Using CHP to Profit From the Self-Generation Incentive Program

Investors of CHP (Combined Heat and Power) find that the investment comes with great benefits, such as tax credits, accelerated depreciation, self generation incentives, and sustainability metrics. These create a worthy purchase. In California, a Self-Generation Incentive Program (SGIP) provides incentives to support all sorts of energy resources, including CHP sources. The SGIP provides rebates for qualifying distributed energy systems installed on the customer's side of the utility meter. For CHP projects under 30 kW, 100% of the tax incentives will be paid up front with an incentive of $0.44/W. Larger systems are paid out over 6 years with the first 50% near start up. The incentives can reduce cap ex by up to 50-60%, and it costs about $35,000 for measurement and verification. Therefore, 100 KW systems are the minimum size for the incentive.

Arizona provides the same CHP credits but have a $500/KW self generation incentive. The incentive is easy to apply for and qualify. Costs for this incentive is very low, like $2000/ CHP system install.

Arizona wants to encourage clean energy manufacturers to locate in the state through the Renewable Energy tax credit (A.R.S. §41-1511) in 2009.The state wants to promote the renewable energy industry in the state and create high quality employment opportunities to enhance Arizona’s position as a center for production and use of renewable energy products. The program accomplishes this goal by providing incentives to companies in the solar, wind, geothermal and other renewable energy industries who are expanding or locating in Arizona.  The program offers a refundable income tax credit up to 10% of the new qualifying investment.