Policy’s Role in Combined Heat and Power Deployment

Combined heat and power (CHP) (also known cogeneration), where both electric and thermal energy is produced and utilized through a single combustion process, offers significant opportunities for gains in energy efficiency—gains that in large part have yet to be realized. Many industrial processes generate excess heat that can be recovered and used for heating and cooling, water heating, or electricity generation. In some cases, enough electricity can be generated from CHP that an industrial plant can sell excess power into the grid. 

The Importance of Policy for CHP

Policies intended to catalyze CHP adoption in industry need to encompass more than just the CHP system itself. This is especially true of interconnection and permitting policies and processes, which can affect the feasibility of CHP projects. These policies can provide market definition for industrial facilities that can generate excess power using a CHP system and sell that excess power into the grid. Many states are playing and can continue to play a key role in promoting CHP through policies that enable more straightforward interconnection and permitting requirements. As more states have become familiar with CHP technologies, including deployment of small CHP systems for buildings, work has begun to streamline permitting and processing of CHP applications.

Massachusetts: Moving Forward with Best Practices

Massachusetts – already highly ranked for its energy-efficiency policies – has begun making strides to address more of the barriers that affect CHP deployment. In August 2012, the state legislature passed a law requiring the Department of Public Utilities to establish a standard timeline that it enforces for the interconnection of distributed generation systems – such as CHP – the timeline is required to be set by November 2013 (Section 49). Further, earlier this month the Massachusetts Distributed Generation Working Group, composed of various stakeholders including CHP providers and utilities, released its recommendations which include a uniform Technical Standards Manual, and adjustments to allow more distributed generation applications to be reviewed through the “Expedited Track.”  Each of Massachusetts’ three review tracks have been established based off of a statewide model tariff that sets standardized fee restrictions among other guidelines, providing rules and increased clarity for utility customers considering implementing a CHP system. 

Better Models for Understanding Interconnection

Lawrence Berkeley National Laboratory (LBNL) has worked since 2000 to develop a model for determining the optimal on-site generation for a site, including combined heat and power. Giving firms access to clear analysis of interconnection and standby rate costs as well as optimal configuration can raise the confidence of an investment in CHP and work to advance adoption. LBNL’s Distributed Energy Resources Customer Adoption Model (DER-CAM) (currently available in non-commercial versions) analyzes fuel price, load profiles, and capital costs for the prospective projects among other figures to determine optimized CHP capacity, along with other distributed generation technologies such as photovoltaics.  

Opportunities for CHP in Current Environment

Boiler MACT, which includes an output based standard option that allows firms to implement CHP as a compliance pathway, combined with other possible regulatory measures including the court ordered replacement of the Clean Air Interstate Rule (CAIR) will likely place compliance burdens on the nation’s fleet of coal-fired power plants. As an ACEEE report highlights CHP could help mitigate lost electric-generation capacity, which could be significant in some states as many aging coal-fired power plants are retired in the Midwestern and Appalachian U.S. According to ACEEE’s Anna Chittum, the lead author “Utilities could invest in new CHP and generate much cleaner electricity instead of building new centralized power plants.”

The Executive Order issued in August intends to facilitate investments in industrial energy efficiency and requires several federal agencies to coordinate their efforts to encourage CHP adoption and provide policy and technical assistance to states. By leveraging these resources and offering clear, streamlined paths toward permitting and interconnection of CHP, states can play an even greater role in accelerating CHP deployment.