Energy IQ: Three situations that maximize the advantages of cogeneration applications
Greenhouses, hospitals, industrial manufacturers and commercial building owners are some of the many turning to cogeneration, also known as combined heat and power (CHP). They enjoy benefits ranging from improved financial performance to reduced environmental footprint. Cogeneration applications’ high efficiency in converting the energy in the original fuel into useful energy is the foundation of these advantages.
These benefits of cogeneration applications are further amplified under certain situations. Let’s cover these situations and associated examples of cogeneration applications.
No. 1: Certain aspects of your business operate 24/7
The most cost-effective cogeneration systems operate at full output 24/7.
This doesn’t mean your whole business needs to run 24/7. Instead, you can identify aspects of your business that run 24/7, and power these with a cogeneration system. Meanwhile, you can still have the utility connection and on-site boilers. These are useful to power the rest of your business operations and to manage potential peaks in electricity or thermal energy demand. Another advantage of using a combination of cogeneration and utility power is around maintenance events. This combination allows you to conduct maintenance and service on your cogeneration system without interrupting access to electricity for your business.
Hospitals are a good example of cogeneration applications for this scenario. Controlling the temperature, managing air quality, keeping the medical equipment operational and many other activities require electricity and thermal energy throughout the day.
No. 2: The need for thermal energy is consistent; it is also simultaneous with the need for electricity several months of the year
Selling or storing excess thermal energy is often not practical. Excess heat is commonly released as waste heat, lowering the overall efficiency and financial gains of the cogeneration application. The efficiency of a cogeneration system increases when the thermal needs (steam, hot water or chilled water) stay at a consistent level. The same doesn’t apply as much to electricity needs, since excess electricity could often be sold back to the electric utility.
The longer the simultaneous need for electricity and thermal energy, the more advantageous a cogeneration application is. In fact, a good guidance is to consider cogeneration applications if your business has simultaneous needs for electricity and heating/cooling around half of the year or more 1. There are exceptions to this, and some applications are feasible even when the simultaneous need is 2,000 hours a year, about three months.
Industrial manufacturing is a good example of a cogeneration application for this scenario. Thermal energy needed in industrial processing tends to be consistent throughout the facility’s operation. Moreover, thermal energy and electricity is usually needed simultaneously throughout the year in these facilities.
No. 3: Electricity prices are high compared to the cost of natural gas
You are financially better off if producing electricity on-site is cheaper than purchasing electricity from the utility. Many cogeneration systems that produce electricity on-site use natural gas as the fuel, and this is where the spark spread comes into play.
The spark spread is a metric for estimating the profitability of natural gas-fired electric generators. It is the difference between the price of electricity and the cost of the natural gas needed to produce that electricity 2. As the spark spread increases, savings provided by a cogeneration system also increases. Spark spread is an indicator of financial viability, but it is not an exact measure of profitability.
Facilities where the cost of electricity is high and natural gas as a fuel is available are good examples of cogeneration applications for this scenario.
Beyond the factors above, the Evaluating Cogeneration for Your Facility white paper outlines other aspects to consider as you explore cogeneration as an option.
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1 Hamilton, J. (n.d.). Evaluating Cogeneration for Your Facility [Bulletin]. Cummins Inc. Retrieved from https://www.cummins.com
2 U.S. Energy Administration Office (February 2013). An Introduction to Spark Spreads. Retrieved from https://www.eia.gov/