Tax policies can significantly affect the economics of investing in new CHP systems. CHP systems do not fall into a specific tax depreciation category, and their depreciation periods can range from 5 to 39 years. These disparate depreciation policies may discourage CHP project ownership arrangements, increasing the difficulty of raising capital and discouraging development.
In another important tax issue, bottoming cycle CHP systems that convert waste heat to power do not qualify for tax incentives that other renewable and clean energy technologies do. Adding these waste-heat-to-power systems to list of eligible systems would encourage more installations.