Around 2010, California established multiple Combined Heat and Power (CHP) goals and programs with the collective goal of increasing CHP use in the state. Since that time, broader state energy policy has increasingly emphasized clean energy, while CHP policy has remained static. Staff analyzed historic fleet capacity and generation from Quarterly Fuel and Energy Report data and constructed plausible scenarios of how CHP facilities may operate without export contracts using data from Qualifying Facility and Combined Heat and Power Settlement reporting. Historical analysis shows the fleet is experiencing long term declines in both capacity and annual generation, with nearly 6 percent decline in nameplate capacity and 23percent decline in annual electrical generation from 2010 to 2016.If facilities cannot reliably obtain export contracts, future scenarios indicate that the CHP fleet could experience steep declines in capacity and generation in the early 2020s of roughly one-half to three-quarters from 2016 levels. TheSecondProgramPeriod of the Qualifying Facility and Combined Heat and Power Settlement expired at the end of 2020 without clarity on what happens next. Forecasting and planning assumptions based on nameplate capacity and state targets do not capture operational changes or consider contracting constraints and likely overestimate contributions from the fleet. Staff recommends adopting forecasting and planning assumptions based on real world data and plausible facility behavior and revisiting current CHP policies in light of Senate Bill 100 and broader state energy policy.
