​Response to the Duke CHP overview document

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The Duke CHP planning document posits that the proposed CHP plant will reduce greenhouse gas emissions by 46,000 MTCO2e/year (i.e. metric tons CO2-equivalents per year) relative to the baseline Duke Climate Action Plan (CAP) emissions of 261,000 MTCO2e/year (pages 16-17). This estimated 18 percent reduction accrues from the reduction in natural gas use at the existing Duke University steam plants due to the purchase of steam generated from waste heat at the CHP plant. Since there will be no change in electricity purchased from the grid and since the single CHP plant will have an insignificant impact on the carbon intensity of the Duke Energy electricity generation fleet, emissions from the CHP plant are not directly taken into account in calculating the reduction in CAP emissions in the CHP planning document.

The CHP document also argues that the CHP plant will reduce greenhouse gas emissions in North Carolina under the assumption that Duke Energy will reduce electricity production at a more carbon-intensive generation facility by an amount equal to the CHP plant electricity output (page 17). On this basis, the university concludes that the proposed CHP plant will have a positive impact on both Duke University CAP emissions and North Carolina’s greenhouse gas emissions (page 25).

We disagree with this assessment from an accounting perspective, and further argue that broader fairness and leadership perspectives must be brought to bear in deciding how best to proceed.

Accounting for CHP plant emissions

The university’s assertion that emissions associated with electricity production at the CHP plant should not be directly accounted for in the Duke CAP emission calculations is inappropriate. The shortcoming of this approach can be illustrated by considering a hypothetical alternative—that Duke Energy proposes to build a CHP plant powered by biogas that only produces 90 percent of the thermal output of the currently-proposed CHP plant. Under the university’s accounting principle, the current fossil-fuel based CHP plant proposal would still illogically win out as it produces more steam than the hypothetical alternative and its carbon footprint of electricity generation is omitted in the CAP calculations. Furthermore, the university’s accounting principle is inconsistent with its own statement that the future ‘ability to burn biogas will further reduce CAP emissions’ (page 25). If emissions associated with electricity production at the CHP plant are not directly accounted for in the Duke CAP emission calculations, then there is no incentive from a CAP perspective to convert the CHP plant to burn biogas.

Additionally, the assumption that the CHP plant will reduce fossil-fuel use associated with electricity production in North Carolina is tenuous at best. There is no guarantee that Duke Energy will in fact reduce electricity production at a more carbon-intensive generation facility, and it is unrealistic to expect that this can be carefully monitored and verified going forward in time. In fact, the only unequivocal impact for NC is that a new electricity generation facility with an emission factor well above the current Duke Energy fleet average will be added.

We argue that a more appropriate approach would be for the university to directly include the CHP plant emissions in its CAP calculations. This can be done by assuming that the university will de facto derive a portion of its electricity needs from the output of the CHP plant (with the university taking responsibility for all the CHP plant emissions), with the remainder obtained from Duke Energy (with emissions calculated using current Duke Energy fleet emission factors). Under this alternative assumption, the net greenhouse gas emission benefits to Duke University are dramatically reduced since the carbon intensity of electricity produced at the new CHP plant is considerably higher than the carbon intensity of the current Duke Energy electricity generation fleet. This alternative scenario is in fact presented as Scenario 1 on page 18 of the planning document, showing a net emission saving of only 25,000 MTCO2e/year, rather than the 46,000 MTCO2e/year savings that are highlighted in the CHP planning document.

We further note that (i) transmission losses associated with the CHP plant must be considered in a manner similar to the BAU calculations shown in Scenario 1—since electricity generated will be fed into the grid, all losses must be consistently accounted for using grid average loss factors, and (ii) natural gas use on campus will in fact increase, and the upstream leakages associated with this incremental natural gas increase must be accounted for. We estimate that accounting for both these factors will further reduce the emission savings to about 10,000 MTCO2e/year, corresponding to a net CAP emissions reduction of less than 4 percent. We call on the university to accept this alternative accounting principle to estimate the CAP emission savings that will accrue from this project.

Fairness and leadership

The proposed CHP plant will cost Duke Energy about $55 million, with Duke University contributing an additional $5 million to enable the thermal output of the plant to be used on campus. It is estimated that Duke University will recover its outlay in less than 2 years owing to savings in fuel costs at its existing steam plants. At first glance, this seems to be a very advantageous proposal from Duke University’s perspective. But it raises a basic question—is Duke Energy really paying for the CAP benefits that Duke University will accrue? Duke Energy has indicated that it will seek a rate increase from the North Carolina Utilities Commission (NCUC) to offset its financial cost and to seek an adequate return on its investment in the plant. If this is the case, the project in effect will be financed by all Duke Energy customers in the state, while Duke University will claim all the purported greenhouse gas emission benefits associated with the project. This does not seem to be in keeping with fundamental notions of fairness.

We therefore call on the university to commit to not supporting CAP proposals which involve costs being passed on to the public at large – or alternatively, to commit to passing on some of the monetary benefits to the public by investing a portion of the accrued fuel cost savings in new community or clean energy projects in North Carolina.

From a broader perspective, we believe that the proposed fossil fuel CHP project sends the wrong signal with regards to Duke University’s commitment to leadership on climate change mitigation. We believe that the CHP project can in fact provide an opportunity for the university to reaffirm this commitment. For example, Duke Energy recently announced plans to use biogas at four of its electricity plants in North Carolina. We call on the university to require biogas use at the CHP plant from the outset as well—or at least, to require a contractual obligation to convert to biogas use in a specified period of time.

Another aspect of leadership is to more broadly and fully engage the university community, especially students, in a discussion of the pros and cons of the proposed project and potential non-fossil fuel alternatives. Planning the energy future of the campus by fully engaging the university community presents an ideal opportunity to realize this vision and to discuss how the university’s mission to train and prepare students for the future can be reconciled with supporting additional investment in fossil fuels that so clearly threaten that future. The current proposal and dialogue, however, leaves us with the impression that ‘the train has left the station’ with respect to the CHP plant.

We call on the university to clearly dispel this notion and to seize this opportunity to fully engage all stakeholders in the decision-making process.

Prasad Kasibhatla and Drew Shindell are professors in the Nicholas School.


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