SEPA COMBINED HEAT AND
POWER PARTNERSHIP
Financing CHP Projects at Wastewater Treatment
Facilities with Clean Water State Revolving Funds
Combined heat and power (CHP), also known as
(regeneration, can be a reliable, cost-effective
solution for managing energy costs at wastewater
treatment facilities (WWTFs).1 The wastewater
treatment process can be energy-intensive, using
pumps, motors, and solid handling and aeration
equipment day and night. Energy is also
consumed for building ventilation and lighting.
Energy costs account for approximately 25 to 35
percent2-3'4 of total operating costs at conventional
WWTFs.5 By capturing waste heat from electricity
generation, CHP systems improve fuel efficiency,
and when sized appropriately, they improve
power availability and thermal energy supplies and
provide energy cost savings.
Depending on the local weather conditions at the
WWTF, the specific anaerobic digestion
treatment process employed, and other factors, a
CHP system might be able to provide all the heat
required to operate the anaerobic digestion
process. In the event that the CHP system does
not provide adequate heat, the shortfall is
typically met by backup natural gas fired boilers.
Should a CHP system provide heat in excess of
the anaerobic digestion heating requirements, the
additional heat can be used to heat water for
treatment processes, and/or can provide space
heating or space cooling (via an absorption
chiller) for onsite facilities.
Obtaining capital with a suitable return on
investment is often the primary challenge to
installing a CHP system at a WWTF. Public funds
such as EPA's Clean Water State Revolving Fund
(CWSRF) program, w hich provides low-interest
loans for publicly owned WWTFs,6 can help
overcome this financing challenge.
This fact sheet:
•	Describes the CWSRF, how it works, and
how it applies to CHP project development.
•	Provides examples of CHP projects that have
been funded through the program.
•	Presents a case study that highlights how a
publicly owned WWTF in Michigan used a
CWSRF loan to develop CHP.
Financial Challenges to CHP Development
A WWTF typically has a backup power or
emergency generation system to ensure temporary
power availability when there is interruption in
the grid power. With on-site energy production
using CHP, a WWTF will be able to ensure that
power is available at all times—even during grid
outages. As is the case with other equipment
installed at a facility, initial capital, installation,
and permitting costs will be incurred, as well as
periodic operating costs. The average initial
capital costs for a CHP system are between $700
and $3,000 per kilowatt (kW),7 depending on the
specific CHP technology employed.8 These costs
are recovered through energy savings from the
CHP system over the life of the equipment.
The structure of financing will impact project
costs, management, and flexibility, as well as
affect a WWTF's long-term return on investment.
In some cases, WWTFs have been able to pay for
CHP projects through their operating budget;
however, CHP financing typically comes from
local or state bonds, partnerships with local
utilities or third-party owner/operators, or
state/federal loans and grants.
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HOW IS CHP USED AT WWTF?
CHP is the production of both power arid heat from a single fuel source. It can be an effective solution at WWTFs that have or are
planning to install anaerobic digesters to stabilize sewage sludge. The biogas from the anaerobic digester is used as "free" fuel to
generate electricity for the facility using a turbine, microturbine, fuel cell, or reciprocating engine. Excess electricity can be sold
to the grid. Exhaust gas (i.e., the "waste heat") is captured in a heat recovery unit where it used for digester heat loads and space
heating. A typical internal combustion (IC) CHP system at a WWTF is shown in the figure below. Depending on the facility
configuration, CHP can also be used for sewage sludge incineration. When effectively installed, CHP systems can offset a
significant portion of a WWTF's electric power demand.
Engine Exhaust
Exhaust Heat
Exhaust Heat
Recovery
Electricity
®
a Energy
DIGESTER
GAS
Internal Combustion
Engine
Compressor
Digester
Gas
Treatment
Jacket Water
Lube Oil
Anaerobic
Digester
Recovered
Heat
Other
Heat Uses
Process
Heat
Process Flow Diagram of a Typical IC Engine CHP System at a WWTF
Source: Evaluation of Combined Heat and Power Technologies for Wastewater Treatment Facilities. September 2012.

Internal Combustion Engine CHP System at Bergen
County Utility Authority, Little Ferry, New Jersey
Source: Evaluation of Combined Heat and Power Technologies
for Wastewater Treatment Facilities. September 2012.
The Clean Water State Revolving Fund
(CWSRF)
Authorized under the 1987 Clean Water Act
Amendments (Title VI), the CWSRF program
funds water quality improvement projects such as
the construction of publicly owned WWTFs and
the implementation of nonpoint source pollution
control and estuary protection projects. The
program has assisted a range of borrowers,
including municipalities, communities of all sizes,
farmers, homeowners, small businesses, and
nonprofit organizations. Each state and Puerto
Rico operates a CWSRF. As of June 2014, the
CWSRF has provided over SI00 billion, funding
more than 33,000 low-interest loans for
wastewater treatment, including CHP, nonpoint
source pollution control, and estuary
management projects.
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How the CWSRF Works
Under the CWSRF program, the U.S.
Environmental Protection Agency (EPA)
provides grants to states to capitalize their
own CWSRF programs. States are required to
match 20 percent of the federal funding they
receive. To meet higher demand for funds,
some states increase their available funds in
some years by selling bonds. CWSRF monies
are then loaned to communities, and loan
repayments are recycled back into the
program to fund additional water quality
protection projects. The revolving nature of
these programs provides for an ongoing,
long-term funding source.
In addition, each state is required to provide a
portion of its grant to subsidize the cost of
projects, generally in the form of principle
forgiveness on some loans. The percentages for
these two requirements change from year to year
based on the annual Appropriations Act; the
dollar amount varies significantly from state to
state.9
Each state is responsible for operating its own
CWSRF program. States can structure their
programs based on their specific environmental
needs and use a variety of assistance options,
including loans; refinancing, purchasing, or
guaranteeing local debt; and purchasing bond
insurance. Each state CWSRF program
establishes its own interest rate, ranging from 0
percent to just below the market rate. Some states
set their rates at 75 percent of the market rate.
The loan repayment period is for 30 years or the
useful life of the project, whichever comes first.
CHP PROJECT DEVELOPMENT RESOURCES
Project Development Handbook
The CHP Project Development Handbook provides
information, tools, and insights on project development,
CHP technologies, and the resources of the CHP Partnership.
Available at: http://www.epa.sov/chp/proiect-
development/index.html.
c/CHPP (CHP Policies and Incentives Database)
To assist project developers, policy makers, and others find
financial incentives and state/federal policies that support
CHP project development, the CHP Partnership maintains
c/CHPP, an online database that allows users to search for
CHP policies and incentives by state or at the federal level.
Available at:
http://www.epa.Eov/chp/policies/database.html.
Also, many states offer preferred loan terms to
disadvantaged communities and priority projects.
The national average for CWSRF interest rates is
currently 1.7 percent.
Each state is required to provide a portion of its
annual capitalization grant to further subsidize the
cost of projects from fiscal years 2010 — 2014.
Additional subsidization generally takes the form
of grants or principle forgiveness on loans. The
authority to provide additional subsidization was
made permanent by the 2014 Water Resources
Reform and Development Act, which also
stipulates that states are no longer required to
provide a minimum amount of additional
subsidization.
How the CWSRF Is Applied to CHP
Publicly owned WWTFs are eligible to receive
CWSRF loans for the planning, design, and
MORE INFORMATION ABOUT THE CLEAN WATER STATE REVOLVING FUND
•	EPA's CWSRF Webpage: http://water.epa.sov/srants fundins/cwsrf/cwsrf index.cfm.
•	How the CWSRF Prosram Works: http://water.epa.sov/srants fundins/cwsrf/basics.cfm.
•	Fact Sheets and Other Publications: http://water.epa.sov/srants fundins/cwsrf/factsheets.cfm.
•	Green Project Reserve: http://water.epa.sov/srants fundins/cwsrf/Green-Proiect-Reserve.cfm.
•	Regional and State Contacts (provides access to details about each state's CWSRF):
http://water.epa.sov/srants fundins/cwsrf/contacts.cfm.
To apply for a CWSRF loan, contact the applicable state CWSRF program. Details about each state's CWSRF
program can be accessed at: http://water.epa.sov/srants fundins/cwsrf/contacts.cfm.
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construction or improvement of their facilities,
including the capital costs associated with
installing CHP systems, digester gas pretreatment
equipment, other retrofits, process improve-
ments, and upgrades. Projects addressing the
energy needs of a WWTF have always been
eligible for CWSRF loans.
Created by the American Recovery and
Reinvestment Act of 2009 and perpetuated
through annual appropriation acts from FY 2010
to 2014, the Green Project Reserve (GPR)
requires every state's CWSRF program to use a
portion of each year's capitalization grant for
green infrastructure, water efficiency, energy
efficiency, or other environmentally innovative
activities. The GPR has contributed to the
number of CHP projects that have been funded
at WWTFs.
CWSRF loans have been used to finance the
installation of a single CHP system as well as
larger facility upgrades, in combination with the
construction of new or upgraded anaerobic
digesters that include new CHP projects or
retrofits. Table 1 lists examples of CHP projects
that have been funded by CWSRF loans, and it
provides a cross-section of the size and type of
these projects. A facility could apply for funding
for the CHP system alone or it could be a part of
a larger application package. The state makes its
own determination of the number of projects that
can be funded in a year. Most project funding is a
combination of public and private funding, but
projects can be fully funded through the CWSRF.
The state determines whether the CHP project is
fully or partially funded by the CWSRF, based on
the applicant's need.
The loan application process is straightforward
and can be completed with guidance from the
state environmental agency. Typically, an
applicant works with the state CWSRF contact to
Table 1: CHP Examples at Wastewater Treatment Facilities Installed Through CWSRF Funding
Facility Name
Location
Year of
CWSRF
Funding
CHP System
Size
CHP Prime
Mover
Year CHP
Became
Operational
Beaver Dam Municipal
Water Treatment Plant
Beaver Dam, WI
2009
788 kW
Reciprocating
engine
2011
City of Covington
Wastewater Treatment
Plant
Covington, VA
2009
43 kW
Stirling engine
2010
Delhi Charter Township
Wastewater Treatment
Plant
Delhi Charter
Township, MI
2007
60 kW
Micro turbine
2009
Hampton Roads
Sanitation District Atlantic
Treatment Plant
Hampton Roads,
VA
2012
1.6 MW
Reciprocating
engine
2013
Johns town-Glovers ville
Joint Wastewater
Treatment Facility
Johnsonville, NY
2010
400 kW
Reciprocating
engine
2010
Lewis ton Auburn Water
Pollution Control
Authority Wastewater
Treatment Plant
Lewis ton, ME
2011
460 kW
Reciprocating
engine
2013
Medina Wastewater
Treatment Plant
Medina, NY
2010
60 kW
Reciprocating
engine
2012
Pittsfield Wastewater
Treatment Facility
Pittsfield, MA
2010
200 kW
Micro turbine
2012
R.M. Clayton Wastewater
Treatment Plant
Atlanta, GA
2011
1.6 MW
Reciprocating
engine
2012
West Lafayette Wastewater
Treatment Facility
West Lafayette, IN
2006
130 kW
Micro turbine
2009
Wolf Creek Water
Reclamation Facility
Abingdon, VA
2009
60 kW
Micro turbine
2010
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develop the application. The application
processing time depends on the nature of the
CHP funding request, on its own or as part of a
larger request that includes other improvements.
CWSRF in Action: Delhi Charter Wastewater
Treatment Plant
Delhi Charter Township is located south of the
city of Lansing, the state capital, in Ingham
County, Michigan. The Township's wastewater
treatment plant was built in 1962, with upgrades
made in 1982 and 2007.10 Prior to the 2007
upgrade, the plant capacity was estimated to be
severely overloaded due to population growth in
the Township during the previous decade. The
Township started exploring alternatives in 2005
and decided to upgrade to an integrated biomass-
to energy (IBES) system. This was the first IBES
system in Michigan, and its design secured local,
regional, and national awards. The upgrade was
achieved using a CWSRF loan combined with
state funding and cash the Township had on
hand. The new system, completed in 2009,
consists of new replacement digesters, a 60
kilowatt (kW) microturbine CHP system to
produce electricity and heat for the plant, gas
mixers and sludge recirculation pumps, process
piping, a building to house the sludge pumps, and
other components. The project also replaced a
leaking junction chamber on the nitrification
pipeline, rehabilitated additional digesters located
onsite, and installed a sludge grinder.
The CHP System. The plant serves a population
of 25,000 and is designed to treat a wastewater
flow of 2.5 million gallons per day (MGD), with a
design flow of 4.0 MGD. The project uses a two-
phase (i.e., thermophilic-mesophilic) anaerobic
digestion process that yields "Class A" biosolids
suitable for direct land application. The Township
estimates that the reduction in the plant's demand
for natural gas and electricity attributable to the
CHP system yields an estimated annual cost
savings of $60,000.
Prior to the digester upgrade and CHP system
installation, the plant flared the biogas produced
in its digesters. The IBES system allows the plant
to capture and use the biogas produced in its
Aerial view of the Delhi Charter Township IBES System
anaerobic digesters to fire two 30 kW micro-
turbines. These are designed to operate with a
turndown of up to 50 percent, which allows the
two turbines to operate in the range of 25 to 100
percent of the combined operable capacity and
produce 15 to 60 kWh of electricity on demand.
The electricity generated is used to operate
pumps, compressors, and other equipment related
to the operation of the two-phase anaerobic
digestion system. Electricity generated by the
microturbines reduces the amount of electricity
the facility must purchase from the utility by more
than 40 percent.
The majority of the energy generated from the
CHP system is in the form of heat. Approxi-
mately 43 percent of the available heat from the
CHP system is recovered and used by the facility
to heat the digesters in lieu of natural gas. The
temperature of the microturbine exhaust gas
exiting the system is around 500° F, and the
exhaust is captured using a tube-m-shell gas-to-
liquid heat exchanger. The heat is used to heat the
thermophilic and mesophilic digester anaerobic
digester tanks, thus significantly reducing the
amount of natural gas needed to heat the digester
tanks.
CWSRF Funding and Application Process. In
Sep tember 2007, Delhi Township received a
$9.85 million CWSRF low-interest loan to finance
the entire IBES system. A small component of
this loan covered the equipment and installation
costs of the CHP system.11 The Michigan
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Department of Environmental Quality (DEQ)
provided the loan, in conjunction with the
Michigan Municipal Bond Authority (Department
of Treasury). The CWSRF loan has an interest
rate of 1.625 percent with a 20-year term. The
Township also received approximately $500,000
through a Michigan state grant and used
approximately $840,000 in cash it had on hand to
cover the remaining cost of the project.
The plant manager was initially concerned that it
would be too much effort to apply for the
CWSRF loan and that the money might come
with too many strings. However, he quickly
became a proponent of the funding program
when he discovered that the CWSRF interest rate
of 1.625 percent was significantly lower than the
market interest rate available to the plant, which
was in the 4 to 5 percent range. The lower interest
rate made the project much more economical and
was critical to its success. In addition, the facility
used part of the Michigan state grant it received
to pay for development of the 20-year capital
improvement plan required by the state's CWSRF
program.
Delhi Tow nship reports that the loan application
process was straightforward, with helpful
guidance provided by the Michigan Department
of Environmental Quality (DEQ). For example,
DEQ clearly described the steps of the
application process and made staff available to
help answer the Township's questions. It took
approximately 18 months to receive the CWSRF
funding from the time Delhi Township started
the application process.
Lessons Learned. As part of the CWSRF loan
application process in Michigan, facilities must
submit a 20-year capital improvement plan that
outlines how the loan money will be expended.
Delhi Township's original CWSRF plan included
only the upgrade of the plant's digesters. When
the plant decided to develop its CHP system, it
had to submit an amendment to its 20-year plan,
and this required additional effort. The plant
notes that it is difficult to anticipate everything
that might be needed over a 20-year horizon but
points out that plants should plan as best as
possible from the outset and be prepared that
plan amendments may be necessary. Delhi
Township believes that developing the plan was
well worth the effort, given the successful results,
including helping them to be better plant
operators.
1	The CHP Partnership's report Opportunities for Combined Meat and Power at Wastewater Treatment Facilities: Market Analysis and Lessons from the Field
(available at: http: / /www.epa.gov/chp /documents/wwtf opportunities.pdf) provides information about the current state of CHP use at WWTFs,
the technical and economic potential for further development of CHP at WWTFs, and operational insights from WWTF operators.
2	California Energy Commission. July 2009. Combined Heat and Power Potential at California's Wastewater Treatment Plants. CEC-200-2009-014-SD (Draft
Staff Paper), http://www, energy, ca. gov/2009publications/CEC-200-2009-014/CEC-200-2009-014-SD.PDF.
3	Wastewater Management Fact Sheet on Energy Conservation. July 2006.
http://water.epa.gov/scitech/wastetech/upload/2008 01 16 mtb energveon fasht final.pdf].
4	Evaluation of Combined Heat and Power Technologies for Wastewater Treatment Facilities. September 2012.
http: / /www.cwwga.org/documentlibrarv/300 CHP%20-%20EPA%20iTinaP)%20w-Apps.pdf.
5	In comparison to WWTF systems that employ natural systems such as ponds, land treatment, wetland treatment systems.
6	As defined by 40 CFR 403.3(o), POTWs treat municipal sewage or industrial wastes of a liquid nature. While WWTFs can be owned or operated
privately or publicly, POTWs are according to the Federal definition treatment works that are owned by a State or municipality.
7	American Council of Energy Efficient Economy. September 2011. Challenges Facing Combined Heat and Power Today: A State-by-State
Assessment, http://www, aceee.org/sites/ default/files/publications/ researchreports/ielll.pdf.
8	EPA Catalog of CHP Technologies, http: / /www.epa.gov/chp /technologies.html.
9	A recent amendment to the CWSRF program, based on the 2014 Water Resources Reform and Development Act (WRRDA), provides further
subsidization to WWTFs in disadvantaged communities, communities with fewer financing options, and/or to projects that meet the GPR
10	http: / /www.degremont-technologies.com/IMG/pdf/tech infilco Biogas-Cogeneration.pdf.
11	Micro turbine-based CHP systems have an installed cost of $2,500/kW-$4,300/kW according to the EPA's CHP Catalog of Technologies (available
at: http://www.epa.gov/chp/technologies.html).
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