A Ranking of State Combined Heat and Power Policies

Abstract

Combined Heat and Power (CHP) has been identified as a significant opportunity for greater energy efficiency and decreased environmental impacts of energy consumption. Despite this, the regulatory and policy landscape for CHP is often quite discouraging to the deployment of these systems, despite their many benefits to customers and society at large. That the landscape changes considerably from state to state only confuses the matter. Of all the various types of distributed generation, CHP systems encompass technologies particularly hard hit by policies and regulations that do not actively support their deployment. Given the large size of some CHP systems, interconnection standards that clearly delineate interconnection processes for multi-megawatt systems are necessary. In addition, since many CHP technologies emit incremental criteria pollutants as part of their operation, the manner in which emissions are regulated by a state can significantly impact the financial realities of running a CHP system. In the absence of strong federal guidance, interconnection standards, tax incentives, tariff designs, environmental regulations and other policy measures that dramatically impact the attractiveness of CHP projects can only be significantly addressed by state lawmakers and regulators. State activity is essential to creating a policy framework that encourages CHP. Within the past several years, a number of states have made significant strides in implementing more “CHP-friendly” policies. Some states have worked to develop these policies at an accelerated rate while others have done little. In many cases the difference between states that are proactively encouraging CHP and states that are ignoring it all together is stark. This paper will identify which states are leading the way, which states are following, and what the policies of all states look like at this current point in time. It will define what “CHP-friendly” policies are, what makes a good policy better, and discuss the manners in which a variety of states have chosen to approach CHP. CHP system developers will come away with a clearer picture of each state’s unique CHP barriers, potential CHP customers will understand how their current CHP climate compares to that of other locations, and state lawmakers and CHP advocates will be able to learn about best practices in policy creation that already exist in the field.