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Combined Heat and Power Partnership

Reliability Benefits

Quantifying Reliability Benefits of CHP

Combined heat and power (CHP) systems, when properly designed, provide critical power reliability for a variety of businesses and organizations while providing electric and thermal energy to the sites on a continuous basis, resulting in daily operating cost savings.

Unreliable electricity service represents a quantifiable business, safety, and health risk for some industries. Typically these businesses install backup or emergency diesel generators to protect against the risk of power failures. However, during the Northeast blackout of 2003, half of New York City's 58 hospitals suffered failures in their non-CHP backup power generators.1

The first step in incorporating CHP into a strategy to reduce business risk is to calculate the value of reliability and risk of outages for a specific facility. The companion Web page, Calculating Reliability Benefits, provides methods for determining these values and costs and describes CHP technology options for configuring a CHP system to provide outage protection.

After identifying and quantifying (in monetary terms) the value of reliable power to your operations, the costs of designing and configuring CHP technology for outage protection can be evaluated. CHP systems can be configured in a number of ways to meet the specific reliability needs and risk profiles for a wide array of businesses and organizations.

An example of the cost effectiveness of using CHP for outage protection is shown in the table below. The example provides a comparison of the costs and payback for a hypothetical 1,500 kilowatt (kW) natural gas-fueled CHP system with and without backup power capability. The CHP system with backup capability includes a capital cost credit for a backup diesel gen-set, controls, and switchgear that would otherwise have been installed at the facility.

The internal rate of return for this project example increases from 12.2 percent to 16.9 percent with backup capability, and the net present value is more than doubled.

CHP System Components Standard CHP (no off-grid reliability benefit) CHP With Backup Capabilities
Generator Capacity (kW) 1,500 1,500
CHP System Total Installed Cost ($/kW) $1,800 $1,800
Added Controls and Switchgear ($/kW) N/A $175
Typical Backup Diesel Generator, Controls, and Switchgear ($/kW) N/A ($550)
Incremental Capital ($/kW) $1,800 $1,425
Total Incremental Capital Cost ($) $2,700,000 $2,137,500
Net Annual Energy Savings ($) $400,000 $400,000
Payback 6.8 years 5.3 years
Internal Rate of Return 12.2% 16.9%
Net Present Value (at 10% discount) $311,302 $822,665

Additional Resource

Experiences With Combined Heat and Power During the August 14, 2003 Northeast Blackout (PDF) (9 pp, 48K, About PDF) by Energy and Environmental Analysis, Inc. for the U.S. Department of Energy Oak Ridge National Laboratory, June 2004. This report identifies specific facilities that were able to operate during the blackout of 2003 and assesses how their operations were affected.

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Notes:
1 Levy, C. and Zernike, K. (2003). The Blackout: Hospitals: Lessons Learned on 9/11 Help Hospitals Respond, New York Times. August 16, 2003.

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