State Policies Impact Combined Heat and Power Installations

October 17, 2002

Washington, D.C. — Due to deregulating energy markets, state governments are looking for ways to encourage diversification of power production resources, and some states are developing policies regarding combined heat and power (CHP). The American Council for an Energy-Efficient Economy's (ACEEE) new report, State Opportunities for Action: Review of Combined Heat and Power State Activities, reviews current state activities regarding CHP, including interconnection standards, emissions regulations, and financial incentives. Five states offer state-level financial incentives, most have no state-level standardized interconnection standards, and only seven have or are currently planning any specialized emissions regulations regarding CHP. States making considerable progress on encouraging CHP are New York, Texas, and California.

"Although only a few states have taken steps to encourage CHP, they offer a wide range of programs that can be good models for many states," said Elizabeth Brown, co-author and ACEEE's Industry Research Assistant. States have the ability to tailor incentive programs to specific needs, giving their programs a good chance of success. While the programs will not transfer directly to other states, they are good examples from which other states can work.

CHP systems, also known as cogeneration, generate electricity and thermal energy in a single, integrated system. These systems are more energy efficient than separate generation of electricity and thermal energy because heat that is normally wasted in conventional power generation is recovered as useful energy for satisfying an existing thermal demand. CHP systems can be employed in many commercial and industrial facilities.

State Opportunities for Action: Review of Combined Heat and Power State Activities (by Elizabeth Brown, Kalon Scott, and R. Neal Elliott) is available for free at