Do Combined Heat and Power plants perform? Case study of publicly funded projects in New York

We investigate lower than expected capacity factors of Combined Heat and Power plants using a publicly available dataset of hourly performance for plants in the state of New York. Low utilization of a CHP indicates underperformance. We examine possible causes of this underperformance including economic arbitrage, poor maintenance and operational practices, oversizing of plants, and reliability and resiliency needs. Based on seasonal and weekday/weekend capacity factor averages, we find that there is not enough evidence to support the economic arbitrage cause. Out of 99 plants in the dataset, 64 plants have average capacity factor below 60%, indicating they are either oversized and/or poorly maintained. This suggests that the current practice of one-time fixed incentive ($/kW) favors investment in capacity with no incentive for utilization (unlike a production credit which incentivizes generation $/kWh). From a policy perspective, this paper recommends better pre-engineering assessment for correct sizing, as well as revision of incentives based on performance. Additional information should be collected so that a more accurate ongoing analysis of the societal benefits of CHP projects can be made. Lastly, the energy efficiency gap may be smaller than is commonly assumed and other options should be explored to meet energy efficiency goals.