This post was written by Anna Chittum, Senior Policy Analyst at the American Council for an Energy-Efficient Economy and a contributing author at the ACEEE blog.

Here at ACEEE we love combined heat and power (CHP). CHP is a critical, affordable, and proven energy resource that can produce electricity and thermal energy at the same time from a single fuel input. CHP does this at up to double the efficiencies of traditional utility power plants. CHP units already provide over 12 percent of the country’s electricity generation — avoiding the emissions of a substantial amount of NOx, SO2, CO2, and particulates that would have been emitted by the traditional separate generation of electricity and thermal energy. In fact, a 2008 report from Oak Ridge National Laboratory found that the CHP systems operating in the U.S. avoid CO2 emissions equivalent to removing 45 million cars from the roads annually.

As a country we can do even better. In a recent ACEEE white paper, we show how energy efficiency resources, including CHP, can meet energy demands and new environmental regulations at a fraction of the cost of retrofitting or replacing old coal-fired power plants. CHP is a highly cost-effective energy resource (see page 10) — cheaper than most renewables and new fossil fuel-powered plants (see slide 15). It is easily distributed and can be sized to meet the energy needs of a single building or multiple buildings aggregated together. CHP comes in many shapes and sizes and runs on many fuels. It can take advantage of local solid waste, biofuels, or waste energy when available. But despite the obvious need and all of the benefits, CHP faces continued barriers across the U.S.

Today we released a new report on the barriers and opportunities facing CHP systems at the state level in the U.S. The report reflects first-person accounts of the CHP markets in all 50 U.S. states and reflects the opinions and viewpoints of over 50 individual CHP developers and supporters around the country. For years we have tracked policies that impact CHP in each state and rated states on their respective policies in our State Energy Efficiency Scorecard. While some states have historically scored well in the CHP category, our new report indicates that not all of those states are actually viewed as favorable by CHP developers. Conversely, some of the states that have historically scored poorly for their CHP policies are actually viewed as quite healthy markets for CHP by developers.

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So what’s the deal? We found the recent recession has had a lot to do with it. But that’s not the whole story. In some states certain utilities are good on paper, but in practice they make it very difficult for CHP project developers to move projects forward. In other cases a lack of affordable and available fuel makes it difficult for most CHP projects to compete with cheap electric rates. And in some states where the policies to support CHP have traditionally been viewed as poor, high electric rates have made CHP more attractive than it might otherwise be. We discuss these issues and many more in the report, which aims to help states identify better ways to encourage CHP and take advantage of existing CHP opportunities.

The U.S. Department of Energy, the U.S. Environmental Protection Agency, and numerous states themselves have identified CHP as an integral part of the energy future. CHP can save energy and can save facilities money immediately. As we find in this report, the U.S. already has the tools needed to implement substantially more CHP now. With cash-strapped companies, universities, and municipalities looking to reduce costs and facing rising fuel prices, CHP is an opportunity this country cannot afford to miss, particularly if many utilities are looking at investing tens of billions in new generation assets in the coming decade.

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Anna Chittum is a Senior Policy Analyst at ACEEE. She researches and helps develop federal, state, and local industrial energy policies, particularly those pertaining to combined heat and power (CHP) systems and industrial energy efficiency programs. Her expertise includes regulatory and policy issues surrounding CHP systems and best practices in the development and deployment of utility-administered industrial energy efficiency programs.