MEMORANDUM 

From: Office of Air Quality Planning and Standards 

 U.S. Environmental Protection Agency 

To: EGU NSPS Docket (EPA-HQ-OAR-2013-0495) 

Date: September, 2013 

Subject: Credit for Thermal Output at Combined Heat and Power (CHP) Facilities 

Accounting for Thermal Output from CHP Systems

When electric generator emission standards are set on an output basis, it is necessary to account for the 

non-electric or mechanical output (e.g., useful thermal output) of combined heat and power (CHP) units. 

Two common approaches to calculate an emissions rate that includes the primary and secondary output 

of CHP in output-based regulations are the equivalence approach and the avoided emissions approach. 

For more information on the approaches and to calculate CHP emission rate values, see the EPA CHP 

Partnership website (http://www.epa.gov/chp/). These approaches have been used in both State and 

Federal rules on CHP. The appropriate choice could involve either approach and would be governed by 

the overall regulatory structure and objectives. 

In the equivalence approach, the output-based limit is calculated by directly adding the thermal output to 

the electric output when determining the emission rate of a CHP facility. Different approaches have been 

taken to determine the amount of thermal credit based on the CHP source, its efficiency and fuel type. In 

the avoided emissions approach, the output-based limit is calculated by giving credit for avoided 

emissions from the displaced thermal emissions (e.g., the boiler that the CHP system replaces). The 

avoided emissions approach potentially gives a more accurate comparison of the emissions of a CHP 

facility to equivalent useful output from separately generated electricity and thermal output. For 

example, in the avoided emissions approach, CHP units that primarily produce electricity would have to 

operate at an emission rate that is close to what utility electric only units must achieve, and CHP units 

producing primarily thermal output would be able to operate at an emission rate that is close to what 

industrial boilers achieve. In contrast, in the equivalence approach, a CHP unit that primarily produces 

electricity would have to operate at an emission rate that is close to what utility electric only units must 

achieve, and CHP units producing primarily thermal output would not necessarily be required to operate 

at an emission rate that is close to what industrial boilers achieve. 

The avoided emissions approach requires two more data points than the equivalence approach: an 

emission factor and boiler efficiency. For CO2, the emission factor can be determined based on the fuel 

type. One approach would be to assume that any new or replaced industrial boiler would be natural gasfired. An alternate approach would be to assume that the displaced boiler would have used the same fuel 

as the CHP facility. A final approach for retrofit applications is to use the actual fuel that was used in the 

boiler prior to the installation of the CHP facility. It is conceptually possible to arrive at a negative 

emission factor using the avoided emissions approach under a scenario where either a natural gas-fired 

CHP with a high thermal output replaces steam from a coal-fired boiler or a CHP facility uses carbon 

capture technology. This result could be prevented by a limitation that the "avoided" boiler cannot have 

a higher emission rate than the CHP system. 

The utility NSPS (Subpart Da) for criteria pollutants and the combustion turbine NSPS (Subpart KKKK) 

use the equivalence approach. The utility NSPS (subpart Da) for criteria pollutants uses a 75% thermal 

credit, and the combustion turbine NSPS (subpart KKKK) for criteria pollutants uses 100% thermal 
credit. State regulations have used both approaches to account for the thermal output from CHP systems. 

Examples of State regulations using either approach can be found in EPA resources on output-based 

regulations.1

 

Once an emission factor and boiler efficiency are established, the avoided emissions approach is not 

significantly more difficult to apply than the equivalence approach. The EPA has concluded that both 

approaches would be suitable. The avoided emissions approach would be more accurate but would 

require defined parameters to be included in the rule as described above. The equivalence approach is 

sufficient and adequate and has past precedent of use in previous EPA rules. 

Procedure for the Amended NSPS

In evaluating the appropriate credit for CHP facilities with respect to GHG emissions, we evaluated 

natural gas-fired combustion turbines, since that technology is expected to represent the majority of new 

CHP facilities. As described earlier, the avoided emissions approach requires an assumption of what 

supplied the electric and thermal output if separate electric and thermal generating technologies were 

used. The following equation would be used in the evaluation for comparing the avoided emissions 

approach to the direct thermal crediting approach. 

CHP Electric Output

Total CHP Emissions Displaced Thermal Emissions Equivalent Standard  

The equivalent emission standard varies depending on the ratio of electric to thermal output (also known 

as “power to heat ratios”). For this example, we assumed the displaced electric output is from a 50% 

efficient natural gas combined cycle facility with an average emission rate of 800 lb CO2/MWh of gross 

electric output. The assumed displaced boiler is an 80% efficient natural gas–fired boiler, resulting in a 

displaced boiler standard of 500 lb CO2/MWh of thermal output. 

Using several model CHP plants at different relative ratios of electric to thermal output, we can 

determine the percent credit for thermal output that would approximate the same overall emission rate as 

separate heat and power (SHP). Figures 1 and 2 show the calculated emission rate at differing amounts 

of credit for thermal output for several CHP plants with varying ratios of electric to thermal output and 

compares those to the overall emission rate of SHP. The figures show that the 50 percent credit results in 

a higher emission rate than the overall emission rate. Increasing the thermal credit to 2/3 reduces the 

disparity, but, in this example, still tends to result in CHP facilities having a higher emission rate. In 

contrast, the 100 percent thermal credit approach results in a lower emission rate for CHP compared to 

the equivalent overall separate electric and thermal emission rate. The best approximation to get an 

equivalent emission rate, in this example, is to give 75 percent credit for recovered thermal energy. 

Using the assumptions in this analysis, the 75 percent credit approach results in a slightly lower 

emission rate in cases with lower power to heat ratios and in a slightly higher emission rate at high 

power to heat ratios. However, over the range of designs it is the closest approximation of the overall 

emission rate for SHP. Therefore, from a greenhouse gas emission standpoint, giving 75 percent credit 

for recovered thermal energy is the approximation of an equivalent emission rate. 

An alternate way to establish the value of thermal output for CHP facilities is to compare the overall 

emissions, as opposed to an emission rate, of the CHP facility to the emissions of an equivalent amount 

of generation from SHP (along the lines of the “avoided emissions approach”). Using this approach, and 

 

1 Accounting for CHP in Output-Based Regulations, February 2013. Accessed at http://epa.gov/chp/documents/accounting.pdf. 
assuming no use of carbon capture technology and the same fuel source for the CHP and SHP, would 

result in giving 100 percent credit to the thermal output from CHP facilities. The emission rate approach 

inherently accounts for the increased efficiency from CHP and does not give credit for the fuel savings. 

In contrast, the overall emissions approach does not require a CHP facility to be more efficient than 

SHP. If thermal energy is credited at 100%, then, in this example, a CHP facility that has the same 

efficiency as the overall efficiency of SHP would have the same overall numerical emission rate. 

Multiple State-based distributed generation rules give 100% credit for thermal output when determining 

CHP emission rate values. 

Impact for coal-fired CHP

We also evaluated the impact of the thermal crediting approaches on the compliance options available to 

potential new coal-fired CHP EGUs. Coal-fired CHP facilities typically operate at low power to heat 

ratios and Figure 3a shows that crediting thermal output at 75% would enable only the most efficient 

facilities to construct without the requirement to install some type of additional GHG control 

technology. Crediting thermal output at 100% would allow more options for coal-fired CHP to be 

installed without the use of additional GHG control technologies. The comparisons to SHP were done 

assuming an 83% efficient bituminous coal-fired boiler (displaced thermal emission rate of 840 

lb/MWh) and a 38% efficient bituminous coal-fired EGU with 40% carbon capture and storage 

(displaced electric emission rate of 1,100 lb/MWh). Figures 3b shows the overall relative CO2 emissions 

from a coal-fired CHP facility relative to SHP assuming the displaced thermal emissions are from an 

80% efficient natural gas-fired boiler. Figures 3a and 3b show that coal-fired CHP would require the use 

of carbon capture technology in the majority of cases to emit CO2 at an equivalent emission rate relative 

to a new coal-fired boiler subject the proposed NSPS requirements. 
Figure 1: Comparison of Calculated CHP Emission Rate to Overall Separate Heat and Power 

for Natural Gas-Fired Combustion Turbines 

CHP Emission Rate (lb CO2/MWh) % 

Power 

to Heat 

Ratio 

Overall Separate 

Heat and Power 

(SHP) Emission 

Rate (lb 

CO2/MWh) 

SHP 

Efficiency 

CHP 

Efficiency 

CHP 

Fuel 

Savings 

CHP 

Efficiency for 

Equivalent 

CO2

Emissions 

50% 

Thermal 

Credit 

67% 

Thermal 

Credit 

75% 

Thermal 

Credit 

100% 

Thermal 

Credit 

50% 

Thermal 

Credit 

0.7 623 64.0% 79.9% 19.8% 64.0% 707 620 586 500 13% 0.9 642 62.2% 73.8% 15.7% 62.2% 734 654 623 541 14% 1.2 663 60.2% 67.8% 11.2% 60.2% 762 693 665 589 15% 1.7 689 57.9% 61.7% 6.1% 57.9% 793 736 713 647 15% 2.8 721 55.4% 55.6% 0.5% 55.4% 826 786 768 718 15% 
Figure 2: Emission Rate at various Power to Heat Ratios for Natural Gas-Fired Combusti
Figure 3a: Comparison of Calculated CHP Emission Rate to Overall Separate Heat and Powe

for Coal-Fired CHP Systems, Displacing Coal-Fired Boiler 

 CHP Emission Rate (lb CO2/MWh) 

Power 

to 

Heat 

Ratio 

Overall Separate 

Heat and Power 

(SHP) Emission 

Rate (lb CO2/MWh) 

SHP 

Efficiency 

CHP 

Efficiency 

CHP 

Fuel 

Savings 

CHP CO2

Reduction 

(%) 

Required CCS 

for Equivalent 

CO2 Emissions 

67% 

Thermal 

Credit 

75% 

Thermal 

Credit 

100% 

Thermal 

Credit 

T

0.06 858 77.5% 82.1% 5.6% 1% NA 1,234 1,113 852 0.15 877 71.9% 75.6% 4.9% -5% 5% 1,296 1,181 925 0.28 899 66.2% 69.1% 4.2% -13% 11% 1,364 1,258 1,012 0.47 925 60.5% 62.7% 3.5% -21% 17% 1,440 1,345 1,116 0.80 957 54.6% 56.2% 2.7% -30% 23% 1,524 1,446 1,245 

Figure 3b: Comparison of Calculated CHP Emission Rate to Overall Separate Heat and Powe

for Coal-Fired CHP Systems, Displacing Natural Gas-Fired Boiler 

CHP Emission Rate (lb CO2/MWh) 

Power 

to 

Heat 

Ratio 

Overall Separate 

Heat and Power 

(SHP) Emission 

Rate (lb CO2/MWh) 

SHP 

Efficiency 

CHP 

Efficiency 

CHP 

Fuel 

Savings 

CHP CO2

Reduction 

(%) 

Required CCS 

for Equivalent 

CO2 Emissions 

67% 

Thermal 

Credit 

75% 

Thermal 

Credit 

100% 

Thermal 

Credit 

T

0.06 536 75.0% 82.1% 8.6% -59% 37% 1,234 1,113 852 0.15 579 69.9% 75.6% 7.5% -60% 37% 1,296 1,181 925 0.28 629 64.7% 69.1% 6.4% -61% 38% 1,364 1,258 1,012 0.47 691 59.4% 62.7% 5.2% -62% 38% 1,440 1,345 1,116 0.80 767 53.9% 56.2% 4.1% -62% 38% 1,524 1,446 1,245