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Credits & Incentives talk with Deloitte

“Credits & Incentives talk with Deloitte,” is a monthly column by Kevin Potter of Deloitte Tax LLP, featured in the Journal of Multistate Taxation and Incentives, a Thomson Reuters publication. The October edition co-authored with Jeremy Demuth of Deloitte Tax LLP ​ gives an overview of incentives for CHP systems and how they can impact a business.

Overview

For many people, a large industrial boiler burning natural gas to produce steam for use in a manufacturing process is not the image that comes to mind when considering green energy technologies. Utilization of these systems, however, is an important component of domestic alternative energy policy.1 As with other environmentally friendly sources of energy such as solar panels, wind turbines, or fuel cells, these combined heat and power (CHP) systems can be eligible for significant federal, state, and local incentives.2 CHP systems benefit the environment by efficiently using energy from a single fuel source to simultaneously or sequentially produce (1) energy in the form of electricity or mechanical shaft power, and (2) energy used for a thermal application.3 Rather than purchasing electricity from the grid and burning fuel in an on-site boiler to produce needed steam or hot water, a business can use CHP to provide both forms of energy.4 For example, in a manufacturing setting, a company can use the steam or heat to produce its products and to meet some of its electrical or mechanical shaft power needs by routing excess steam through turbines and generators.

CHP technology is not new and is fairly widespread across many types of industries such as refining, paper and pulp, chemicals, metals, manufacturing, and food processing. There has been a steady increase in investments in CHP systems both for new systems and for upgrades to current systems since 2009 when President Obama set a national goal of increasing CHP capacity by fifty percent by 2020.5

1 See U.S. EPA Office of Air and Radiation and U.S. DOE Advanced Manufacturing Office, Combined Heat and Power: A Clean Energy Solution at 8 (Aug. 2012), https://www.epa.gov/sites/production/files/2015-07/documents/combined_heat_and_power_a_clean_energy_solution.pdf. A 10 MW combined heat and power system is estimated to save 42,751 tons of CO2 annually.

2 Id. at 3.

3 Office of Energy Efficiency and Renewable Energy, DOE/EE-1328, Combined Heat and Power (CHP) Technical Potential in the United States, (March 2016), http://www.energy.gov/sites/prod/files/2016/04/f30/CHP%20Technical%20Potential%20Study%203-31-2016%20Final.pdf.

4 US EPA Office of Air and Radiation and US DOE Advanced Manufacturing Office, A Clean Energy Solution Combined Heat and Power at 7 (Aug. 2012), https://www.epa.gov/sites/production/files/2015-07/documents/combined_heat_and_power_a_clean_energy_solution.pdf.

5 Katrina Pielli, Energy Department Turns Up the Heat and Power on Industrial Energy Efficiency (March 13, 2013), http://www.energy.gov/articles/energy-department-turns-heat-and-power-industrial-energy-efficiency.

​More from "Credits & Incentives talk with Deloitte"

For more information regarding tax credits and incentives, contact: 

Kevin Potter, director, Deloitte Tax LLP, New York, +1 212 492 3630

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