Inclusion in Demand Side Management

As an efficiency technology, CHP lowers demand on the electricity delivery system, frequently reduces reliance on traditional energy supplies, makes businesses more competitive by lowering their costs, reduces greenhouse gas and criteria pollutant emissions, and refocuses infrastructure investments towards a next-generation energy system. (Read more about these benefits here.) These benefits correspond with many of the same reasons state pursue demand-side management (DSM).

The net energy savings from CHP (once the additional fuel input is netted out) are akin to the energy savings from a lighting project, a motor upgrade, an industrial process improvement, or other traditional end-use efficiency measures. However, CHP is often overlooked in DSM programs or ineligible for custom incentives. The U.S. DOE Southwest CHP Technical Assistance Partnership is available to provide information on how other states and utilities calculate the energy savings from CHP. Although CHP systems consume additional fuel onsite, less fuel is burned at the utility power plant to supply that same load, and less total electrical and thermal losses occur. Waste heat recovery systems use no extra fuel and thus represent 100% energy savings.

Options and Examples of CHP in Utility Efficiency Programs in Other States

• Since at least 2008, Massachusetts has included CHP in efficiency programs and provides an approach for consideration of how to do so.
• Arizona recently included CHP as eligible for meeting the electric efficiency resource standard and the gas efficiency resource standard. The main regulated electric utilities have not yet proposed CHP DSM programs but may do so in the future. The main gas utility, Southwest Gas, has had a CHP program in place for several years now, offering $400-500/kW in incentives for CHP systems meeting minimum efficiency thresholds.

Further Resources:

• Combined Heat and Power ("CHP") Program Guidebook for Submitting CHP Applications for an Energy Efficiency Incentive in Massachusetts (Massachusetts Department of Energy Resources, PDF, 30 pgs)
• Use of an Alternative Energy Standard Portfolio by Mass for the Support of CHP (Massachusetts Department of Energy Resources, PDF presentation, 21 slides)