At a recent U.S. Senate hearing, Texas was heralded as an energy policy leader. That Texas is singled out as an energy leader is not uncommon, but what made this compliment so interesting is that it was for an obscure bill passed last year by the state Legislature to allow cogeneration facilities to sell electricity to multiple customers in microgrid-type arrangements.

Cogeneration is electric generation, but instead of dumping the wasted heat from the process into the air or a body of water like a typical power plant, the heat is captured and used. The captured heat is used for an industrial process or repurposed for heating and cooling. With cogeneration (also referred to as "combined heat and power" or CHP) the energy contained in the fuel is maximized, and the fuel is typically natural gas.

Before the Legislature's recent action, cogeneration facilities could only sell electricity to one customer. This restriction was, in part, keeping otherwise good energy projects from moving forward. This change is important in the ongoing discussion about how Texas will supply enough power to keep pace with industrial expansion and vibrant population growth.

Texas' leading industries, such as chemical processing and refining, need heat. Where these or other concentrations of manufacturing facilities are located are typically the same locations where cogeneration facilities can best provide heat and power. Facilities such as hotels, hospitals, food processors and data centers are also good candidates for cogeneration.

This brings us to the ongoing discussions about the ability to supply adequate power to the Texas energy grid. Some say that the consumers must provide ongoing and stable compensation to power plant owners in order for them to invest in new generation, while others say that adding controls into the system to manage the demand is the solution. What is absent from the discussion is the need for more distributed generation.

Distributed generation is electricity that is produced onsite where it is needed, and cogeneration is the most effective form of distributed generation that can help Texas meet its energy needs. The cogeneration systems operating at The University of Texas in Austin and Texas A&M University are award-winning models of efficiency that yield tremendous cost savings helping to funnel more dollars into education and research. Other cogeneration systems found throughout the state are helping to keep energy costs low, preserving jobs.

From an environmental perspective, cogeneration systems do not use water like traditional power plants, and their high efficiency means much lower air emissions. Economically, most of the component parts used in cogeneration systems are built or assembled in Texas with installations designed by Texas engineers and ultimately constructed by skilled workers, pipe-fitters and welders.

Currently, Texas has a capacity to generate 77,000 megawatts of power. An analysis by the Public Utility Commission done in 2008 suggested that there is potential to add 13,400 megawatts of new cogeneration power by 2023. This figure could very well be much higher because, due to the abundant supply of shale natural gas, many manufacturers and chemical processors have announced plans to make $50 billion to $75 billion in new investments in the state over the next five to 10 years.

For a wide variety of reasons, the installation of cogeneration systems in Texas has stalled. The new law that allows the creation of cogeneration microgrids is expected to spur some projects (although not in municipal-owned or cooperative electric utility areas, because they wanted to be excluded from the bill), but perhaps the biggest gain to be made is through implementation of a renewable portfolio standard-like concept aimed at cogeneration and waste heat to power projects.

Since the Texas Renewable Portfolio Standard was created in 1999, wind power capacity in Texas has more than quadrupled to 12,355 megawatts, leading all states in the nation. If this same type of policy was applied to cogeneration and waste heat to power, it could add even more capacity but it would be reliable and secure and placed at the exact locations throughout the state where the energy is needed.


Paul Cauduro is director of the Texas-based Cogeneration Industries Council.