CHP Support at the State Level 

C

ombined
heat
and
power
(CHP)
can
help
states
reduce
energy
costs
and
improve
their
business
environment,
support
energy
infrastructure,
and
improve
energy
security
and
power


reliability,
all
while
offering
environmental
and
climate
change
benefi
ts.
In
recognition
of
these


benefi
ts,
many
states
have
implemented
policies
favorable
to
CHP
that
are
delivering
results.
The


U.S.
EPA’s
CHP
Partnership
is
highlighting
California
and
New
Jersey
as
two
examples
of
states


with
successful
CHP
programs.


California 

In
2006,
Governor
Arnold
Schwarzenegger
signed
Assembly
Bill
32
(AB
32),
the
Global
Warming
Solutions
Act
of
2006.
This
landmark
legislation
requires
a
reduction
in
greenhouse
gas
emissions
to


1990
levels
by
2020.
The
California
Air
Resources
Board
(CARB)
is
the
lead
agency
for
implementing


AB
32;
in
2008,
CARB
developed
a
draft
Scoping
Plan
that
proposes
a
comprehensive
set
of
actions


designed
to
reduce
overall
carbon
emissions
in
California.


Recognizing
the
proven
economic
and
emission
benefi
ts
of
CHP,
CARB
recommended
an
increase


of
4,000
MW
of
CHP
capacity
by
2020,
enough
to
displace
approximately
30,000
gigawatt­hours
of


demand
from
other
power
generation
sources.
CARB
estimates
that
this
increase
in
CHP
capacity


will
reduce
6.8
million
metric
tons
of
carbon
dioxide
equivalent
by
2020.


Recognizing
that
market
barriers
stand
in
the
way
of
CHP
reaching
its
full
market
potential
in
California,


the
state
is
moving
forward
with
a
multi­pronged
approach
that
addresses
signifi
cant
market
barriers,


provides
incentives
where
appropriate,
and
may
include
potential
mandates.
Specifi
c
actions
under


consideration
include:


•

 Creating
utility
portfolio
standards
for
CHP.


•

 Encouraging
power
export
so
CHP
systems
are
optimally
sized
for
onsite
heat
loads
and
large


enough
to
provide
transmission
and
distribution
capacity
to
utilities.


•

 Developing
guaranteed
rate
structures
and
market
access
for
CHP
that
appropriately
value
the


electrical
system
and
environmental
benefi
ts
of
CHP.


To
encourage
the
development
of
small
CHP
systems
(i.e.,
systems
that
produce
less
than
20
MW),


California
passed
Assembly
Bill
1613,
the
Waste
Heat
and
Carbon
Emissions
Reduction
Act.
The
Act


directs
the
California
Public
Utility
Commission
(CPUC),
publicly
owned
electric
utilities,
and
the
California
Energy
Commission
(CEC)
to
establish
policies
and
procedures
for
the
purchase
of
electricity


from
eligible
CHP
systems.
It
also
directs
CARB
to
report
on
the
greenhouse
gas
emissions
reductions
resulting
from
the
increase
of
new
electricity
generation
from
CHP.
The
Act
requires
the
CEC


to
establish,
by
January
1,
2010,
technical
criteria
for
eligibility
of
CHP
systems
under
programs
to


be
developed
by
the
CPUC
and
publicly
owned
utilities.
By
statute,
the
CEC’s
guidelines
require
that


CHP
systems:


•

 Be
designed
to
reduce
waste
energy.


•

 Have
a
minimum
effi
ciency
of
60
percent.


July
2009


For
more


information
about


CHP,
please
visit
the


CHP
Partnership


Web
site
at


www.epa.gov/chp.


July
2009


•

 Emit
no
more
than
0.07
pounds
of
nitrogen
oxides
per
megawatt­hour.


•

 Be
sized
to
meet
the
eligible
customer
generation
thermal
load.


•

 Operate
continuously
in
a
manner
that
meets
the
expected
thermal
load
and
optimizes
the
effi
cient


use
of
waste
heat.


•
 Be
cost
effective,
technologically
feasible,
and
environmentally
benefi
cial.


More
information
about
actions
California
is
taking
to
support
CHP
as
part
of
AB
32
is
available
on


CARB’s
Web
site
at
<www.arb.ca.gov/energy/chps/chps.htm>.
This
Web
site
contains
a
link
to
the


2008
Climate
Change
Draft
Scoping
Plan,
announcements
of
the
CHP
Technical
Stakeholder
Workgroup
and
archives
of
past
meeting
materials,
implementation
status
of
the
Waste
Heat
and
Carbon


Emissions
Reduction
Act,
and
CHP­related
links
to
the
CPUC
and
CEC.


New Jersey 

New
Jersey
has
positioned
itself
as
a
leader
in
supporting
and
expanding
the
use
of
CHP
through
a


sustained
focus
on
implementing
favorable
CHP
policies.


In
October
2008,
the
state
released
the
New
Jersey
Energy
Master
Plan
(EMP).
The
EMP
proposes


a
road
map
for
building
a
responsible
energy
future
with
adequate,
reliable
energy
supplies
that


are
both
environmentally
responsible
and
competitively
priced.
The
EMP
was
developed
through
an


extensive
and
inclusive
stakeholder
process.
Recognizing
the
environmental
and
economic
benefi
ts


of
CHP,
the
EMP
identifi
es
CHP
as
a
key
solution
to
meeting
the
state’s
energy
and
environmental


goals.
Specifi
cally,
New
Jersey
hopes
to
spur
the
development
of
1,500
MW
of
new
CHP
capacity
by


2020.
Steps
to
reach
this
goal
include
building
on
existing
economic
and
regulatory
incentives
and


developing
new
ones,
as
well
as
smoothing
regulatory
and
legal
hurdles
to
turn
waste
energy
into


useful
energy.
The
EMP
tasked
New
Jersey’s
Board
of
Public
Utilities
(BPU),
Department
of
Environmental
Protection
(DEP),
and
Economic
Development
Authority
(EDA)
with:


•

 Identifying
and
alleviating
regulatory
confl
icts
across
permitting
agencies
to
streamline
and
simplify


approval
processes
(including
DEP’s
adoption
of
a
general
permit
for
cogeneration
facilities,
where


appropriate).


•

 Using
Retail
Margin
Funds*
to
provide
rebates
to
new
CHP
facilities.


•

 Exempting
from
sales
and
use
taxes
all
fuels
used
by
new
and
existing
CHP
facilities
that
meet
a


minimum
effi
ciency.


If
successful,
the
EMP
estimates
that
1,500
MW
of
additional
CHP
capacity
could
result
in
10,000


gigawatt­hours
of
reduced
demand
on
the
electrical
grid
by
2020,
displacing
more
than
33
trillion


Btu
of
space
and
process
heating
requirements
from
natural
gas
and
heating
oil
in
the
commercial


and
industrial
sectors.


The
EMP
builds
on
a
suite
of
policies
already
in
place
in
New
Jersey
that
support
CHP,
highlighted
on


the
next
page.


*
New
Jersey’s
Retail
Margin
Fund
derives
from
a
non­bypassable
charge
imposed
on
all
customers
of
New
Jersey’s
seven


investor­owned
electric
public
utilities
and
gas
public
utilities.

Combined Heat and Power Grants 

On
March
31,
2009,
Governor
Jon
Corzine
signed
Bill
A2507/S1932,
which
authorizes
the
BPU


to
use,
at
minimum,
up
to
$60
million
of
the
Retail
Margin
Fund
to
provide
grants
for
CHP


production,
energy
efficiency
projects,
and
programs
promoting
renewable
energy
and
energy


efficiency.
The
money
will
be
used
primarily
to
develop
CHP
facilities
and
will
provide
rebates
up


to
$450
for
every
kilowatt
of
capacity
installed,
based
on
efficiency
levels
and
performance.


In
addition
to
this
performance­based
program,
incentives
to
offset
the
up­front
capital
costs
of
CHP


projects
are
being
funded
through
New
Jersey’s
participation
in
the
Regional
Greenhouse
Gas
Initiative


(RGGI).
RGGI
is
a
regional
cap­and­trade
program
developed
by
10
northeastern
states
to
reduce
CO2


emissions
from
the
power
sector
10
percent
by
2018.
New
Jersey
was
the
fi
rst
state
in
RGGI
to
support


auction
allowances.
As
part
of
RGGI,
New
Jersey
auctions
100
percent
of
its
allowances.
Proceeds
from


the
auction
are
placed
in
the
New
Jersey
Global
Warming
Solutions
Fund.
Sixty
percent
of
the
monies
in


the
fund
are
allocated
to
the
EDA
to
provide
grants
and
other
forms
of
fi
nancial
assistance
to
commercial,
institutional,
and
industrial
entities
to
support
end­use
energy
effi
ciency
projects.
CHP
is
specifi
cally


called
out
as
a
measure
deserving
support.
The
RGGI
auction
is
estimated
to
generate
$60
million
annually.
The
fi
rst
solicitation
for
grants
is
currently
available
on
the
EDA
Web
site
at
<www.njeda.com>.


New Jersey Pay for Performance 

The
New
Jersey
Clean
Energy
Program
offers
the
Pay
for
Performance
(PFP)
incentive
program


for
energy
efficiency
improvements
in
existing
non­residential
buildings
with
an
annual
average


peak
electricity
demand
of
200
kW
or
larger.
The
program
requires
a
committed
energy
reduction
of
20
percent
in
a
“whole
building”
approach.
Rather
than
offering
specific
rebate
levels
for


specific
equipment
types,
the
PFP
program
calculates
the
performance
incentive
as
a
variable
$/


kWh
or
$/therm
incentive
based
on
projected
energy
savings.
Projects
involving
CHP
are
limited


to
$1
million
per
CHP
project
per
calendar
year.
The
2009
budget
for
PFP
is
$33.9
million.
More


information
is
available
on
the
PFP
Web
site
at
<www.njcleanenergy.com/commercial­industrial/


programs/pay­performance>.


Favorable Interconnection Standard 

New
Jersey’s
interconnection
rules
are
favorable
to
distributed
generation,
allowing
systems
up
to


2
MW
in
capacity
to
qualify
for
net
metering.
The
rules
specify
three
levels
of
review
and
include


simplifi
ed
procedures
for
systems
less
than
10
kW.
Fees
vary
by
level.
There
is
no
fee
for
Level
1


interconnection;
the
fee
for
Level
2
is
$50
plus
$1
per
kW,
and
the
fee
for
Level
3
is
$100
plus
$2
per


kW.
Utilities
may
not
require
Level
1
and
Level
2
customer­generators
to
install
additional
controls
or


external
disconnect
switches
not
included
in
the
equipment
package,
perform
or
pay
for
additional


tests,
or
purchase
additional
liability
insurance.
Interconnection
to
networks
is
also
permitted.


For
more
information
about
the
New
Jersey
Energy
Master
Plan
funding
opportunities
for
CHP


and
the
steps
New
Jersey
is
taking
to
support
CHP,
visit
the
EMP
Web
site
at
<www.state.nj.us/


emp/>
and
the
New
Jersey
Clean
Energy
Web
site
at
<www.njcleanenergy.com/>.


July
2009