Cogeneration (Combined Heat & Power)

What's New

Spurred by the summer ’03 blackout in the Northeast, Congress reassessed the need for comprehensive energy legislation in general, and more specifically, electricity deregulation. This effort culminated in the passage of H.R. 6, legislation that was approved by a House-Senate Conference and by the full House of representatives in the fall of 2003. Regional and political differences, however, could not be overcome in the Senate where a cloture vote fell only 2 votes short of the 60 needed to end debate and proceed to a final vote on the measure. In another attempt to negotiate and enact an energy bill, the Senate has recently offered a pared-down version of H.R. 6 (S. 2095), but the electricity provisions remain essentially unaltered. See the Energy Policy page for additional information.

As with previous congressional attempts to restructure the nation’s electricity industry, the legislation under consideration directly impacts independent co-generation facilities. Current law, the Public Utility Regulatory Policies Act of 1978 (PURPA), requires electric utilities to both—depending on specific circumstances—buy power from or sell power to co-generating facilities. Terms of the sales are to be market-based. Both H.R. 6 and S. 2095, the revised Senate bill, reform PURPA by repealing the mandatory purchase provisions and require the Federal Energy Regulatory Commission (FERC) to assess markets conditions and determine the ultimate market or markets, if any, for cogeneration units.

Cogeneration facilities would also be impacted by the legislation developed and introduced to implement the Clear Skies program advocated by the Administration. Some stakeholders are advocating that cogeneration or combined heat and power (CHP) units should be included in Clear Skies legislation and thus subject to the requirements applicable to utilities. Most others, including NPRA, argue that inclusion of CHP units in Clear skies Legislation is counter-productive from all parameters—energy, economic, and environmental.

Given that passage of Clear Skies Legislation remains in doubt, EPA is proposing a regulatory approach that tracks closely with Clear Skies Legislation. Under this plan, utility emission of nitrous oxides (NO_x), sulfur dioxide (SO₂), and mercury (Hg) would be reduced over a 12-14 year period. Under the plan, mercury emissions would be reduced 70% by 2018.

NPRA filed comments on both EPA proposals on NO_x and SO₂ and Mercury.

NPRA Position

NPRA supports programs to encourage reliable, affordable and clean energy sources such as cogeneration facilities. Such facilities currently produce about 7% of the nation's electricity. On average, they are twice as fuel efficient and produce only half of the emissions as a conventional utility. Because of these benefits, the President has set a goal of doubling the capacity of these units by 2010.

NPRA also supports maintaining the Public Utility Regulatory Policies Act (PURPA), regardless of whether electricity issues are considered in a stand-alone electricity bill or as part of national energy legislation. Altering the status of PURPA would jeopardize thousands of megawatts of cogeneration capacity at a time when many regions of the nation are low on electricity and when the federal government is seeking to expand cogeneration capacity. Reforming PURPA without a new regulatory framework to ensure fair access to the grid is also contrary to the goals of promoting competition and environmental in electric generation. NPRA remains concerned that the framework for FERC arbitration outlined in energy legislation fails to ensure adequate protection for cogeneration facilities.

NPRA does not support the inclusion of cogeneration or large industrial boilers in multi-pollutant or Clean Skies legislation. We will continue to advocate public policies that support a vibrant cogeneration industry.

Issue Brief

Cogeneration units, also known as combined heat and power (CHP) facilities, offer a clean, efficient way of using energy while helping to keep U.S. manufacturing internationally competitive. These units use heat that would otherwise be wasted to generate electricity. According to the U.S. Energy Information Administration, there are more than 1,000 of these facilities in the U.S. Both refineries and petrochemical plants operate these units at their plants. These units are also subject to a host of regulations.

Cogeneration offers significant environmental benefits. By combining the production of steam, electricity and mechanical power, cogeneration facilities burn far less fuel and release fewer emissions, including greenhouse gas (CO2) emissions.

Cogeneration units also increase the reliability of the grid, can help bypass transmission system constraints and gain further energy efficiencies by reducing transmission system losses.