Cogeneration/Combined Heat and Power (CHP)

Generating electricity and thermal energy onsite

Cogeneration/Combined Heat and Power (CHP) is a great opportunity to save money and increase your system reliability. Typically, it can make sense for businesses that have high annual hours and a continuous thermal load to take advantage of the thermal energy produced. Examples include hotels, hospitals, nursing homes, pools, and health facilities.

What you get

PSE will provide incentives for cogeneration/CHP projects that meet minimum efficiency requirements and are cost-effective. The incentives are based on the following:

  • $0.30/kWh on first year kWh savings up to 70% of the incremental cost compared to PSE's combined cycle power plant system for cost-effective projects.
    • Baseline system, as identified in PSE's 2015 Integrated Resource Plan, has a capital cost of $1,256/kW and a baseload heat rate (HR) of 6,798 BTU/kWh.
    • Savings calculated based on annual kWh output multiplied by [(1-net HR)/baseload HR)], where net HR is calculated as by the net gas input divided by the electricity generated.
    • Guidelines per WAC 480-109-060.13.a (

To be connected with an EME near you, call an Energy Advisor at 1-800-562-1482, Monday through Friday from 8 a.m. to 5 p.m.

  • How to qualify

    To be eligible for PSE's cogeneration/CHP grants:

    • You must be a PSE business electric customer.
    • You must be pre-approved by PSE prior to all energy efficiency improvement measures.
    • Cogeneration systems must have useful thermal energy output of no less than 33% of the total energy output.
    • The system must use natural gas as the input fuel. Renewable energy power generation or CHP using waste energy are not included in this measure. CHP using waste energy is considered energy recovery measure that can be funded under standard custom grant. Renewable energy may be funded under customer renewable energy program.
    • All energy output must be used on site (no energy output to grids)
  • Incentive example

    The following is an example of how the savings and grant would be calculated for a 60 kW microturbine for a high school natatorium that provides heat for the space, pool, and domestic hot water:


    • The total gas input for the microturbine throughout the year is 5,000 MM BTU and will provide a useful thermal output of 3,000 MM BTU, equivalent to 3,750 MM BTU of input based on 80% efficient boiler.
    • The microturbine will provide 300,000 kWh of electricity for the site.
    • The net gas input is equal to 1,250 MM BTU (5,000 – 3,750).
    • The net heat rate is equal to 1,250 MM BTU / 300,000 kWh x 1,000,000 = 4,166 BTU/kWh
    • Savings = 300,000 kWh x [1 – (4,166/6,798)] = 116,000 kWh


    • Proposed Cost = $180,000 ($3,000 / kW)
    • Baseline Cost = $75,360
    • Incremental Cost = $180,000 - $75,360 = $104,640


    • Useful thermal output > 33% of total energy output
    • Total thermal output = 3,000 MM BTU
    • Total energy output = 300,000 kWh x 3,413 BTU/kWh + 3,000 MM BTU
    • Useful thermal output = Total thermal output / total energy output = 3,000 MM BTU / (3,000 + 1,029 MM BTU) = 74.6%


    • Minimum of:
      • 70% of incremental cost – $104,640 x 0.7 = $73,248
      • Savings – $0.30/kWh x 116,000 kWh = $34,800
    • Incentive = $34,800
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