Administration Energy Policy

The National Energy Policy Development Group, chaired by Vice President Cheney, released its report to the President in 2001. The complete text of the report is available in downloadable PDF format here. The report prominently features combined heat and power (CHP), and represents a major endorsement for the removal of regulatory and market barriers that have inhibited wider implementation of the technology. The report included several policy recommendations relating to CHP.

Combined Heat and Power

In the report, CHP is positioned in a very positive light. Key points include:

CHP is environmentally preferred, cost effective, efficient, and reliable.

CHP is defined as part of the distributed energy group of technologies that can reduced transmission and distribution (T&D) losses and defer the need to construct expensive new T&D assets. Distributed energy technologies also include: stationary fuel cells, landfill methane, small-scale wind, and photovoltaics.

Location of CHP at or near the end-use site allows for use of waste heat and waste-fuels.

Barriers to CHP are identified as:

Delay and difficulties obtaining air permits, including lack of recognition of CHP air quality benefits.

Difficulties in siting due to local ordinances.

Lack of standards governing utility interconnection.

Inequitable tax treatment.

Regarding barriers, the report states:

“New combined heat and power facilities may face air permitting hurdles when they replace marginally dirty boilers. The Clean Air Act does not recognize the pollution prevention benefits of the increased efficiency of combined heat and power units. At the same time, these combined heat and power investments are taxed at the industry’s tax rate, not at the rate they would receive if they were considered part of the utility sector for tax purposes. In the last few years, surging venture capital investments showed strong support for distributed energy technologies.”

The report includes a case study of IDEA member District Energy St. Paul.

Policy Recommendations

The “National Energy Policy” report made significant policy recommendations for CHP:

· The NEPD Group recommends that the President direct the Secretary of the Treasury to work with Congress to en-courage increased energy efficiency through combined heat and power (CHP) projects by shortening the depreciation life for CHP projects or providing an investment tax credit.

· The NEPD Group recommends that the President direct the Administrator of the Environmental Protection Agency to issue guidance to encourage the development of well-designed combined heat and power (CHP) units that are both highly efficient and have low emissions. The goal of this guidance would be to shorten the time needed to obtain each permit, provide certainty to industry by ensuring consistent implementation across the country, and encourage the use of these cleaner, more efficient technologies.

· The NEPD Group recommends that the President direct the Administrator of the Environmental Protection Agency to work with local and state governments to promote the use of well-designed CHP and other clean power generation at brownfield sites, consistent with the local communities’ interests.

The National Energy Policy report also contains other recommendations with potential impact on district energy and CHP, including directing the EPA to develop legislation for market-based “cap and trade” program for control of sulfur dioxide, nitrogen oxides and mercury.

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