UTILITY OWNERSHIP OF COMBINED HEAT AND POWER: AN ECONOMIC MODEL BASED APPROACH

M. Malguarnera, A. Razban

Abstract: This paper proposes, and reviews, an Excel based model to evaluate the cost effectiveness for utility ownership of Combined Heat and Power (CHP) plants. CHP plants provide highly efficient use of fuel for production of electric power and useful heat. This efficient use of fuel can lead to lower energy bills for a company, or group of companies, utilizing a CHP plant, though at a large upfront cost. In order to provide the needed capital, cash reserves or debt can be used. This large capital experiments leads to longer payback periods, which may make CHP plant unattractive investments for end users, but fits perfectly into Electric power utilities investment strategy. This model was developed as a tool for an electric utility to determine if an investment into a CHP plant and selling the waste heat to an end user, would be an attractive investment worthy of further engineering investigation. For this paper, simulations where ran at seven different power hubs in five different power markets in the United States. Overall, the model showed that CHP plant would be an attractive investment in the New York City region and Boston regions, but not in Midwest. These differences are driven by lower power and lower capacity prices in the Midwest compared to the North East.

Keywords: combined heat and power, economic approach, energy, modelling, simulation, Waste Heat

DOI: https://doi.org/10.15623/ijret.2015.0411025