NC passes CHP investment tax credit law

By Anna Austin
Posted August 18, 2010, at 2:40 p.m. CST

North Carolina is a step ahead of the U.S. federal government in making the installation of clean and efficient combined-heat-and-power (CHP) systems more economically feasible through a CHP or cogeneration investment tax credit recently signed into law by Gov. Beverly Perdue.

House Bill 1829 made several changes to North Carolina's renewable energy investment tax credit, which was previously only available to solar, wind, geothermal and other renewable electricity production technologies. Beginning in August, businesses that install a CHP system can receive a tax credit from the state equal to 35 percent of the cost of the equipment, construction, and installation, up to a maximum of $2.5 million. CHP systems for use in places other than at businesses are eligible for a tax credit of up to $10,500.

The new policy skates ahead of similar pending federal legislation introduced in March by House Rep. Paul Tonko, D-N.Y. On a federal level, CHP systems are already eligible for a 10 percent federal business energy investment tax credit. The Innovative Energy Systems Act of 2010 (H.R. 4751) proposes the removal of the current tax credit limitation to small projects, as the 10 percent credit only applies to the first 15 megawatts (MW) of a project and is limited to 50 MW in size. The bill would apply the tax credit to a project's first 25 MW, as well as provide a 30 percent credit for recycled energy and CHP with efficiencies above 70 percent.

According to the U.S. DOE's Office of Energy Efficiency and Renewable Energy, while the traditional method of separately producing usable heat and power has a typical combined efficiency of 45 percent, CHP systems can operate at efficiency levels as high as 80 percent.

H.R. 4751 is popular with many business, labor, environmental and government organizations, who in April sent a letter to Congress urging for the adaptation of the bill. Referencing a report released by the EERE in 2008, the letter states that if the U.S. adopted high-deployment policies to achieve 20 percent of generation capacity from CHP by 2030, it could save an estimated 5.3 quadrillion Btu of fuel annually, or the equivalent of nearly half the total energy currently consumed by U.S. households.

While the fate of H.R. 4751 remains uncertain, North Carolina may just see a CHP boom. The state currently has a CHP installation capacity of about 1,482 MW at 45 sites, according to the U.S. DOE's Energy and Environmental Analysis Inc. Keith McAllister, director of the Southeast Clean Energy Application Center, said that ICF International, which tracks information for Energy Information Administration, estimates that the tax credit will increase the amount of CHP in the state by 103 MW in the near future. "I wouldn't say that CHP has seen a lot of activity in the state, but the interest level has been definitely rising over the past few years, particularly for biomass fueled projects," he said. "The passage of this bill which allows CHP fueled from any source to get the tax credit should bring the bigger players to the table. There are still barriers to the market place, but having these organizations interest should help to remove those barriers as well."