New Jersey Clean Energy Program: Combined Heat and Power (CHP) Incentive

Are you considering CHP in NJ? Chances are, you’re eligible for state incentive funding up to 30-40% of your total project cost.

The State of NJ has set a goal to enhance energy efficiency through on-site power generation with recovery and productive use of waste heat. A qualified project that meets the program’s requirements can be eligible to receive up to $3 million in incentive payments.

To fully qualify for this program, it is essential for applicants to thoroughly understand the requirements or work with a dedicated CHP partner that can take the lead for them.


Provided here are several of the most important requirements a facility must consider when developing its CHP project. Please review the NJCEP Combined Heat & Power – Fuel Cell Program Guide for full details of CHP system eligibility requirements, or consult with a CHP expert like Kinsley Energy.

Four key areas to consider are system sizing, fuel usage, efficiency, and annual utilization.

The system must be sized not to exceed the facility’s annual electricity consumption or peak demand.

Eligible fuels for the program are natural gas, hydrogen, biogas (including digester gas and landfill), or a mix of natural gas and biogas. Fuels such as diesel and propane are ineligible.

Annual total system efficiency must be at least 60%, based on total energy input (higher heating value, HHV) and total utilized energy output. This will take into account all CHP thermal energy used by the facility. Typical heat recovery applications include hot water heating for space heat and DHW, steam generation, or chilled-water generation with an absorption chiller.

A minimum of 5,000 full-load equivalent hours per year must be met (i.e., run with an annual capacity factor greater than 57%). However, critical facilities can receive an exception from the Office of Clean Energy (OCE) to receive the full incentive if they run 3,500 full-load equivalent hours per year.

Incentives are tiered, which means the incentive levels vary based upon the installed rated capacity, as listed in the chart above. For example, a TEDOM Quanto D1200 CHP System, which is rated for 1200 kW, would receive $2.00/watt for the first 500 kW, $1.00/watt for the second 500 kW, $0.55/watt for the next 200 kW, for a total max incentive of $1,610,000. However, because the total installed cost of a CHP system this size is typically around $3,000,000, the incentive would be capped at 30% of project cost, or $900,000.

CHP systems fueled by a Class 1 renewable fuel source are eligible for a 30% incentive bonus. If the fuel is mixed, the bonus will be prorated accordingly. For example, if the mix is 60/40 (60% being a Class 1 renewable), the bonus will be 18%. This bonus will be included in the final/performance incentive payment, based on system performance and fuel mix consumption data. Total incentive, including bonus, shall not exceed the above-stated project caps.

All CHP systems located at critical facilities and incorporating blackstart and islanding capability are eligible for a 25% incentive bonus (additional to the incentives calculated in accordance with the table immediately above, but still subject to the project cap in that table).

Getting approved and paid:

The process begins well before the installation and purchase of the CHP System. An application is required by the NJCEP and will need to include the technical specifications and designs of the CHP system, heat recovery performance models that demonstrate its integration within the facility and total annual efficiency, and financial calculations that show the overall payback of the project. At this stage, it is crucial to be working with an experienced CHP partner to ensure the application comprehensively addresses all of the ‘NJCEP’s requirements. This technical information, performance models, and financial analysis are a part of the standard package of material Kinsley provides on all our projects.

Payout for the incentive program is staggard over the life of the project, according to the following schedule

1Purchase of equipment30%
2Installation of equipment50%
3After 12 months performance data is approved by program20%  

Kinsley Energy Systems CHP Project at Katz Jewish Community Center:

Our team has developed a working knowledge of this incentive program by helping to secure funds for one of our flagship projects in Cherry Hill, New Jersey. To address the Katz Jewish Community Center’s energy demands, Kinsley Energy Systems partnered with Ecosave Inc. to conduct a comprehensive combined heat and power feasibility study, resulting in the recommendation and installation of a TEDOM 150 kW CHP system. The system has been running since July 2020 and has received a total of $246,000 from the NJ Clean Energy Program to date.