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Combined Heat and Power Partnership


Key Resources
CHP Opportunities and Incentives in the Utility Sector

On November 20, 2008, the CHPP held a Webinar titled "CHP Opportunities and Incentives in the Utility Sector." Presentations from this and other Webinars in the CHPP's Clean DG and CHP Webinar series can be viewed at http://www.epa.gov/chp/

Note: Many links on this page go to non-EPA Web sites. Please read the EPA Disclaimer.

Due to increasing energy costs, expanding load growth, and state and local initiatives to decrease energy consumption and lower carbon emissions, there is increased utility interest in combined heat and power (CHP) across the United States. CHP projects can yield numerous benefits to electric and gas utilities and to the public, including:

  • Bringing economic development to a state.
  • Reducing peak electrical demand on the grid.
  • Yielding improvements to electric grid system efficiency by reducing grid congestion.
  • Deferring or displacing more expensive transmission and distribution infrastructure investments.
  • Reducing the environmental impact of power generation.
  • Helping to meet state mandated renewable portfolio standards in states where CHP constitutes an eligible resource.
  • Reducing fuel price volatility.

To launch its outreach and assistance efforts to utilities, EPA's Combined Heat and Power Partnership (CHPP) published a report on: Utility Incentives for Combined Heat and Power (PDF), (35 pp, 384K, About PDF). This report provides information about investor owned, publicly owned, and cooperative gas and electric utilities programs and policies currently in place to promote and incentivize CHP across the United States.

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Additional Resources

The CHP Partnership collaborates with other government and nongovernmental agencies and programs that are interested in promoting the benefits of CHP for utilities. Provided below is further information on state policy issues and other helpful resources for utilities, along with organizations that could provide additional information to utilities considering CHP.

State Policy Resources

Various resources are available to utilities from the CHP Partnership related to state policy and CHP. Utilities considering promoting CHP can find useful information on renewable portfolio standards, interconnection standards, rates, and public benefits funds.

Renewable Portfolio Standards
Renewable portfolio standards (RPS) establish requirements for electric utilities and other retail electric providers to serve a specified minimum percentage (or absolute amount) of customer load with eligible sources of renewable electricity. As of August 2008, thirty two states plus the District of Columbia have adopted RPS requirements or goals. These policies have varying eligibility requirements. Twelve states—Colorado, Connecticut, Hawaii, Massachusetts, Nevada, North Carolina, North Dakota, Ohio, Pennsylvania, South Dakota, Utah, and Washington—include CHP and/or waste heat recovery as an eligible resource and Arizona explicitly includes renewable fueled CHP systems.

Interconnection Standards
Standard interconnection rules establish clear and uniform processes and technical requirements that apply to utilities within a state. These rules reduce uncertainty and prevent time delays that clean distributed generation (DG) systems can encounter when obtaining approval for electric grid connection.

Utility Rates
A state's Public Utility Commission can support CHP projects and remove unintended barriers by setting electric and natural gas rates that provide appropriate cost recovery for utility services on which consumers depend. A number of states are considering or have taken new and innovative approaches to stand-by (back-up) rates, exit fees, and natural gas rates for CHP. In addition, rate-making methods that decouple utility revenues from their sales, thereby removing a critical barrier to customer-sited resources, are receiving renewed attention from regulators and policymakers.

Public Benefits Funds
Public benefit funds (PBFs) are financing mechanisms typically employed by levying a small fee or surcharge on customers' electricity rates, which can then be used by states to invest in clean energy supply.

Other Helpful Resources

Additional resources from EPA that utilities may find useful when considering the promotion of CHP are available below.

dCHPP (CHP Policies and incentives database)
Funding incentives for CHP are available in the form of direct financial grants, tax incentives, low-interest loans, or utility and environmental policies that increase the financial prospects for a project. Some incentives are aimed directly at installing CHP systems to reduce load on the grid or to reward efficient generation, while others provide funding specifically for certain CHP system configurations and fuels. dCHPP lists these and other incentives and policies for CHP. This resource can be beneficial to utilities by presenting the financial incentives available to a utility for a CHP project, as well as to see the types of incentives and favorable regulatory treatment that utilities can consider offering in their service territories.

Aligning Utility Incentives with Investment in Energy Efficiency (PDF) (116 pp, 1.5MB, About PDF)
In support of the National Action Plan for Energy Efficiency, the report on Aligning Utility Incentives with Energy Efficiency Investment describes the financial effects on a utility resulting from its expenditures on energy efficiency programs, how those effects could constitute barriers to more aggressive and sustained utility investment in energy efficiency, and how adoption of various policy mechanisms can reduce or eliminate these barriers. The report also provides a number of examples of such mechanisms drawn from the experience of utilities and states.

EPA Clean Energy Resources Database
This searchable database describes key resources and documents relevant to the National Action Plan for Energy Efficiency, the Clean Energy-Environment Guide to Action, and State Clean Energy Program Activities. It addresses the following issues: Evaluation, Measurement and Verification; Energy Efficiency Potential Studies; Cost Effectiveness; Program Design and Implementation; Dynamic Rates; Resource Planning; Cost Recovery and Incentives; Codes and Standards; Emissions Trading; State Management Best Practices; Air Quality; Clean Energy Supply; Local Government; and Portfolio Standards.

Clean Energy-Environment Guide to Action
Across the country, states are using clean energy policies to help meet their expanding energy demand in a clean, low-cost, reliable manner. In addition, a growing number of states are interested in learning about successful clean energy strategies and their economic and environmental benefits. The Guide to Action describes 16 clean energy policies, details the best practices and attributes of effective state programs, and provides resources for more information.

Organizations and Initiatives

National Action Plan for Energy Efficiency is a private-public initiative begun in the fall of 2005 with the goal of creating a sustainable, aggressive national commitment to energy efficiency through gas and electric utilities, utility regulators, and partner organizations. The National Action Plan is an ongoing effort led by a Leadership Group of more than 60 leading gas and electric utilities, state agencies, energy consumers, energy service providers, and environmental/energy efficiency organizations. Leadership Group members are identifying key barriers limiting greater U.S. investment in energy efficiency, and developing and documenting sound business practices for removing these barriers.

The Regulatory Assistance Project (RAP) is a non-profit organization formed in 1992 by experienced utility regulators. RAP provides research, analysis, and educational assistance on topics including:

  • Electric utility restructuring
  • Power sector reform
  • Renewable resource development
  • The development of efficient markets
  • Performance-based regulation
  • Demand-side management
  • Green pricing

American Council for an Energy-Efficient Economy (ACEEE) Utilities Program
The ACEEE Utilities Program works with policymakers, regulators, utilities, and other interested parties to advance the use of cost-effective energy efficiency designs or modifications as a utility system resource. ACEEE conducts research, disseminates information, and assists with the design and implementation of utility-sector energy efficiency policies and programs.

Association of State Energy Research & Technology Transfer Institutions (ASERTTI) works to increase the effectiveness of energy research efforts in contribution to economic growth, environmental quality, and energy security. ASERTTI does this by collaborating on research projects with state, federal, and private partners and sharing technical and operational information among members and associates.

Electric Power Research Institute (EPRI) conducts research and development on technology, operations and the environment for the global electric power sector. EPRI supports multi-discipline research in emerging technologies, which drives long-range research and development planning.

Gas Technology Institute (GTI) is a research, development and training organization serving the natural gas industry and energy markets. GTI is dedicated to meeting the nation's energy and environmental challenges by developing technology-based solutions for consumers, industry, and government.

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