Congressional Bill Would Boost Combined Heat and Power with Tax Credit

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combined heat and power

Mike Cocking, of Wisconsin-based Microgen Partners, explains why Congress should approve a 30 percent tax credit for combined heat and power and waste heat to power.

Positive news out of Washington isn’t always the easiest to find, so it may be surprising to learn that a bipartisan group of federal legislators has come together to support an energy policy that could have important benefits for Wisconsin. The Power Efficiency and Resiliency (POWER) Act, currently pending in the House (H.R. 2657) and Senate (S. 1516) with a diverse mix of co-sponsors from around the nation will increase investment in industrial energy efficiency projects — and that’s good for business in Wisconsin and throughout the nation.

The POWER Act would improve the tax credit for those that install combined heat and power systems and provide a tax credit for the commissioning of waste heat to power systems. By producing both heat and power from a single source of fuel, combined heat and power has doubled the efficiency of central station power generation. Waste heat to power captures waste heat that typically would be vented from an industrial facility and uses it to make electricity with no additional combustion and no incremental emissions.

Both combined heat and power and waste heat to power dramatically lower energy use, emissions and cost. Such systems can be used at hospitals, military bases, manufacturing plants, agricultural facilities, wastewater treatment plants and numerous other sites throughout our nation. Combined heat and power can provide reliable electricity even during grid outages.

These technologies are important to our state. At MicroCogen Partners here in Cedarburg, we are working to make Wisconsin’s energy usage more efficient by equipping our clients with the knowledge and tools to implement small-scale combined heat and power systems. We work with utility companies, local governments, hotels, restaurants, and even residential homes to establish primarily heat-generating conbined heat and power systems. And when that heat is utilized, electricity can be generated as a byproduct for under $0.04/kW. The resulting heat and energy savings can then be reinvested, helping to grow jobs, increasing competitiveness, and adding to our local economy.

Increasing the use of technologies such as combined heat and power and waste heat to power can help bring manufacturing jobs back to our state and will improve the quality of life. According to two studies by the Department of Energy and the Oak Ridge National Labs, the incentives in the POWER Act could create as many as one million highly skilled jobs throughout the country. Further, these systems benefit consumers by reducing energy costs in the long term and improving the electric grid’s reliability. So when natural disasters occur that cause power outages, facilities using these technologies can keep the lights on — especially important for our critical infrastructure such as hospitals and other emergency services.

The challenge is that the upfront costs of installing a combined heat and power or waste heat to power system can be prohibitively expensive. Tax incentives help businesses recoup some of these costs, making the investment more attractive. While combind heat and power currently enjoys a federal investment tax credit of 10 percent for qualifying systems, it is not enough to ensure a return on investment in the short time frame most businesses and institutions require.

Further, waste heat to power does not qualify for the credit. The POWER Act aims to help alleviate these financial barriers by providing combined heat and power and waste heat to power an investment tax credit of 30 percent, putting these systems on par with other clean and efficient technologies such as solar and fuel cells. Improving the tax credit for industrial energy efficiency would enable more businesses in states such as Wisconsin to install these systems.

With all the benefits for and applications of combined heat and power and waste heat to power, it’s no wonder the POWER Act enjoys bipartisan support in Congress with diverse co-sponsors and supportive coalitions. Further, the bill is endorsed by more than 200 businesses, trade associations, nonprofit organizations and research institutions, including more than 20 working in Wisconsin.

Through an increase in the use of combined heat and power and waste heat to power, the legislation will help Wisconsinites save money, reduce pollution, and improve their energy security. I encourage my fellow business leaders to add your voices to our call for Congress to pass this bipartisan measure that will move our nation toward a more efficient, affordable and resilient clean energy economy.

Mike Cocking is the owner and president of MicroCogen Partners in Cedarburg, Wisconsin.

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