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On August 2, the Combined Heat and Power Alliance (CHPA) responded to the notice of proposed rulemaking (NOPR) issued by the Internal Revenue Service containing proposed amendments to the Income Tax Regulations to implement sections 45Y Clean Electricity Production Credit and 48E Clean Electricity Investment Credit of the Internal Revenue Code.  The filed comments voiced why combined heat and power (CHP) systems should qualify for the technology-neutral tax credits in the Inflation Reduction Act (IRA).

CHP systems are important tools for decarbonization, given they displace more greenhouse gas (GHG) emissions from the electrical grid than emitted from themselves. For instance, CHP systems can deliver emissions reductions more than three times as quickly as solar photovoltaic units of the same capacity. This is due to the rate of marginal grid emissions in every area of the U.S. being more than double the emissions of a 16-megawatt CHP unit burning natural gas. 

Many APGA members have customers who operate CHP systems or are considering installing them. Ensuring policy around this equipment is right is necessary. Given their impact on reducing GHG emissions, CHP systems should be included under Section 45Y and Section 48E, and the comments proposed a possible methodology in which tax credits are granted only to CHP units that have less emissions than either the marginal grid emissions in the region where the project is located or an average combined cycle natural gas plant – whichever has less emissions.  

To read the comments submitted, click here. APGA will continue to work on this issue, collaborating with CHPA, and will inform members of any future actions impacting tax credits for CHP.

For questions on this article, please contact Sydney Novoa of APGA by phone at 202-464-0834 or email at snovoa@apga.org.