Combined Heat and Power

CHP is the simultaneous generation of electric and thermal energy from a single fuel source such as natural gas. For example, when coupled with a generator, a natural gas-fired engine produces electric energy. The engine also produces waste heat via engine exhaust gas, as well as heat rejected through the radiator, to keep the engine and the lubricant at the optimal temperature. This normally wasted heat can be captured to produce steam or hot water for space heating, domestic hot water, or manufacturing processes. The steam or hot water produced by the CHP unit will reduce the amount of fuel otherwise used in the facility’s boiler for these end uses. The overall efficiency of a CHP system can be as high as 80%, exceeding the efficiency of power generated from a central plant and delivered via the transmission and distribution system (~ 35 to 40% efficiency) combined with on-site production of thermal energy.  Additionally, the increased efficiency of CHP often leads to a lower carbon footprint because of reduced greenhouse gas emissions.

Other significant benefits of the CHP system may include standby power capability at the facility and better control of power factor, depending on the type of generator and controls used in the CHP system. If these capabilities are of interest, discuss options and costs with your CHP supplier.  In addition, federal, state and electric utility energy efficiency program incentives for CHP systems can significantly improve project economics.

In order to derive the maximum benefit from a CHP installation, thermal energy generated by the CHP unit should be fully utilized by the host facility. The best CHP applications are facilities with high annual hours of operation and continuous thermal load. Facilities in which electrical and thermal loads coincide to a large degree are ideal.  Examples of such applications include industrial processes that need heat and electricity during the same time period (particularly those with 24/7 operation), and commercial applications such as hotels, hospitals, nursing homes, schools, colleges, laundries, health facilities, and multi-unit apartments. Round-the-clock thermal and electrical loads are of key importance in allowing a return on the CHP capital investment within an acceptable amount of time.

Incentives available for CHP projects are designed to encourage “right-sizing”.  In general, CHP systems which are sized without taking into account available electrical and thermal energy efficiency measures may ultimately end up being oversized relative to the eventual building electric and thermal load if standard building energy efficiency measures are implemented after, rather than before, a CHP system is sized and installed.

The incentives offered for CHP units are designed specifically with this in mind with higher incentives for projects that incorporate more standard building energy efficiency measures in advance of CHP project development.  Available incentives are as follows*:

Tier 1: $750 per kW for systems <= 150 kW, for larger systems - contact your Program Administrator for details

Tier 2: $1,000 per kW for systems <= 150 kW, for larger systems, a maximum of $950 per kW - contact your Program Administrator for details
  • ASHRAE Level 1 Audit
  • All cost-effective EE with < 3 year payback implemented within 18 months
  • Minimum CHP efficiency > 60%
Tier 3: $1,200 per kW for systems <= 150 kW, for larger systems, a maximum of $1,100 per kW - contact your Program Administrator for details
  • ASHRAE Level 2 Audit
  • All cost-effective EE to achieve 10% reduction to be implemented within 36 months
  • Minimum CHP efficiency > 65%

* For complete details, contact your Program Administrator.  For more information about all aspects of CHP project possibilities, please refer to A Guide to Submitting CHP Applications for Incentives in Massachusetts.

Current Incentives for Combined Heat and Power