Combined heat and power (CHP)

Combined heat and power (CHP) can be an efficient and clean method of generating electric power and useful thermal energy from a single fuel source at the point of use. Instead of purchasing electricity from the local utility and burning fuel in an on-site furnace or boiler to produce needed thermal energy, an industrial or commercial user can use CHP to provide both energy services in one energy-efficient step.

CHP can provide significant energy efficiency and environmental advantages over separate heat and power. By being more efficient, less fuel is consumed and greenhouse gases (GHGs) and other emissions are reduced. Properly designed CHP can also bolster the grid, provide security benefits, and potentially support intermittent renewable energy sources.

Key Focus Areas

Combined heat and power (CHP) is a proven commercial technology that has been used for more than a century. Currently, 82 gigawatts (GW) of CHP capacity are in use at more than 4,100 sites in the United States. Although 87% of CHP is in manufacturing plants around the country, a growing number of facilities from other sectors are considering its use. Estimates indicate the technical potential for additional CHP at existing industrial and commercial/institutional facilities is more than 130 GW. A 2009 study by McKinsey and Company estimated that 50 GW of CHP in industrial and large commercial/institutional applications could be deployable at reasonable returns with then-current equipment and energy prices.

Today’s economic and technical potential likely exceeds these estimates given the improving outlook in natural gas supply and prices. The importance of CHP to the United States was highlighted in President Obama’s Executive Order of August 30, 2012, which calls for deployment of 40 GW of new, cost-effective CHP by 2020.

State and Local Energy Efficiency Action (SEE) Action has identified six key focus areas for CHP:

  1. Design of standby rates: encourage customer-generators to use electric service most efficiently and minimize costs they impose on the electric system.
  2. Interconnection standards for CHP with no electricity export: effective standardized interconnection rules governing how on-site generators connect to the grid can help overcome barriers to customer-sited generation.
  3. Excess power sales: where markets for it exist, additional revenue streams from excess power sales can help CHP projects move forward.
  4. Clean energy portfolio standards (CEPS): CHP can help states meet energy efficiency or renewable portfolio standards, when it is explicitly included as an eligible resource.
  5. CHP in critical infrastructure: CHP offers the opportunity to improve critical infrastructure resiliency, mitigating the impacts of an emergency by keeping critical facilities running without any interruption in service.
  6. Utility participation in CHP markets: CHP installations can be increased by allowing utilities to participate in CHP markets, either by owning CHP facilities directly, or by providing packages of services to customers who own their own CHP

Key Initiatives

SEE Action is currently working to provide state utility regulators and other state policymakers with actionable information to assist them in implementing key state policies that address barriers to, and promote opportunities for, CHP development. This includes:

  • Providing detailed information on key CHP policies, plus examples of successful state regulatory implementation strategies, which meet one of more of the following criteria: they achieve the intent of state policy; they send clear market signals; and where applicable, they adhere to the principle of ratepayer benefits or neutrality.