Page 127 - Sustainable On-Site CHP Systems Design, Construction, and Operations

Regulatory Issues 105

rapid development coming in the last decade. An electricity supply crisis in California
combined with escalating energy costs and rising global warming concerns have
prompted a number of U.S. states as well as European countries to try to speed up the
pace of CHP adoption within their jurisdiction.
Early measures were often targeted at removing specific barriers to CHP implemen-
tation without having coordinated efforts toward removing other barriers. Complexities
regarding administration of programs as well as recognition of utility concerns regarding
safety and revenue helped to slow progress. In addition, the market for CHP began to
shift from large industrial sites to smaller commercial and institutional sites and policy
makers needed to come to grips with the effects of restructuring the electric power market.
While there was some success at varying levels, many of the barriers to implementation
of CHP on a wide scale still existed. Recent efforts have embraced a more coordinated
approach between regulators and industry with support from the Department of Energy
and recognition of utility concerns eliminating some of the barriers that previously
existed. Standard interconnection agreements combined with capital grants and stream-
lined air permitting procedures have begun to open the market for CHP.
While the situation has improved, barriers such as natural gas price volatility, high
expectations by owners on the rate of return on their investment, and the complexity of
implementing CHP at a particular site still hold the industry back. Earlier programs
also failed to necessarily produce the results expected by those funding the programs.
Poor design led to under utilization and lower than expected efficiencies while meeting
emissions targets on a continuous basis has also proved difficult.
As the industry continues to try to find ways to avail of the benefits offered by CHP,
future policy will need to address remaining barriers where practical as well as encour-
age further cooperation from utilities who have yet to become a full proponent of CHP.
Many U.S. states are currently investigating the potential to decouple utility revenue
from power throughput in order to gain stronger utility support for CHP. Such efforts
are generally spearheaded by the state utility regulatory authorities and would
require legislative policy changes. As with some renewable energy support programs,
CHP support may shift toward production payments and measurement and verifica-
tion models to help ensure that public money invested in CHP does in fact derive the
desired results.
Greenhouse gas reduction targets at the federal, regional, and state level will have
increased impact as regulators and policy makers begin to recognize the important role
to be played by CHP in meeting these targets. Cap and trade programs will support
CHP development when displacement of both power and thermal energy use is
attributed to CHP. Furthermore, a transition from input-based emissions rating to out-
put-based emissions whereby credit is given for the higher fuel efficiency of CHP prime
movers will also allow for easier deployment of CHP.
All these issues are currently in various stages of discussion or development and
represent a natural evolution for CHP related policy.

CHP System Requirements
The continually evolving policy efforts by federal, state, and local authorities will have
some impact on the design of CHP systems. In general the benefits offered by CHP can
only be realized if the system is significantly more efficient than non-CHP options and
if the CHP system has a high load factor. CHP systems should have an annual operating