Evaluation of Financial Incentives for Combined Heat and Power (CHP) Systems in U.S. Regions

Zhang, J., Cho, H., & Knizley, A. (2016). Evaluation of Financial Incentives for Combined Heat and Power (CHP) Systems in U.S. Regions. Renewable & Sustainable Energy Reviews. Elsavier. 59, 738-762. DOI:10.1016/j.rser.2016.01.012.

Abstract

In recent years, combined heat and power (CHP) systems have gained more attention from the U.S. government. Both the federal government and the state government have proposed many incentive policies to promote CHP systems. This paper focuses on analyzing and evaluating the effectiveness of existing incentive policies for CHP systems in various U.S. states. In this paper, the existing incentive policies for CHP systems in different states are classified in four categories: capital cost rebate, tax credits, low tax loan, and utility credits. Four types of buildings including hospitals, large offices, large hotels, and primary schools, located in different U.S. regions, are selected and analyzed for the CHP incentives. Using the EnergyPlus simulation software, the energy consumption of each building is obtained. Then the simulation models of a CHP system are established for each building type. From the simulation results, the payback period of the CHP systems in different locations is calculated according to local incentive policies. This payback period is then compared with the one without regard for incentive policies. The results show that most of the incentive policies could obviously shorten the payback period in various U.S. regions, however some of them seem meaningless because some incentives were not effective enough to give a favorable payback period. This paper reveals that the type and level of incentives to promote CHP systems need to be carefully determined because the effectiveness and usefulness of incentive policies are highly dependent on the CHP performance due to the capacity of the power generation unit, the operational strategy of CHP system, the climate location, and the ratio of electricity cost to fuel cost.