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2018 shaping up to be a banner year for CHP

2018 is shaping up to be a banner year for CHP

Nearly three quarters into 2018, it's a fine time to look at the year so far for Combined Heat and Power (CHP).

Combined Heat and Power, or cogeneration, is a technology which allows businesses to generate reliable energy onsite to decrease the amount of energy they procure and increase their energy resilience. A number of local incentive programs have been expanded or extended, making CHP even more financially appealing to businesses, but which stories from 2018 will have the longest-lasting impact?

What's happened?

The first major US story was federal: the budget deal signed by President Trump on February 9, the Bipartisan Budget Act of 2018, reinstated the tax credits for the ‘orphan’ technologies such as CHP and fuel cells. These were not included in previous wind/solar extensions and allowed to expire at the end of 2016.

For CHP, this meant a 10% Investment Tax Credit (ITC) for units up to 15MW (or 20,000hp), as long as construction is started within 2017–2021. Together with the lower corporate tax rate and bonus depreciation (100% in the first year), this can meaningfully improve the business case for businesses to install a CHP unit.

Attention then moved to a number of state processes. On April 5, Pennsylvania’s energy regulator released a policy statement in strong favor of CHP.

In addition to improving manufacturing competitiveness and reducing greenhouse gas emissions, CHP benefits businesses by reducing energy costs and enhancing reliability for the user.”
Pennsylvania’s energy regulator

On August 1, the Michigan Agency for Energy released a ‘CHP Roadmap for Michigan’—an extensive report detailing the opportunities CHP offers to the state and how they can best take advantage of them. The agency’s economic modelling found that adding another 700–1000MW of CHP systems by 2030 would be an optimal outcome for the state.

What can we learn?

These policy developments go hand-in-hand with a positive market outlook for CHP, driven by rising electric distribution charges, low natural gas prices, and an increasing focus on energy reliability and resilience, particularly for regions which have experienced natural disasters in recent years.

They share a similar understanding of the value of CHP—to deliver low-cost, high-resilience power and heat to the nation’s businesses and critical organizations—and the state processes are agreed on the key elements to unlock this opportunity:

  • Helping businesses and organizations to convert the capital cost into an operating expense, such as through Property Assessed Clean Energy (PACE) programs, or combined solutions from Centrica Business Solutions.
  • Accelerate deployment through streamlining the interconnection processes and improving the standby tariffs of local distribution utilities.
  • Valuing the energy efficiency, resilience, reliability and other benefits that CHP deployment brings to the state.

What’s Next?

Look for these trends to continue. Incentives will continue to play a role in energy regulation on the Federal, State and Local levels. It can be a challenge to keep up with changes across multiple geographies, while doing your day job. Our blog will keep you updated on regulatory events, energy trends, technology and more.