U.S. Department of Energy - Energy Efficiency and Renewable Energy

Advanced Manufacturing Office – Industrial Distributed Energy

Developing a Combined Heat and Power Project

Developing a combined heat and power (CHP) installation requires significant time, effort, and investment. So it's prudent to approach the task in a series of steps. The first step requires less work, typically only one to two days, and help you to determine whether further efforts are justified. The next step is a more detailed feasibility analysis, which, if positive, would be followed by a preliminary design. At that point, the cost projections should be sufficient to allow you to make an informed decision about whether a full CHP project design effort would make sense for your application.

  1. Walk-Through Analysis — Screen a potential site to decide whether a detailed analysis is appropriate:
    • Technical issues — Are thermal and electrical loads sufficient to support CHP? (Are they above a minimum size threshold, are the electric and thermal loads coincident, are thermal requirements compatible with CHP outputs?)
    • Site conditions — Can the facility infrastructure support a CHP system (available space, fuel availability, zoning limitations)?
    • Economics — Do the fuel and electric rates support CHP (average retail electric price, fuel costs, required return on investment, or payback)?
    • Environmental issues — Are there any environmental limitations that would preclude CHP?
  2. Feasibility Analysis — If the Walk-through is positive, the next stop is a screening analysis that considers more specific details such as:
    • Bundled and unbundled electric tariffs (retail service rates, partial service rates, standby/back-up rates, transmission and distribution tariffs)
    • Fuel access and price
    • Capital budget
    • Operation and maintenance costs
    • Operating modes (baseload, thermal following, electric following)
    • Interconnection requirements and costs
    • Environmental permitting requirements and costs (including the cost of offsets)
    • Project structure and project development costs (insurance, administrative and management fees, financing).
  3. Preliminary Design — The preliminary detailed design phase is a more comprehensive evaluation than the screening analysis, including:
    • Analysis of hourly energy requirements and costs
    • System part load performance.
  4. Detailed Design — Forms the basis for performance modeling and budget