Cogeneration and waste heat recovery policies aim to increase the share of on-site generation at industrial facilities that comes from combined heat and power (CHP) plants. CHP plants are much more efficient than conventional power plants because they capture and use the excess heat that is produced to generate steam. In many cases, this process heat can be recovered on-site and used in other manufacturing processes, replacing the need for purchased heat.

Policies promoting CHP generally fall into three categories: financial incentives, guaranteed grid access and interconnection standards, or technical assistance. Financial incentives are relatively straightforward and might include tax credits or production incentives for CHP facilities.

Guaranteed grid access requires utilities to purchase power from CHP plants and helps create investment certainty for businesses. In the U.S., the Public Utilities Regulatory Policy Act of 1978 established CHP plants as “qualified facilities” and required utilities to purchase power from these facilities. This resulted in significant growth in the number of CHP plants. Interconnection standards, which are pre-approved criteria that generators must meet to connect to the grid, can help expedite grid access and minimize costs.

Technical assistance can help educate businesses that could benefit from building CHP plants by demonstrating the financial and environmental benefits of opting for these more efficient facilities.