Growth and diversity in utility combined heat and power programs
Combined heat and power (CHP) programs are growing increasingly popular—and, based on several converging trends of utility needs, the time is ripe to take advantage.
Utility program managers are seeking new and diverse assets for their portfolios, increasingly favoring measures that can deliver energy savings in specific locations to alleviate grid issues. Investments that increase system resilience and help keep customers up and running regardless of external events are among the highest priorities. CHP can meet these needs, which is why they’re gaining traction with utilities across the country.
To get a current and comprehensive look at how CHP is being used in utility energy efficiency portfolios, ICF conducted a national review of utility-run CHP programs. We interviewed more than a dozen utility program administrators and technical assistance providers, researched regulatory filings, and reviewed public marketing materials to dig up the details on programs being administered today. Here’s a quick snapshot of what we found:
1. At least 20 utilities are administering incentive programs specifically for CHP. 16 of them are part of the utility’s energy efficiency portfolio and support compliance with a state energy efficiency resource standard. The ability to count CHP toward energy efficiency targets is a strong driver for utility-run CHP programs. By defining energy savings from CHP as an eligible technology, states can open the door for utilities to encourage their customers to use CHP through demand-side management programs.
2. All utility CHP programs were launched in the last 10 years. The first CHP programs were launched and administered by state agencies in New York and California in the early 2000s. Only in the last decade have utilities started administering their own programs. Half of the utilities in this review launched programs in the last five years, and at least six launched new CHP programs in the last two years.
3. Utilities pursue a variety of CHP program design options. Approximately half are standalone programs designed specifically to encourage CHP, while the other half include CHP as a clearly defined measure within a “custom” efficiency program. In either approach, utilities tend to offer support for feasibility studies and/or two common types of incentives—capacity incentives and production incentives.
The incentive values vary widely and some utilities negotiate them individually with customers. For the programs reviewed, capacity incentives ranged from $75 per kW to $1,800 per kW, typically with maximum incentive caps. Production incentives ranged from $0.02 per kWh to $0.30 per kWh and were typically offered for timeframes of about 12 to 18 months.
The diversity of experiences utilities reported was one of the most interesting findings from the survey. Some reported strong interest from customers, favorable economics, and good opportunities to use CHP as a low-cost solution for constraints on the local distribution system.
Others described limited customer interest, lack of technology awareness, and difficulty identifying investment opportunities with positive economics. For several utilities experiencing good results with CHP program implementation, common success factors tended to include a dedicated marketing and outreach strategy to attract customers and help them through the process of installing CHP, which can be complex and time-consuming.
A handful of utilities also identified new strategies they’re pursuing, such as the opportunity to own CHP at their customer sites, use CHP for load relief as part of a non-wires solution, and explore the potential for flexible configurations, based on system size and performance characteristics. As these approaches evolve, even more utilities are likely to find CHP is a strategy that goes beyond energy efficiency and delivers new value to support the ongoing transition to a more modern, future grid.
ICF presented these findings at the 2018 ACEEE Summer Study on Energy Efficiency in Buildings and ACEEE published them in a paper in the conference proceedings. The various economic, regulatory, and other factors that influence the creation of utility CHP programs and the traction they are able to gain were key topics of discussion at the conference. Below you can find the slides from the presentation. If you’ve got insights to share that may be relevant for future reviews of utility CHP programs, send us an email.
