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Monetizing Environmental Benefits
Funding Resources
Key Resources and Tools
- The Funding Database is a list of federal and state incentives for CHP systems, sorted by name, state, or application type.
- Environmental Revenue Streams for Combined Heat and Power (PDF) (21 pp, 770K, About PDF) discusses three key types of programs or policies (i.e., cap and trade, offset, and REC programs) that can provide environmental revenue streams (ERS) for CHP projects. It also helps project developers determine what ERS programs are available in their state, if CHP systems qualify, and if a project might be eligible for more than one program.
Combined heat and power (CHP) systems generate environmental benefits, such as reduced emissions, that can be quantified and, in many cases, monetized. States often offer financial incentives (or revenue streams) for emissions reductions or other environmental attributes that are designed to reward highly efficient or renewably fueled generation projects like CHP.
Types of Environmental Revenue Streams
By using waste heat recovery technology to capture a significant proportion of the heat created as a byproduct in electricity generation, CHP systems typically achieve total system efficiencies of 50 to 80 percent for producing electricity and thermal energy. Because CHP uses less fuel than conventional separate heat and power generation, it reduces emissions of greenhouse gases and other pollutants. Federal and state governments have begun to create a number of regulatory incentives to recognize and reward technologies using biomass or biogas for their positive environmental attributes. Revenue streams for biomass CHP projects include:
- Emission cap-and-trade allowances
- New source emission offsets
- CO2 offsets
- Energy portfolio standard certificates
- Voluntary market renewable energy certificates
These programs provide financial incentives to promote the development of new environmentally beneficial sources of generation. The structure and value of the different programs varies greatly but often can provide either capital-cost offsets or production-based funding mechanisms (per megawatt-hour payments).
Resources
The CHP Partnership has developed resources to help project developers and energy users gain access to these revenue streams.
- The Partnership maintains a listing of federal and state environmental revenue streams in the Funding Database, updated twice a month.
- The report Environmental Revenue Streams for Combined Heat and Power (PDF) (21 pp, 770K, About PDF) discusses three key types of programs or policies (i.e., cap and trade, offset, and REC programs) that can provide environmental revenue streams (ERS) for CHP projects. It also helps project developers determine what ERS programs are available in their state, if CHP systems qualify, and if a project might be eligible for more than one program. The paper also provides a case study example of a CHP project in which potential ERS payments under several of the policies/programs discussed are calculated. An Appendix contains guidance on how to estimate the monetary impacts of an ERS on a specific project.