-start capability
- Grid inertia, via synchronous generators, which solar and wind can't provide
- Lower transmission losses from local siting
- Outage resilience, running on widely available natural gas
- Lower emissions, with the option to run on hydrogen or renewable methane
Why adoption has lagged
If CHP is this useful, the obvious question is: Why it isn't everywhere already? The panel pointed to a mix of structural and financial reasons, drawing on a recent Power Magazine analysis:
- Capital cost: $1,500 to $3,000 per kilowatt installed
- Regulatory friction: Interconnection rules built for utility-scale, not distributed, systems
- Operations and maintenance (O&M): Skilled technicians and service contracts add ongoing cost
- Structural: CHP has always been sold to serve one customer so its grid-wide benefits have gone unrecognized by regulators and market rules, according to David Gardiner.
- Customer priorities: CHP competes with lower-cost, easier-to-implement efficiency projects, adds complexity like new metering and interconnection agreements, and carries payback uncertainty when incentives aren't guaranteed to last, said Sam Gage.
The technical fix: Interconnection
Underneath those cost and complexity concerns is a more specific engineering problem, and Bob Gemmer argued it's the real bottleneck:
- The real friction isn't the CHP equipment, it's the grid interface.
- Anti-islanding protection forces CHP offline during grid dips, exactly when it's most valuable, even though the advanced inverter electronics to solve this are already standard in solar and wind.
- Interconnection review doesn't scale by system size.
- Metering needs to separately track exported power, host load, and heat delivery.
- The fix: a standardized, pre-certified interconnection package so systems don't each need a lengthy custom review.
- St. Joseph's Hospital Health Center in Syracuse, New York, had to prove its safety essentially from scratch, the kind of friction standardization would remove.
Installation incentives vs. grid services incentives
Even where the technical barriers get solved, a program-design gap remains between paying for CHP and paying for what it can do.
Most utility programs pay to install CHP but not for the flexibility it delivers afterward.
Some programs are shrinking further: Baltimore Gas and Electric ended its program, and Massachusetts may end its incentives by 2028, often in the name of emissions goals.
That's a mismatch: a 15 MW gas CHP unit displaces generation with roughly twice its marginal emissions, and at 90–95% capacity, it can match a comparably sized solar array's CO2 reduction in about eight years instead of 25.
One promising financing model is performance contracting, where an energy services company finances and operates the system for a share of the savings.
The data center angle
One audience question captured a seeming contradiction the panel turned into one of the biggest opportunities of the discussion. CHP's main byproduct is heat, and data centers need cooling, which sounds like a mismatch until you look closer.
The heat captured by a CHP unit can drive an absorption chiller, providing the cooling a data center needs without drawing additional electricity from the grid. The result: a data center that generates on-site power and uses captured heat for cooling can reduce grid electricity demand compared with one running power and cooling as separate systems.
At a moment when data centers are driving some of the fastest load growth the grid has seen in decades, that's a meaningful efficiency gain, and one the panel sees as one of CHP's most under-recognized opportunities.
What would unlock the opportunity
To close the discussion, Kiran asked each panelist the same question: if you could change one rule, practice, or requirement tomorrow, what would have the biggest impact on unlocking CHP as a true grid resource? Their answers mapped to the three barriers covered earlier – policy, technical, and relational – underscoring why the panel sees CHP as closer to ready than it might seem:
- David Gardiner: Reinstate CHP's eligibility for the federal tech-neutral tax credit. (CHP's own credit expired at the end of 2024; Treasury could restore it administratively.)
- Bob Gemmer: Standardize a pre-certified interconnection package with modern anti-islanding electronics.
- Sam Gage: Streamline interconnection timelines and build stronger utility-industry partnerships.
FAQ
What is combined heat and power (CHP)? CHP generates electricity and captures the resulting heat for on-site use, helping systems reach 60–80%+ efficiency versus roughly 45% for conventional generation.
What is "flexible CHP"? CHP equipped with power electronics that let it serve a facility's own needs while also supporting the grid on demand.
Why hasn't CHP been used more as a grid resource? It was historically built to serve individual facilities, and adoption has been slowed by high capital costs, complex interconnection rules, and utility programs that typically don't compensate CHP for flexibility.
Why is CHP relevant to data centers? The heat it captures can drive cooling equipment, helping data centers meet both power and cooling needs more efficiently than treating those systems separately.
This recap is based on Episode 2 of CLEAResult Energetics' Flexible Grid Technologies webinar series. Watch the full recording here.
Coming up next
Episode 3 will focus on Energy Storage and is set for this August. Follow CLEAResult Energetics on LinkedIn to make sure you don't miss an update. And if you want to know more on CHP, talk to our experts.