Michigan CAT Power Systems is a member of the Michigan Energy Innovation Business Council (EIBC) and a provider of turnkey Combined Heat & Power (CHP) systems and a host of other energy solutions, like solar firming and waste-to-energy. Michigan EIBC talked to Michigan CAT Advanced Energy Systems Manager Kevin O’Connell about the innovative ways companies are managing their energy use and the kind of barriers that are preventing more of these projects from developing. [This conversation has been edited for clarity and length.]

You all completed a project for Bell’s Brewery in Kalamazoo that is not only an interesting example of a value proposition in the clean energy business, but is also just downright cool. Can you tell us about it?

As Bell’s was growing, they ran into a situation where they were putting a larger burden on the local water treatment plant. They wanted to be a good corporate citizen.

They looked into putting their brewery waste into an anaerobic digester. It’s essentially a big keg with a set of bacteria they feed into it. That bacteria consumes the waste, and then produces methane. Methane goes into our generator to create electricity. Bell’s uses the electricity and captures the heat for hot water.

It’s a cost-saving measure: they’re using less water, less electricity and less natural gas to heat water.

What is the market for these kind of waste-to-energy projects like currently?

Most of our anaerobic digesters are being used to create renewable natural gas. Almost all instances where people buy our equipment is for renewable natural gas because tax credits make it more profitable. There are still healthy opportunities for growth in Michigan and the Midwest.

Anaerobic digesters might be novel to many, but really, it’s another example of combined heat and power. But CHP more typically uses natural gas-fired reciprocating engines. What is your CHP work like in Michigan?

You see sporadic CHP projects with larger users. We are doing power plants at places like University of Michigan, Michigan State, Eastern Michigan, Oakland University, a couple larger commercial pharmaceutical companies. Ford Motor Co. has a CHP project as part of their campus redevelopment.

We could absolutely do more. The Michigan Energy Office did a report that identified the viability of CHP systems in Michigan. It found 722 to 2,360 MW of commercially viable CHP projects that are not being done for a multitude of different reasons.

Fuel prices are very favorable for CHP in most areas of Michigan and Indiana. We recently commissioned a CHP project with Pepsi in Indiana – in Indiana not Michigan.

There are numerous opportunities in Michigan, but they are held back by standby rates that can high, and/or difficult to understand.

The larger users have a much broader or longer vision. U of M will not go away in 10 years. Unless you are somebody bigger like U of M with the resources and the longevity to see a project through, the other commercial users are more timid in terms of implementing or installing CHP.

Those standby rates, where the utilities impose extra fees on customers with backup power just for being connected to the grid, are also problems for customers that want to use solar or wind to reduce their energy peaks or another service. What is the status of your work in that space?

A lot of customers are looking at reciprocating engines to back up a wind or solar project. Compare it to battery storage. If you are looking at a 1-MWh energy storage system… You are in the $800,000 to $900,000 range for that one hour of output. For about 40% less of that cost, we can put in a reciprocating engine that can run for multiple hours. Not only are initial capital costs significantly lower, your flexibility is significantly higher because as long as there is a natural gas flowing, you can run the engines 24 hours a day.

Michigan utilities currently don’t in most cases allow customers to use their, say, onsite solar panels, to generate energy if the local grid is down. But there is no technical reason that could not happen, right?

Automatic transfer switches have been in use for decades. If you put in the right devices, you could use your solar during an outage. That makes sense to me.