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How Cogeneration Can Reduce Energy Costs

Updated on December 22, 2012


We live in a society that is very dependent on oil. Due to the pressures of dwindling supplies and increasing prices there is a great interest in developing more fuel-efficient technologies. Since large buildings consume so much fuel a lot of this effort has been directed towards making them more efficient. One such technology is cogeneration, or producing more than one type of energy simultaneously, typically electrical energy and heat, often called CHP (combined heat and power) (Crosby 20). Installing a CHP system lowers fuel usage and emissions, and ultimately reduces the operating cost of a building.


Cogeneration was first introduced in the United States and Europe in the 1880s. During that time around 58% of all electricity produced in the U.S. was through CHP. In the 1900s large power plants became popular and they began to offer electricity at a lower cost, enticing industrial facilities to abandon their CHP systems in favor of electricity off the grid. By 1974 only 4% of electricity was produced via CHP. When several energy and environmental acts were passed in the 1970s-1990s incentives were given for using CHP, bringing its usage up to about 6.1% in 2005. Although this percentage is not as high as it once was CHP is on the rise, with European countries (Denmark, 53% and Netherlands, 37%) leading the way. (Krarti 13-2).

Description of Cogeneration

In an electricity/heat generation system the power is created by burning the fuel, and the exhaust heat that would normally be purged is collected to be reused. By recycling the heat it can be used for applications like hot water heating (or cooling), absorption cooling, and comfort heating (Crosby 21). Not only does this reduce heating costs but it can also cut environmental emissions by as much as 50% (Kanoglu 105). Cogeneration can be applied different types of energy plants, including steam, gas turbine, diesel, and geothermal plants. Geothermal is the most efficient of these options; however it should only be implemented in situations where the electrical demand greatly exceeds the thermal needs. Steam, gas turbine, and geothermal systems follow from most to least efficient, respectively.

A typical steam powered CHP system.
A typical steam powered CHP system. | Source

A typical CHP system is made up of a prime mover, a generator, and a heat recovery system. The prime mover is a turbine that creates power by burning fuel. The generator then takes that power and converts it into energy. Finally the heat recovery system extracts the exhaust heat and converts it into a useful form (Krarti 13-4,5).

Cogeneration schematic.
Cogeneration schematic. | Source

The majority of cogeneration systems are topping cycles. In a topping cycle the main priority is the production of electricity and secondary is heat generation, whereas in a bottoming cycle the opposite is true. When running a topping cycle a gas turbine is used to produce electricity. This process creates exhaust gas, which can then be processed through a steam generator to create more electricity. Excess heat from the system is collected and can be used for hot water (Krarti 13-5).


When sizing a CHP system you first must decide between an induction and synchronous generator. An induction generator relies on power from the grid, so if the grid goes down the generator will not function. A synchronous generator can run independent from the grid, and because of this they tend to cost more (Crosby 21).

Case Studies

Kimberly-Clark, a health and hygiene product manufacturer began planning a $115 million CHP plant in 1993. Installation was completed by August of 1996. Kimberly-Clark opted to use a wood-chip fired steam turbine generator. To further their sustainable practices the company tries to burn as much waste wood as possible (Zwaller 2).
The general consensus was that using a wood powered plant was not the best way to go. The factory required too much power to be able to utilize such a system. They also faced many maintenance problems related to wood, ash, slagging, etc. Despite these issues the CHP system still wound up saving Kimberly-Clark money. Cases such as this are one of the primary reasons why a wood-chip generator would not be used in this application (Zwaller 4).

In October of 2001 a company called SP Newsprint in Newberg, Oregon completed their CHP project to much greater success than Kimberly-Clark. The company spent a grand total of $80 million to completely overhaul their plant in an attempt to conserve energy can cut operating costs. A 50% increase in electrical rates was one of the driving forces in the decision to go forward with the project (Lakey 1).

The SP factory utilizes a gas turbine plant to generate power. The facility provides 100% of the plants needs and variable excess power between 20 and 25 MW as well. The CHP plant has provided a 25% cut in energy costs. The company has been satisfied with the reliability of turbines, running them with an availability of 95+% (Lakey 4).

The installation of the CHP system has allowed SP Newsprint to remain open well many other large factories in the same region have been forced to shut down due to high operating costs. Their system has provided a good example for other Oregon businesses (Lakey 5).


While the benefits of CHP are obvious, there are some drawbacks. A CHP system requires that heat and electricity be produced at the same time. During winter months it is easy to find an outlet for the heat, in the form of comfort heating for the building. During the summer, however, this heat is not required so instead it can be used for absorption heating. Even though a heat-powered air conditioning system is expensive the long-term savings still make it economical.

There can also be an issue because CHP systems tend to be more efficient at larger scales. This does not mean that they cannot be used on small projects, however the payback period will be longer. It should also be noted that CHP systems do not drastically reduce the amount of fuel used, but they do use it much more efficiently. More environmentally conscious fuels such as biomass can be used in cogeneration, and in the future we may see the efficiency increase further thanks to these “green” fuels.

Sample Analysis

For analysis purposes it will be assumed that the building has a peak annual demand of 400 kW. This building will have living spaces so it will be in use 24 hours a day, making the annual operating hours 8,760. The minimum demand for the building would be approximately 138 kW, broken down over the 17,970 square foot building as follows:

1) Lighting = 1.5 W/ft2 = 27 kW

2) Fans = .75 W/ft2 = 14 kW

3) Misc. Electrical Loads = 1.2 W/ft2 = 22 kW

4) Commercial Kitchen Appliances = 50 kW

5) Motors, Pumps, Etc. = 25 kW

To begin sizing the unit the mean demand needs to be found. In this case it is 270 kW. A 250 kW would be too small so it is likely that a 300 kW unit would be used. This would also allow for some expansion. The installation costs between units is small but a smaller unit in the long run has a higher annual savings.

A 300 kW plant would provide enough waste heat to produce approximately 80 tons of cooling (via an absorption process). The savings for each ton produced would be at least .58 kW/ton, therefore:

.58 kW/ton x 80 tons = 46 kW saved

However, the cooling unit does require power to operate (typically 4 kW), which makes the savings 42 kW. Assuming a charge of $3.70/kW, this would mean a savings of $155. The increased efficiency is what really saves money by using CHP. If the boiler runs at 90% efficiency then there would be the following savings:

$0.05/kWh x .90 x 800,000 kWh/year = $36,000/year

Even with these savings it would still take several years to see savings. For example, if the system costs $500,000 for installation and start-up, it would be 14 years before it paid itself back.


In the case of the Vermont Technical College Living/Learning center, a cogeneration system could be very useful. The CHP plant could utilize the existing steam line to run a steam-turbine generator. Since Vermont is such a cold climate the CHP system would be particularly useful for turning waste heat into usable comfort heat. The installation of such a system would not only save the college money but also promote more sustainable practices on campus.


Although cogeneration is not perfected yet, it is well on the way to becoming a leading system in sustainable practices. Designers are constantly researching and testing new ways to make these plants less expensive and more efficient and productive. As bio fuels become more popular it is likely that we will see an increase in cogeneration use and higher energy savings.

Works Cited

Crosby, D. Allen. "COGENERATION. (Cover story)." ASHRAE Journal 46.2 (2004): 20-26. Print.

Lakey, Dennis. Energy Efficiency and Renewable Energy. Washington D.C.: U.S. Department of Energy, 2004. Print.

Kanoglu, Mehmet, Ibrahim Dincer, and Marc A. Rosen. "Exergetic Performance Analysis of Various Cogeneration Systems for Buildings." ASHRAE Transactions 113.2 (2007): 105-112. Print.

Krarti, Moncef. "Cogeneration Systems." Energy Audit of Building Systems: an Engineering Approach. Boca Raton, FL: CRC, 2011. 13-1-13-9. Print.

Zwaller, Steve. Energy Efficiency and Renewable Energy. Washington D.C.: U.S. Department of Energy, 2004. Print.


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    • gmmurgirl profile image

      Geisha M 4 years ago from Pilipinas

      Cool! Very good and detailed hub on cogen. Many of the manufacturing industries in the Philippines have used this as a viable source of energy.

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