Connecticut Class III REC Monetization for CHP

Connecticut's Class III REC program was designed specifically to support combined heat and power and energy efficiency. The ACP ceiling of $55 per MWh is the highest of any active CHP-eligible REC market, and the obligation steps up to 5% of retail electricity sales in 2026. For customer-sited CHP at commercial and industrial facilities, this is the highest-ceiling market in the country — with one specific caveat that determines whether the headline pricing actually flows to the host.

Updated June 4, 2026 · PA S-RECs Knowledge Hub · ~6 min read

Class III: the CHP and efficiency carve-out

Connecticut's Renewable Portfolio Standard divides eligible resources into three classes. Class I covers new renewables (solar, wind, fuel cells, qualifying biomass and hydro). Class II covers existing renewables and trash-to-energy. Class III is the distinct carve-out for combined heat and power and energy efficiency — created specifically to recognize the carbon and grid value of high-efficiency on-site generation.

The Class III obligation has stepped up over time and reaches 5% of retail electricity sales in 2026. Connecticut's annual retail electricity sales total roughly 28 million MWh, which translates to approximately 1.4 million Class III credits demanded each year. At current pricing, that's a market valued in the $35–$40 million range — smaller than Pennsylvania, but with significantly less competition for supply.

What CHP qualifies for Class III

The Class III statute defines three categories of eligible resources:

• Customer-sited CHP systems with a minimum operating efficiency of 50%, installed at commercial or industrial facilities in Connecticut, with a commercial operation date on or after January 1, 2006.
• Waste heat recovery systems that recover heat or pressure from commercial and industrial processes, installed on or after April 1, 2007.
• Electricity savings from conservation and load management programs that started on or after January 1, 2006 — though new ratepayer-supported programs are no longer eligible to add to the supply pool.

The 50% operating efficiency floor is the gating criterion most CHP systems clear easily — well-designed natural-gas CHP systems typically run 65–80% efficient, and the floor is set well below typical performance. The COD requirement (January 1, 2006 or later) excludes legacy facilities but covers essentially the entire modern CHP fleet.

How the revenue split works

The revenue-sharing requirement varies based on:

• Whether the CHP system was installed before or after specified statutory milestones
• Whether the owner is residential or non-residential
• Whether the project received state financial support (grants, incentives, low-interest financing)

For non-residential CHP installed without state support, the host typically retains 100% of the credit revenue. For projects that received state grants or incentives — including Connecticut Green Bank financing — a portion of the credit revenue (often 25–50%) returns to the C&LM Fund. The implication is straightforward: a CHP system financed entirely with private capital can realize the full $25–$30 per MWh market price; a CHP system that received a Green Bank incentive may realize closer to $15–$20 per MWh net.

This is the single most common surprise in Connecticut Class III monetization. Confirming the project's funding history before signing an aggregation contract is essential.

Registration and monetization

1. PURA application — submit a Class III resource registration to the Public Utilities Regulatory Authority. The application requires nameplate capacity, fuel source, efficiency calculations, COD documentation, and funding history.

2. NEPOOL GIS registration — open a generator account at NEPOOL GIS. CT credits are minted at the same registry as MA and ME credits, so a host with multi-state exposure uses a single account.

3. Quarterly production reporting — Class III credits are issued based on metered electrical output, reported to NEPOOL GIS on the standard quarterly cycle.

4. Sales — Class III RECs trade primarily through OTC brokers and bilateral contracts with Connecticut electric distribution companies (Eversource, United Illuminating) and competitive suppliers. The market is less liquid than PA Tier II but supports both spot and forward contracting.

Pricing context

Connecticut Class III pricing has been remarkably stable in the $25–$30 per MWh range for several years, reflecting the balance between the steady annual obligation (4% historically, stepping to 5% in 2026) and the limited supply of qualifying projects. The $55 ACP ceiling provides substantial upside headroom — pricing could nearly double before reaching the rational compliance penalty cap.

Who Class III works best for

Connecticut Class III is the best fit for CHP hosts who:

• Have CHP systems installed on or after January 1, 2006 at Connecticut commercial or industrial facilities
• Financed the project with private capital (no Green Bank or state incentive funding)
• Operate at 50% or higher overall efficiency
• Have continuous-load profiles (hospitals, university campuses, manufacturers, district energy systems)

For projects that received state financial support, the realized revenue is materially lower due to the revenue-split rule — but still meaningful and worth pursuing.