What Is It?

Cost: Reciprocating engine: $1400-1800/kW
Gas Turbine: $1300-1900/kW
Microturbine: $2500/kW
Fuel cell: $5600-7500/kW
Backup controls/switchgear add approx. ~$175/kW
Applications: Can be installed in retrofits or new construction. Only a cost-effective investment if heat is properly utilized.
Service Life: Approx. 20 years

A combined heat and power (CHP) generator simultaneously creates heat and electricity from a single fuel source. CHP systems are highly efficient and cost-effective if the heat generated from power production is utilized on-site, as the use of on-site power reduces the loss of electricity through transmission. Overall efficiency can reach 80-85%, compared to the 35-40% electric efficiency in central power plants (including transmission and distribution). Other benefits of using CHP include increased reliability, reduced greenhouse gas emissions, and, if installed, backup capability to ensure continuous functionality during blackouts. Backup requirements include a battery powered startup system, a synchronous generator, and switchgear. With automatic/seamless backup controls installed, a CHP system can respond to a blackout in seconds.

A number of technologies can be utilized for CHP, including reciprocating engines (the cheapest), gas turbines, microturbines, and fuel cells (the most expensive). Regardless of the technology used, the upfront costs for CHP are high and it will only be a cost effective investment if the heat generated is properly utilized. CHP is ideal for large commercial, institutional, and industrial buildings and can be used in some multifamily residential applications. CHP can be cost effective, and payback periods range from 5.2 to 6.8 years. Payback periods will be reduced depending on annual power outage time.


  • High efficiency and reliability. Can operate as backup power during extended power outages.
  • Reduced energy costs and emissions.


  • High upfront costs. Can be mitigated by using available incentives.
  • In flood-prone areas, CHP generator and attached systems must be floodproofed or located above the flood zone, increasing capital costs.

Regulatory Impacts and Requirements

A summary of regulatory touchpoints follows below:

Financing Options, Incentives, And Rebates

CHP is eligible for a number of federal and Massachusetts incentives. A database of federal and state CHP initiatives is available here. Some of these incentives include:

  • MassSAVE Utility Energy Efficiency Program – Retrofitted CHP projects that pass a Benefit Cost Ratio test are eligible for an incentive of anywhere from $750 to $1200 per kW for systems of up to 150 kW, depending on the conditions met for each tier. CHP used in new construction is eligible for the first tier ($750/kW)
  • Business Energy Investment Tax Credit – Fuel cells, microturbines, and CHP are eligible for tax credits of 10-30% of expenditures.
  • Accelerated MARC Depreciation – Qualifying CHP equipment can be depreciated using the 5-year modified accelerated recovery system.
  • Massachusetts Alternative Energy Portfolio Standard – CHP is an eligible technology for the Massachusetts Alternative Energy Portfolio standard. Tradeable AEC credits for generation can be sold and traded.
  • Mass Save offers custom incentives for construction of new systems that go above and beyond regulatory requirements.

Additional Resources




Photo credit: Bilfinger SE on Flickr