Monday, August 5 (Washington, D.C.) — The Combined Heat and Power Alliance, the leading national voice for the deployment of combined heat and power (CHP), on Friday filed comments with the U.S. Treasury Department outlining why efficient CHP systems should qualify for the Inflation Reduction Act’s technology neutral tax credits, so long as they displace more greenhouse gas emissions from the electrical grid than they emit themselves.
The Inflation Reduction Act (IRA) allows combustion and gasification technologies to qualify for the tech-neutral credits if their lifecycle emissions amount to net-zero. In comments to the Department of the Treasury, the Alliance proposed a comprehensive methodology to calculate the lifecycle emissions of a CHP unit within the legal bounds of the IRA Section 45Y statute. That methodology — which is in line with the Environmental Protection Agency’s Clean Air Act guidance for CHP projects and the World Resources Institute’s GHG Protocol for Project Accounting — accounts for the fact that adding high-efficiency CHP systems to the grid typically displaces dirtier resources, resulting in “net negative” greenhouse gas emissions.
“If CHP units are installed instead of planned natural gas development, we can avoid up to 85 million tons of carbon dioxide per year,” said CHP Alliance Executive Director David Gardiner. “Given their high efficiency rates, CHP systems can deliver substantial — and immediate — emissions reductions that the U.S. needs to reach Congress’ objective for these tax credits of cutting power sector emissions by 75%. To meet this ambitious target, even as energy demand rises rapidly, CHP powered by natural gas or cleaner fuels will remain an important tool for near-term electricity sector decarbonization.
The CHP Alliance’s proposed methodology would only grant the tax credits to CHP units that have fewer emissions than either the marginal grid emissions in the region where the project is located or an average combined cycle natural gas plant, whichever is cleaner. Today, the marginal grid emissions rate in every region of the U.S. is more than double that of a 16 megawatt CHP unit that burns natural gas. As a result, CHP systems can deliver emissions reductions more than three times as quickly as solar photovoltaic units of the same capacity.
A copy of the Alliance’s comments can be found here.