State Barriers to CHP Development

Abstract

Every year, ACEEE collects data on regulatory policies in each state that theoretically serve to promote and discourage combined heat and power (CHP) development. In our annual State Energy Efficiency Scorecard (5), we assess the regulatory environment for CHP in each state and score states based on the favorability of their policies for CHP. As part of an effort to make this Scorecard more robust, ACEEE is conducting research to determine the practical realities of CHP development in each state from the perspective of CHP developers and technical assistance agencies. Preliminary research has shown that while certain regulations-and lack of regulations-can greatly influence the attractiveness or success of a project, there are market barriers outside the realm of policy that deserve a great deal of exploration and attention. Traditional regulatory barriers to CHP, such as interconnection procedures, air emissions regulations, and utility standby rates, do pose challenges for development in many states. However, discussions with CHP developers have revealed that many of these issues are overshadowed by economic and financial barriers, as well as other hidden market hurdles. Among these hurdles are the availability of natural gas at reasonable prices, the spark spread in a given region, the effectiveness of CHP developers, the presence of a devoted CHP champion at a host site, and the availability of financing mechanisms to mitigate the upfront capital burden on new projects. This paper will examine each region of the country and each state to determine specific barriers and outline a state-by-state market overview for CHP.