Home Energy Management Cogeneration Cost Incentives to Aid Hotel Industry in Coming Years

Cogeneration Cost Incentives to Aid Hotel Industry in Coming Years

Dan Burke

Energy costs are soaring, forcing countless hotel owners and managers to search for more cost-effective, clean energy alternatives to the traditional power grid.

Unsurprisingly, the adoption of distributed power generation is also rising—especially in the combined heat and power (CHP) market, which is expected to reach $35.2 billion by 2026.

This growth is spurred by the willingness of government programs to provide support and incentives for its implementation. With an estimated $26.6 billion in incentives and clean energy initiatives over the next five years, the booming CHP market is expected to become more accessible to a range of hotels, providing them with improved energy- and cost-efficiency options.

What is Combined Heat & Power?

Before we examine the incentives, it’s important to understand what makes combined heat and power important. CHP systems utilize on-site natural gas engines to generate electricity while simultaneously reclaiming heat (cogeneration) off the engine. This provides thermal energy for other heating and cooling processes within a facility, including domestic hot water, pool water, comfort space heat and more.

The Department of Energy has praised CHP as an efficient method of providing energy necessities while also reducing costs and lowering the overall carbon footprint. CHP systems provide an operational efficiency of 85 percent compared to that of a central power plant, which are only 30 percent efficient on average, because traditional plants lose energy in discharged heat and electrical losses during transmission. In addition to efficiency, CHP also improves reliability and can be used in conjunction with microgrids to ensure the lights stay on when the traditional grid goes down.

How Will CHP Support the Hotel Industry?

Over the next few years, as reducing carbon emissions and avoiding the effects of climate change become a major worldwide priority, the landscape of how energy is generated and distributed in the United States will change dramatically. To display this, the Combined Heat and Power Alliance released a report last November detailing the many ways CHP will play a role in future electrical grids and gas systems. To combat America’s aging and dysfunctional electric grid, future grids will call upon distributed energy resources such as CHP during periods of high demand to improve reliability.

When specifically looking at the hospitality industry, scalable on-site cogeneration systems can reduce energy costs by up to 50 percent in facilities of any size, while ensuring guests never experience a cold shower, an uncomfortably hot room or the inconvenience of an electricity blackout. This makes CHP systems the ideal solution for hospitality facility managers by:

  • Reducing operating costs;
  • Improving return on investment;
  • Enhancing the guest experience; and
  • Offering continuous guest comfort. 

CHP Success Stories

The Marriott Boston Quincy is a dynamic property said to be capable of helping guests to relax and rebalance. With its contemporary rooms and their plush pillowtop beds, deluxe room amenities, posh fitness center and indoor pool—there are plenty of things to do and experience. Behind the scenes is a CHP system, helping to keep things up and running. CHP units from Dalkia Aegis, EDF Group were installed in the sprawling 456-room, 9-story facility. In addition to reducing the property’s annual carbon emissions by a significant 197 tons, they will save the hotel more than $200,000 a year. 

Similarly, the Saybrook Point Inn and Marina along the Connecticut shoreline contracted with Dalkia Aegis to engineer and install a highly efficient Aegen Thermopower 75kW. The recovered engine heat will offset nearly all the thermal demand presently supplied by the resort’s oil burning boilers. Savings are expected to average $69,000 per year but the reduction in pollutants and greenhouse gases is equally profound. In addition, the on-site system will supply 31 percent of the resort’s electrical demand, thereby displacing electricity produced by highly inefficient central power plants fed into the grid.

Available Incentives

The major issue with the adoption of this technology is the traditionally high upfront installation costs—committing to energy efficiency is a high bar to surmount for any hotel, and the original monetary investment can sometimes make it impossible. Government incentives and company power purchase agreements (PPA) have been created to subsidize these costs and allow more widespread integration. 

Incentives for energy efficient technology include the Environmental Protection Agency’s Combined Heat and Power Partnership, which allows CHP providers to supply their customers with a knowledge base for tools, policy information and other resources to promote the environmental benefits of CHP as an affordable, reliable and low-emission energy source. Some of the major incentives listed by the EPA and provided at the state level include, but are not limited to:

  • NYSERDA: The New York State Energy Research and Development Authority offers up to $2.5 million for systems up to 3 MW in size. To qualify, most systems must be black-start capable and installed to provide priority power during grid outages.
  • Mass Save: As a result of the Massachusetts Green Communities Act of 2008, CHP projects are eligible for funding in Massachusetts through multiple utility companies. All owners of CHP systems are eligible, but the best applications are typically those with high annual hours of operation with near full use of the thermal output.
  • New Jersey Clean Energy: New Jersey is committed to enhancing energy efficiency throughout the state with generous incentives for CHP installations. Savings are calculated by performance thresholds and system specifications.
  • Efficiency Maine: Efficiency Maine’s Commercial and Industrial (C&I) Custom Program offers financial incentives ranging from $10,000 to $1 million to Maine businesses, nonprofits, institutions, and governments toward distributed generation projects, including CHP system installations.

While the state incentives are enough to allow some customers to surmount the upfront costs of CHP, some will still require additional support, which is where company-supported incentives come in. For instance, businesses can take advantage of PPAs like the Dalkia Aegis Shared Savings Program, in which the company designs, installs, owns, maintains and fuels a CHP system at a customer facility and provides the produced electricity at a discounted rate. It’s all part of an effort to support the primary available incentives and to ensure the affordability of this critically important technology, which we hope leads to a greener, stronger, and more sustainable energy-efficient future for everyone.

Dan Burke is Vice President of Sales and Marketing for Dalkia Aegis, EDF Group. With a business management degree and over 20 years of professional experience, Dan Burke capably leads all national business development, marketing, advertising and sales activities. Based in Holyoke, Mass., Dalkia Aegis is the leading provider of Combined Heat and Power (CHP) systems in the Northeast, Mid-Atlantic and California. For more information about the complete line of state-of-the-art cogeneration products and services, visit AegisCHP.com.