Combined Heat and Power (CHP) plants produce electricity and utilize the waste heat instead of discarding it, thereby making them more efficient than traditional power plants. Many cities use CHP or just heat plants to produce steam that is used to heat nearby buildings.
Policies promoting the use of CHP plants for heating buildings aim to increase the share of heating plants that are CHP plants. Policies promoting CHP generally fall into three categories: financial incentives, guaranteed grid access, or techinical 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. The result was signifncant 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 this process and minimize costs.
Third, technical assistance can help businesses that could benefit from building CHP plants by demonstrating the financial and environmental benefits of opting for these more efficient facilities.
A final option is to mandate that all new heat plants be CHP plants.