COMBINED HEAT AND POWER

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COMBINED HEAT AND POWER ( combined-heat-and-power )

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Modular reductions in CHP systems can be made with better integration of major subsystems into packages. This is particularly valuable in the small- to mid-size CHP market. In those high-potential markets, system designs that incorporate intelligent controls, sensors, and facility energy management systems with generation and heat recovery technology would offer compelling value. Policies Proven to Support and Promote CHP Given adequate motivation and political drive, energy-efficient technologies are able to deliver fast and cost-effective results. For example, during its 2000–2001 electricity crisis, California undertook a massive demand-side energy efficiency campaign. In less than 1 year, peak electricity demand was reduced by more than 10 percent, with overall demand down by 6.7 percent.28 The state avoided the need for rolling blackouts the next summer. Interconnection Standards Interconnection is the ability of a nonutility generator to operate while connected to the electric transmission/distribution system. Under some service agreements—power purchase or net metering contracts—the non-utility generator is contracted to sell or send excess electricity back onto the grid. Currently, each utility and service territory establishes its own interconnection rules. The lack of uniform standards for interconnection procedures is due, in part, to the fact that jurisdiction over interconnection is split between the Federal Energy Regulatory Commission (FERC) and the states’ utility regulator body. In 2006, FERC adopted Small Generation (<= 20 MW) and Large Generation (>20 MW) Interconnection Procedures for facilities within its jurisdiction.29 Model interconnection procedures have been developed by the National Association of Regulatory Utility Commissioners (NARUC)30 and others such as Interstate Renewable Energy Council (IREC).31 Technical requirements of IEEE 1547 are adopted by reference in many interconnection model rules. The technical standards and procedures were developed to ensure that electricity grids maintain their safety and reliability when nonutility generators are connected. As operating experiences with CHP increase and best practices are developed, the standards have evolved and their application has become more uniform. State officials and local utility personnel must also be kept apprised and educated of changes in standards and procedures. Investment Tax Credits Investment tax credits (ITCs) promote adoption of technologies by essentially lowering the initial financial risk involved in development of a capital-intensive project such as a CHP system. There are several effective state ITC programs for CHP, such as the Hawaii High Technology Business Investment Tax Credit. A 10 percent ITC for CHP has recently been enacted at the Federal level under the Energy Improvement and Extension Act of 2008 (H.R. 1424). Production tax credits (PTCs) are a performance-based credit based on generation output. They promote adoption and sustained performance of generation technologies by allowing qualified systems to receive a per KWh tax credit for electricity generated. 28 Kushler, et al. 2003. Examining California’s Energy Efficiency Policy Response to the 2000/2001 Electricity Crisis: Practical Lessons Learned Regarding Policies, Administration, and Implementation. ACEEE. 29 18 CFR Part 35, Docket No. RM02-12-000; Order No. 2006. 30 National Association of Regulatory Utility Commissioners. 2003. Model Interconnection Procedures and Agreement for Small Distributed Generation Resources. 31 Interstate Renewable Energy Council. 2005. IREC Model Interconnection Standards and Procedures for Small Generator Facilities. Combined Heat & Power: Effective Energy Solutions for a Sustainable Future 25

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