ACEEE is improving the methodology it uses to evaluate a state’s policies toward combined heat and power (CHP) for this year’s annual State Energy Efficiency Scorecard. The new analysis will incorporate lessons learned from prior years as well as feedback provided by the CHP community.
CHP is a suite of technologies that simultaneously generate electricity and thermal energy. These systems can provide reliable, cost-effective power to a wide range of types of buildings, from single-family homes and small commercial buildings to large institutions and energy-intensive manufacturing facilities. CHP systems run on a variety of fuels, including natural gas, biomass, and biogas, and are much more efficient than traditional centralized generation. For all these reasons ACEEE considers CHP a smart policy choice and worthy of preferential treatment by state governments and public utility commissions.
For almost a decade, we have tracked and analyzed how different states encourage the deployment of CHP. While the market for CHP varies dramatically with the local price of electricity and other factors, state policies also make a difference. States can offer financial incentives, financing assistance, preferential emissions permitting, and game-changing regulatory treatments that may make CHP much more attractive to facility owners and managers. States that see robust CHP deployment typically have higher electricity prices as well as strong policies in place that encourage the local CHP market.
We rank states on their CHP policies in our annual State Energy Efficiency Scorecard. This analysis has always looked at several policies and regulations and ranked states based on their in-place policies for CHP. In recent years, CHP developers and advocates have indicated that the CHP rankings were not always reflective of their experience on the ground. To address this, we issued a report reflecting some of these anecdotal thoughts on local CHP markets and began to consider the methodology we would use in future analyses.
Today we issued a white paper outlining a new methodology for ranking states on their CHP policies. While many of the categories remain the same, the new methodology offers substantial clarity in the ranking process and incorporates additional considerations of a state’s CHP market and attendant policies. One notable change is the inclusion of additional policies and revenue streams for CHP, such as feed-in-tariffs, standard offer, and inclusion of CHP in utilities’ energy efficiency programming.
One common concern with prior Scorecard rankings was the fact that highly-ranked states were also home to utilities that tended to discourage CHP projects. ACEEE recognizes the importance of this concern. However, the Scorecard is primarily a tool to reflect state-level policies, and as such is not the proper venue in which to rank individual utility treatment of CHP, as we have attempted to do in the past. While such activity does impact local CHP markets, it is not reflected in the updated methodology. Our future work may again address utility treatment of CHP.
We hope this revised methodology will yield easier-to-understand rankings and a clearer picture of the policy and regulatory framework for CHP in each state. As regulators and policymakers at states around the country increasingly view CHP investments as a smart long-term energy strategy, we expect more and more states will adopt new policies and regulations that enhance the market for CHP around the country.