Monetizing Environmental Benefits

Funding Resources

Key Resources and Tools

The Funding Database is a list of federal and state incentives for CHP systems, sorted by name, state, or application type.
The State Environmental Revenue Stream Programs (PDF) (83 pp, 591K, About PDF) document provides detailed, state-by-state information about programs that can add economic value to CHP and biomass/biogas projects based on their beneficial environmental attributes.
Funding Opportunities Guide (PDF) (59 pp, 1.1 MB, About PDF) is a directory of energy efficiency, renewable energy, and environmental protection financial and technical assistance programs available from EPA, other federal agencies, state governments, and private foundations, compiled by EPA's State and Local Capacity Building Branch.

Combined heat and power (CHP) systems generate environmental benefits, such as reduced emissions, that can be quantified and, in many cases, monetized. States often offer financial incentives (or revenue streams) for emissions reductions or other environmental attributes that are designed to reward highly efficient or renewably fueled generation projects like CHP. The CHP Partnership has developed a series of resources to help project developers and energy users gain access to these revenue streams.

The Partnership maintains a listing of federal and state environmental revenue streams in the Funding Database, updated monthly. Additionally, the State Environmental Revenue Stream Programs (PDF) (83 pp, 591K, About PDF) document presents state-by-state information about currently available environmental revenue streams, including deadlines, compliance requirements, pricing structures, and contact information for the administering state agencies.

Types of Environmental Revenue Streams

CHP fueled by biomass or biogas is highly efficient and uses carbon dioxide (CO₂)-neutral fuel, making the technology an environmentally preferable source of electric generation. Federal and state governments have begun to create a number of regulatory incentives to recognize and reward technologies using biomass or biogas for their positive environmental attributes. Revenue streams for biomass CHP projects include:

Emission cap-and-trade allowances
New source emission offsets
CO₂ offsets
Energy portfolio standard certificates
Voluntary market renewable energy certificates

These programs provide financial incentives to promote the development of new environmentally beneficial sources of generation. The structure and value of the different programs varies greatly but often can provide either capital-cost offsets or production-based funding mechanisms (per megawatt-hour payments).

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Example of CHP System Economics

While the economics of a CHP project differ from one site to the next, the additional revenue streams would positively affect the payback of a CHP project. The payback for a sample CHP project is shown below.

CHP Cost to Generate Power
Operating Assumptions
CHP Electric Efficiency (%)	32.0%
CHP Power to Heat Ratio	0.7
Displaced Thermal Efficiency	80.0%
Thermal Utilization (%)	95.0%
Incremental CHP O&M Costs ($/kWh)	$0.0100
CHP Fuel Cost ($/MMBtu)	$8.30
Displaced Thermal Fuel Cost ($/kWh)	$8.30

Operating Cost to Generate
CHP Fuel Costs ($/kWh)	$0.0885
Thermal Credit ($/kWh)	($0.0480)
Incremental O&M ($/kWh)	$0.0100

Operating Costs to Generate Power ($/kWh)	$0.0505

Capital Cost
Installed CHP System Cost ($/kW)	$1,200
Annualized Cost Factor (%)	8%
Operating Hours	8,500
Capital Charge ($/kWh)	$0.0113

Total Costs to Generate Power ($/kWh)	$0.0618

$/kW = dollars per kilowatt, $/kWh = dollars per kilowatt-hour, $/MMBtu = dollars per million British thermal units, O&M = operations and maintenance

For more information on how you can access any of these programs for your project, please contact the EPA CHP Partnership at chp@epa.gov or (703) 373-8108.