Combined Heat and Power

Combined Heat and Power (CHP), or cogeneration, provides both an on-site source of electric power and useful thermal energy from a single fuel source. These systems capture thermal energy that would normally be lost in traditional power generation and use it to serve heating and cooling needs.

The objective of the Pepco CHP Program is to help customers further improve energy efficiency and reduce operating costs. CHP installations reduce the amount of electricity delivered via the power grid to Pepco customer facilities in Maryland.

The incentives available to Pepco customers are paid in Design, Construction and Production project stages.

The Design Incentive is calculated based on $75 per gross kW of the system’s generator. This first incentive is paid upon receipt of a utility Interconnection Agreement, a signed Project Requirements Document (PRD), a statement from the local gas utility stating that gas flow and pressure are adequate for the system to operate at rated output, and evidence that the Pepco customer has spent or incurred obligations to pay at least 50% of the project’s estimated cost.

The Construction Incentive is also based on the system’s gross kW of electric generation. Systems smaller than 250 kW will receive $275 per kW. Systems of 250 kW and larger will receive $175 per kW. This second incentive is paid upon the completion of the system’s installation and commissioning.

The Design and Construction incentives collectively are referred to as the Capacity Incentive. The total Capacity incentive is capped at $1,250,000.

The Production Incentive is paid based on the actual electricity generated by the system, and is based on $0.07 per kWh. The production incentive is paid every 90 days for 6 periods over an 18 month period of scheduled operation after the system is commissioned. The calculated incentive payment will be derived from the monthly system production reports that are to be provided to the program office.

The Production incentive is also capped at $1,250,000. The maximum CHP incentive a customer may receive is $2,500,000. The incentive is also capped at 50% of the total installed cost of the CHP system, including all labor and materials.

The program is not accepting applications at this time. Review the most current Program Update for additional details.

Frequently Asked Questions: Combined Heat and Power FAQs (PDF)

Updated October 8, 2012 Page 1

Combined Heat and Power FAQ

1. What is CHP?

A Combined Heat & Power System (CHP), sometimes known as co-generation, is an efficient and clean approach to generating electric power and useful thermal energy from a single fuel source, or from waste heat. The CHP equipment sequentially produces electricity and useful thermal energy to replace or supplement conventional separate heat and power (SHP) systems such as central station electric via the grid and an onsite boiler or heater.

2. What are some examples of “Useful Thermal Energy”?

These best examples of useful thermal energy are units and facilities that require moderate temperature all-year-round. Some examples are:
  • Domestic hot water such as heated swimming pools
  • Space heat that is needed for 8 to 12 months each year
  • Processed heat at a manufacturing plant
  • Chilled water that is produced in a heat-powered chiller if the chilled water is needed for at least 8 to 12 months each year.

3. What types of CHP Systems exist?
Type Generating Capacity (kW) Likely Capacity (kW) Packaged
Reciprocating Engine 5 to 3,000 50 to 1,000 Yes
Gas Turbine 500 to 50,000+ 500 to 2,000 No
Microturbine 30 to 250 30 to 250 Yes
Boiler & Steam Turbine 200 to 100,000+ 500 to 2,000 No
Fuel Cell (5 Subtypes) 5 to 250 200 to 250 Yes

4. What are the characteristics of the most economic CHP projects?

A constant or nearly constant electric and thermal load at a moderate temperature.

Facilities that would benefit with a CHP project are:

  • Hospitals
  • Nursing Homes
  • Multi-family with common domestic hot water (DHW) system
  • Fitness Centers
  • 3-shift Industrial plants

5. Why is Pepco offering the CHP program?

To help achieve the 2015 EmPOWER Maryland energy savings goals. Pepco recognizes that CHP can have excellent potential for electricity savings.

6. What are the Key Program Rules?

• The host facility must be energy efficient • The CHP system must be at least 65% efficient • All electricity must be used by the Host Facility, i.e., no electricity exported back to the grid • 5-year warranty is required

The facility also must satisfy all utility safety, environmental, and regulatory requirements, including interconnection to the grid. All CHP applicants must submit to Pepco a separate Maryland Combined Heat and Power Interconnection Application and Agreement

7. Can I submit an application for an Energy Study that examines the feasibility of a CHP installation?

Yes, but the study must be comprehensive, identifying and analyzing all electricity-saving measures, and not be limited to only CHP. It must also examine alternative CHP technologies.

8. How is the criterion for host facility electricity efficiency quantified?

Pepco will require all measures with a payback period of less than three years be implemented.

9. Is there a “Buy American” requirement to purchase system(s) or equipment?

No, there is no requirement to “Buy American” equipment.

10. I have a number of multifamily buildings. To help me recover the cost of a CHP system that I install, can I charge my tenants for their share of the electricity and thermal energy the system produces?

PHI believes this question is outside of the scope of the Pepco Combined Heat & Power program's terms and conditions. Since this question could have legal implications, we suggest that your legal representatives consult the Code of Maryland regulations and the Public Utilities Code.

EmPOWER Maryland programs are funded by a charge on your electric bill. EmPOWER programs can help you reduce your electricity consumption and save you money. Go to to learn more about EmPOWER and how you can participate.