Assessing the state friendliness of combined heat and power (CHP) is an inexact science. Many factors impact CHP development. Favorable CHP policies and programs can encourage CHP deployment, but fluctuating electricity and natural gas prices can dramatically impact the business case for CHP.
To examine the relationship between policy and deployment, the American Council for an Energy-Efficient Economy (ACEEE) correlated state CHP scores in the 2014 State Energy Efficiency Scorecard with actual CHP installations data from 2012 and 2013. It found a moderate correlation between scores and CHP installations.
Many of the states with high levels of CHP deployment correspond with high marks in the Scorecard. California is the most noticeable, with more than 90 installations over the last two years. California has a suite of incentives and utility goals for CHP and has been incentivizing smaller CHP systems in particular.
Many states, including those with strong manufacturing bases like Indiana and Michigan, received low scores due to poor policies and have few new installations over the past few years. However, it’s possible that good policies would stimulate dormant demand for CHP services.
Maryland, Oregon and Rhode Island have policies to encourage CHP development. In 2013, the Baltimore Gas and Electric Company (BG&E) launched a new CHP program to encourage its use by commercial and industrial customers. The program provides up to $2 million in assistance for each preapproved CHP project through a series of design, installation and production incentives. The state of Oregon administers a dedicated competitive CHP incentive program that can fund up to 35 percent of project cost. Rhode Island requires its main utility, National Grid, to develop and implement a CHP-focused plan each year. These plans incorporate specific capacity targets, incentive offerings and efforts to identify appropriate CHP candidates.
The increased efficiency of CHP provides substantial energy, economic and environmental advantages over separate heat and power, including reduced overall energy costs, improved system reliability and cost-effective emissions reductions, ACEEE says. As states work toward compliance with new air quality regulations, CHP is a readily available resource that can help states meet their goals for energy savings and greenhouse gas emissions reductions.