On October 29, 2012, Hurricane Sandy blew through the largely populated areas of New Jersey, New York, and Connecticut. It was, at the time, the largest storm in the region’s history. While many areas lost electricity from the electrical grid, the few buildings equipped with Combined Heat and Power (“CHP”) remained lit and heated. For example, many residential and commercial facilities lost power for days after the storm, but natural gas powered CHP systems at the Co-Op City apartment complex and New York University, Fairfield University, and Princeton University kept their buildings functioning. According to Ross Tomlin, an employee of Gulf Coast Clean Energy Application Center of the Department of Energy, “because CHP relies on natural gas delivered through underground pipelines, [the systems] can weather just about any storm.” But minimizing the effects of natural disasters is only one of CHP’s many benefits.

CHP is the process of capturing heat from existing heat sources, such as boilers, and using the heat to power energy sources, such as steam-powered turbines, to create electricity, hot water, and heat. The technology not only reduces energy costs through efficiency—at least twenty to thirty percent more efficient than separate heat and power systems—but it also protects the environment by burning less fuel, and thus reducing greenhouse gas emissions and air pollution. While this technology has seen continued barriers over the years, one company, Recycled Energy Development (“RED”), recognized that “the US lags far behind the world leaders when it comes to producing energy through [CHP]” and has taken steps to utilize the technology.

The average increase in energy costs for households between 2001 and 2012 was forty-three percent. This increase in energy costs affects consumers and businesses alike, with electricity costs topping many businesses’ lists of expenses. America undeniably faces a severe energy crisis both in the private sector, due to rising energy costs, and in the public sector, due to gridlock in government. Among the many green energy technologies currently available, CHP is “the least sexy” and considered “a ‘homeless’ suite of technologies” when compared to solar, wind, and hydropower energy systems. Recently, however, the federal government gave CHP a second look as it attempted to educate state governments and companies about the benefits of the CHP technology. The severe lack of effective and efficient state government incentive programs is hindering the CHP technology from reaching its full potential of providing cheap, sustainable power to businesses.

This Comment will argue that, given the policy benefits of the CHP technology, the federal government should create an organization to establish and monitor a CHP legislative blueprint with three financial incentive program options; states should establish two of those three financial incentive programs; and states should include CHP in their Renewable Portfolio Standards. This Comment will analyze the financial barriers hindering effective widespread use of CHP among private sector companies, examine current effective and ineffective state financial incentive programs, and determine which financial incentive regulations the federal government should include in the legislative blueprint. Because this is mainly a state law issue, no “one size fits all” approach will suffice; however, a legislative blueprint can educate state legislatures about the financial incentives that can be put in place to allow for effective and widespread use of the CHP technology. Such a legislative blueprint must include: 1) a rebate for installed costs of the technology, 2) a feed-in tariff to entice companies to re-funnel excess power through the grid system, and 3) a provision of grants to companies who successfully complete CHP installations.

Section II includes a background discussion of the CHP technology that will help facilitate an understanding of how the technology works and what financial incentives previously existed. Section III includes an analysis of financial incentives, illustrated by state examples that will help analyze how the incentives operate. Section IV includes an analysis of states with little financial incentive programs and demonstrates why it hinders the CHP technology. Section V discusses the proposed solution to this problem, as introduced above.