Creating markets for combined heat and power and clean distributed generation in New York State

Combined heat and power (CHP) is the simultaneous production of electrical or mechanical power and thermal energy from in a single process. Because thermal output from the generation of electricity is captured and utilized onsite, CHP systems can achieve efficiencies from 60% to as high as 90%. In contrast generation of electric power at sites remote from the loads served often results in efficiencies of 33% or less due to losses in generation and transmission and distribution of the power to ultimate end users. A well designed CHP system is the essence of energy efficiency. It may also provide significant environmental benefits. However, the full promise of CHP for improving the efficiency and productivity of businesses and the quality of the environment is unlikely to be realized given the current market structure and regulatory environment in which CHP projects are forced to compete. This paper examines the market structure and regulatory obstacles that hinder the development of more robust markets for CHP in New York State.