Statement of the American Chemistry Council, Arlington, Virginia

The American Chemistry Council (ACC)* strongly supports Administration and Congressional efforts to develop a national energy strategy to ensure dependable, affordable and environmentally sound energy resources, now and for the future. Energy production, supply and conservation should be vital components of that national energy strategy, and we commend this Committee for its attention to policies that will encourage and promote these objectives. The ACC appreciates the opportunity to comment on these important issues.

A comprehensive national energy policy is vitally important to ACC members. We use energy products as fuel, electricity and steam for our operations. In addition, and this distinguishes us from most other sectors of the economy, we use energy as raw materials (feedstocks) for our production processes. From these energy inputs we make many of the products that allow others to conserve energy and reduce emissions. The chemistry industry uses 6.9 quads of energy, 7% of total U.S. energy consumption. Of the chemistry industry’s consumption, 51% is used as feedstocks. Natural gas comprises 41% of the industry’s energy consumption. Chemistry industry natural gas consumption represents 12% of total U.S. consumption of natural gas and 29% of total consumption by industry (excluding electric utilities).

Unstable markets and rising domestic energy prices are forcing key segments of the chemical industry out of world markets, resulting in layoffs and plant shutdowns.

Because many chemical plants are large users of both steam and electricity, they are ideally suited for cogeneration, which is the sequential production of electricity and steam (useful thermal energy) from the same energy input. Cogeneration units producing steam and electricity attain double the fuel efficiencies of a typical electric utility power plant.

Cogeneration units producing steam and electricity readily attain fuel efficiencies of 65%-75%, as compared to 35% for a typical electric utility. Even advanced gas turbine combined cycle electric utility units can only achieve a 50% overall efficiency. These same advanced gas turbines will achieve 75%-80% overall efficiency in a cogeneration application.

The reason for the efficiency advantage is that a chemical plant uses most of the steam from the cogeneration unit in its chemical processes. Without cogeneration, this steam would have to be supplied in some other manner (boiler steam, direct heating with natural gas, etc.). In contrast to cogeneration technologies, a typical utility unit would simply condense the steam and release the waste heat into the atmosphere or cooling water.

Cogeneration offers significant environmental benefits. By combining the production of steam and power, cogeneration facilities burn far less fuel and release fewer emissions, including greenhouse gas (CO₂) emissions, than the combined emissions from separate utility power plants and industrial steam generation facilities.

Cogeneration units built close to the sites where their power is consumed reduce power losses during transmission, alleviate transmission congestion and reduce the need to build additional transmission lines in many regions of the country. Reliability of power supplies to all electricity consumers is therefore improved as more cogeneration units generate "on-site" power.

The chemistry industry’s cogeneration units provide steam and electricity to their own chemical plants and are connected to utilities’ transmission and distribution systems. Section 210 of the Public Utility Regulatory Policies Act (PURPA) ensures that any excess electricity from a qualifying cogeneration unit can be sold to a local electric utility. Equally important is that this section ensures that a qualifying cogeneration unit can receive backup and maintenance power from the utility at just and reasonable, nondiscriminatory rates.

Given the environmental benefits of cogeneration, its importance to the chemistry industry and the current need for every available kilowatt of power, now is not the time to repeal these provisions of PURPA. Properly structured energy policy legislation should spur the development of new cogeneration facilities that will help alleviate power shortages and transmission congestion that many high-growth states and regions are facing.

A company installed a new, highly efficient, state-of-the-art gas turbine generator with a large heat recovery steam boiler. This significantly reduced use of an aged cogeneration unit and boilers with significant NOx emissions, displaced purchased electricity, and enabled intermittent sales of excess electricity back to the grid. Total plant NOx emissions are lower than before even with much higher output, and energy savings are about 19.2% per unit of production.

A company installed a second gas turbine cogeneration system to meet expanded steam needs. The new unit has duel fuel capability and uses byproduct gas from another on-site process as well as natural gas. Use of byproduct gas displaced purchased natural gas and ended flaring of the byproduct gas. Energy savings are about 30%, with associated emissions reductions including NOx reductions from selective catalytic reduction.

Government can support and facilitate energy production, supply and conservation throughout the economy in a number of ways.

One important way government can help is to devise and implement appropriate fiscal and monetary policies to ensure the continued health of the U.S. economy. A healthy economy facilitates company earnings that can be used for investment in new plant and equipment and the turnover of capital stock, and for private research and development.

Congress can also promote energy production, supply and conservation by providing financial incentives to industries that invest in highly efficient cogeneration units. Incentives might include faster capital cost recovery for cogeneration assets (e.g., shortened depreciation schedules), and amendment of technical rules that sometimes require a cogenerator to pay taxes on behalf of an electric utility to which the cogeneration facility is connected.

The American Chemistry Council appreciates the opportunity to present its views to the Subcommittee on Select Revenue Measures. As an industry leader in cogeneration, the business of chemistry will work with the Subcommittee, the Committee on Ways and Means and the Congress to develop targeted incentives that will effectively promote these highly efficient forms of power generation.