Leading the Renewal of American Manufacturing: Ohio’s Combined Heat and Power Program

On March 9, 2012, the Ohio Public Utility Commission hosted a workshop for the Pilot Program on Combined Heat and Power, which it has launched in partnership with the U.S. Department of Energy (DOE). The workshop convened industrial companies, energy experts, and state-level policymakers to discuss the role of Combined Heat and Power (CHP) technology in complying with upcoming federal Boiler MACT (Maximum Achievable Control Technology) standards. The CHP pilot program in Ohio is an important precedent that recognizes the potential for U.S. industry to raise its energy productivity while improving the health of workers and surrounding communities.

Boiler MACT Background

The Boiler MACT rule, which is expected to be finalized by the U.S. Environmental Protection Agency (EPA) this spring, requires boilers and process heaters to reduce emissions of air toxics including mercury, hydrogen chloride, particulate matter, and carbon monoxide. These pollutants can cause a range of damaging public health effects, from developmental disabilities in children, to cancer, heart disease, and premature death. Emissions limits established by MACT are calculated based on the performance of the best-performing 12% of existing sources. The MACT approach to emissions limits was established under Section 112 of the 1990 Clean Air Act Amendments, and has also been applied to the power sector in the 2011 Utility MACT standards.¹ In addition to protecting public health, final promulgation of the Boiler MACT rule will stimulate investment that creates opportunities to improve U.S. industrial competitiveness while reducing toxic emissions.

Once implemented, Boiler MACT will require 12% of all U.S. “major source” boilers² to meet emissions limits, while the remaining 88% can comply through “work practice standards” (essentially, periodic tune-ups). Boilers subject to emissions limits are those with capacity above 10 million Btu per hour, are used more than 10% of the year, and burn fuels other than natural gas or refinery gas. There are three basic compliance pathways for boilers to achieve emissions limits required by Boiler MACT:

1. Switching input fuels to natural gas or refinery gas,
2. Retrofitting existing affected boilers, or
3. Installing CHP technology.

The purpose of the Public Utility Commission of Ohio workshop was to help stakeholders better understand the technical and economic feasibility of the third, CHP-based compliance pathway. A special characteristic of the Boiler MACT rule is its inclusion of output-based emissions standards (OBES) as an alternative compliance option that incentivizes investment into CHP and other energy efficiency technologies.³ This compliance pathway creates an opportunity for U.S. industry to cut costs by reducing energy inputs, which also serves to insulate businesses from energy price volatility.

Ohio’s Boilers and Pilot Program

Ohio is a prime state to initiate the Boiler MACT CHP Pilot Program in the sense that manufacturers located there consume more energy than in any other state in the Midwest region. According to the EPA’s Information Collection Request (ICR) database, Ohio has 340 major source boilers, of which 77—including Ohio’s oldest boiler, from 1923—would be subject to Boiler MACT emissions limits.⁴ Ohio’s sectors with the most affected boilers are utilities and chemical manufacturing. Among U.S. major source facilities, 86% of boilers are used for industrial activity, compared to 8% for institutional and 6% for commercial enterprises. The Ohio Pilot Program will facilitate cost-effective compliance with Boiler MACT standards by providing site-specific technical and cost information to affected facilities, and by assisting interested facilities in CHP implementation.

Potential Benefits of Boiler MACT Standards

The primary purpose of Boiler MACT standards is pollution reduction, which is particularly beneficial for communities located near these units. The EPA has estimated that Major and Area Source Boiler MACT standards would avoid up to 8,100 premature deaths, 5,100 heart attacks, and 52,000 asthma attacks. On an aggregate level, the EPA estimates that total benefits of the major source Boiler MACT rule will be worth $27 to $67 billion in 2015, versus an estimated annualized cost of $1.5 billion.

While compliance will pose technical and economic challenges for affected manufacturers, the flexible administration and unique design of the Boiler MACT standard also creates an opportunity for renewed investment into a more energy-productive U.S. manufacturing sector. Through its participation in the interagency pilot program on CHP technical assistance, Ohio’s Public Utilities Commission will help manufacturers in their state rise to the challenge of regulatory compliance by capturing the potential for energy efficiency.