Non-financial barriers to combined heat and power in the United States - A qualitative study

The economic viability of new energy technologies is held as a central tenet to their future deployment; conventional wisdom posits economically rational decision-makers will readily invest in proven low-risk and affordable technologies. But what happens when this is not true. This paper examines the non-financial barriers facing economically viable Combined Heat and Power (CHP) projects. CHP is a mature and lower carbon technology that efficiently uses waste heat from thermal electricity generation; CHP can also provide flexibility services to help integrate variable renewable resources. CHP is low risk and many industrialized countries, particularly those in colder climates in Northern Europe and Russia, generate as much as 50% of their electricity and heat needs from CHP, but United States deployment remains low and investment hurdle rates high. While lower U.S. energy costs make some projects un-economic, many economically-viable CHP projects are stalled or killed by non-financial barriers. To better understand why financially viable CHP projects are not getting built, developers, owners and operators, regulators, and other stakeholders of this technology were interviewed and three major barriers emerged a) the business model of the electrical utility b) negative subjective impressions and c) challenges in allocating the risks and benefits.