Three key benefits of cogeneration

Cogeneration is an efficient way of producing electricity, heat and, in some cases, cooling. 

Traditional power generation systems waste a large portion of the energy that is released by the combustion of fuel. Energy losses typically occur via the exhaust gas combustion, through the steam condensing system, and out of the various cooling systems. 

Cogeneration systems recover heat from those energy loss pathways and put that heat to good use. This is typically by providing heat or hot water to a nearby property or properties.

Cogeneration has wide appeal because most buildings need what cogeneration systems can provide—electricity, heat, and cooling. 

Installing a cogeneration system can reduce a building’s carbon footprint, enhance the reliability of its electric supply, and, crucially, save money. More broadly, the wide adoption of cogeneration provides benefits to the broader community. These benefits are enhancing the community’s energy security and making its energy infrastructure more resilient.

Sustainability benefits of cogeneration

Environmental concerns motivate many cogeneration projects. 

Traditional fossil-fuel-burning power plants waste between 70% and 40% of the energy that they consume to produce electricity. By recovering much of that waste energy, cogeneration systems remove the need to burn additional fuel for heating purposes. This saves energy and reduces emissions of carbon dioxide (CO₂) and other pollutants. 

For many organizations, investing in a cogeneration system is a smart and cost-effective step towards meeting environmental commitments. 

Various programs, such as the LEED rating system, are available to independently assess and certify progress made in that regard. Additionally, incentives exist at the local, regional, and national level. These incentives reward those who invest in a cogeneration system for their contribution to environmental sustainability. In the United States, for example, a 10% federal tax credit is available to the owners of qualifying systems. This incentivization often shifts the return on investment of a cogeneration system from good to great.

Cogeneration users who can produce their own fuel on site for use in the cogeneration equipment can save even more energy. 

Many industrial processes generate a combustible by-product. This by-product can be burned in a boiler or a power generator to produce electricity and heat. Wastewater treatment facilities, for example, can generate large quantities of methane-bearing gas from the fermentation of sewage sludge. Rather than flare that valuable gas, many facility owners have chosen to use it to fuel a cogeneration system. These facilities are thus able to power their electrical equipment and heat their fermentation pools very cheaply. 

Financial benefits and ROI of cogeneration

Regardless of environmental benefits, far fewer cogeneration systems would exist if cogeneration didn’t also save money. 

At the most basic level, cogeneration systems allow their owners to reduce electricity bills as well as heating and cooling bills. Well-considered cogeneration investments can typically break even within a few years. 

Here are some of the factors that can boost a cogeneration system’s return on investment:

Demand charges and other surcharges

The electric utility levies a demand charge or applies onerous time-of-use surcharges. It is common for utilities to charge large consumers a fee that increases with their peak instant electricity demand. This is in addition to charging for the amount of kilowatt-hours consumed. 

An on-site generator installed behind the meter can effectively shave off those peaks and reduce demand charges. Many property owners complement this peak-shaving capability with solar panels. 

This reduction in peak demand is a win-win for the consumer and for the utility. The consumer saves on fees. Meanwhile, if enough consumers limit their peak demand, the utility can reduce selected investments. These are investments in transmission and distribution upgrades or additional capacity for periods of high usage.

Net energy metering

The electric utility is required to purchase excess electricity generated by privately owned cogeneration systems. Such requirements, typically known as ‘net energy metering’, exist in multiple U.S. states. 

These requirements can significantly offset the cost of operating and maintaining a cogeneration system. These requirements also provide a great deal of flexibility in how such a system is used and designed.

Replacing an existing heating and cooling system

The price of natural gas is at an all-time low in many geographies. This creates an incentive to replace an old boiler running on heating oil, with a natural gas system. 

Where it is available, natural gas is a cleaner, cheaper fuel, which also does not need on site storage. If that old boiler is going to be replaced, why not a greater investment and enjoy the energy savings of a cogeneration system for many years? 

Conversely, some facilities need to generate electricity on-site in a continuous or semi-continuous manner. In these cases, why not add a heat recovery component and enjoy free heating and hot water? Many industrial sites located in countries and regions with an unreliable electric grid have made this choice. In either case, the economics of cogeneration can often beat the economics of the standalone heating or on-site generation investment. 

Moreover, weather related events cause an increasing number of disruptions to the electrical utility. In these cases, having reliable on-site power, such as from a cogeneration system, is critical for safety and business continuity. 

In all cases, achieving the best financial results requires carefully considering each site’s individual energy profile. This includes energy usage, fuel costs, and electricity rate structure. It may also be worthwhile to consider complementary measures. These include installation of LED lights or additional insulation to optimize the site’s energy profile. 

When it comes to sizing, the objective is to maximize usage of the cogeneration system. It is usually more economical to have a cogeneration plant meet half of the site’s energy needs 24/7. This is in comparison to an attempt to cater for all the site’s needs but only run the plant half of the time. 

In many applications across industry, commerce, and the public sector, cogeneration is a sensible economic choice. Whether the project pays for itself in two, three or five years depends on the specifics of each individual application.

Energy security and resiliency benefits of cogeneration

Many electric utilities are keen to promote the adoption of cogeneration by ratepayers. It may seem counterintuitive that for-profit corporations encourage their customers to purchase less, but it makes sense. 

Utilities are happy to sell more electricity overall; meanwhile, they are anxious to limit the peak electric load they support. Think of the height of summer when every house has an air conditioning unit running at full blast. The electricity infrastructure needs to accommodate that peak load, even if it occurs just a few days per year. Customers with on-site cogeneration can effectively shave off their peak demand, reducing their impact on the grid and increasing the overall resiliency of the electricity infrastructure.

Governments tend to encourage the deployment of cogeneration technology for a similar reason, particularly in countries with limited energy resources. In such places, beyond environmental benefits, reducing energy usage and energy imports can be a strategic objective. Cogeneration systems help reduce a nation’s energy requirement. Moreover, when run locally using by-product fuels, cogeneration systems help achieve a better utilization of domestic energy resources. 

Interested to learn more about cogeneration? You might also like: 

• What is cogeneration, its benefits and how does cogeneration work
• Three situations that maximize the advantages of cogeneration applications
• Cogeneration examples across industries 
• Types of cogeneration using gas turbines, engines, and fuel cells 

The advantages of cogeneration are clear across a wide range of applications and power output requirements. Moreover, there are three situations that maximize these advantages of cogeneration applications. As a tried and tested technology, there is low-risk and high-return for suitable projects.