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Combined Heat and Power Partnership

Stage 3: Level 2 Feasibility Analysis

CHP Project Development Process

Graphic of CHP Project Development Process Stages

Stage 1: Qualification Stage 2: Level 1 Feasibility Analysis Stage 3: Level 2 Feasibility Analysis Stage 4: Procurement Stage 5: Operation and Maintenance
Goal:
Optimize CHP system design, including capacity, thermal application, and operation. Determine final CHP system pricing and return on investment.

Timeframe:
1-4 months

Typical Costs:
$10,000 - $100,000, depending upon system size, complexity, and procurement approach (PDF) (23 pp, 431K, About PDF)

Candidate site level of effort required:
16-80 hours, depending upon complexity and procurement approach (PDF) (23 pp, 431K, About PDF)

Questions to answer:
Has the CHP system been designed to meet the goals of the site? Is the Level 2 analysis complete, comprehensive, and sound? Does the project meet the organization's requirements for investment? What is the optimal procurement approach for this project? Will you procure this CHP system?

Resources:

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Completing an Investment-Grade Feasibility Analysis

The primary purpose of a Level 2 Feasibility Analysis is to replace all of the assumptions used in a Level 1 Feasibility Analysis with verified data and to use this information to optimize the CHP system design. It is imperative that the CHP Champion and/or other parties have already identified all operational goals for the project before this stage begins; these goals should include control, monitoring, and maintenance needs, as well as the need for off-grid capabilities (if the system will be designed to run in the event of an utility outage). The results of the Level 2 Feasibility Analysis should include: construction, operation, and maintenance pricing; calculations of final project economics with a simple payback schedule; and a life-cycle cost analysis of the total investment. At the end of this stage, all information needed to make a decision about whether to proceed with the project should be available.

Final system sizing and operation are determined through the development of thermal and electrical load profiles. To the extent possible, hard data will be used to develop these profiles, pulled from electric utility interval data, existing controls systems, and the installation of measurement equipment at the site. Pending load growth due to planned site expansion or new construction will need to be considered and coordinated with any engineering organizations involved at the site. Although integrating CHP systems with new construction can present a challenge, there can be substantial cost savings to the facility by integrating CHP as part of a general construction project. Offset equipment costs and reduced construction costs dramatically improve the system's return on investment.

Multiple site visits and reviews of existing electrical, mechanical, and structural drawings will be required to complete this stage. The CHP Champion will need to work with decision makers to ensure that important decisions are made at this stage in order to determine accurate system pricing. These might include decisions regarding CHP system specifics (e.g., size and location, prime mover type, heat applications), along with 20 to 30 percent design drawings that include flow diagrams, equipment specifications, monitoring and control specification, piping and wiring, and tie-in to existing building systems. CHP system pricing is heavily affected by the proximity and ease of electrical and thermal tie-in points, as well as the ease of the system's installation at the site. Unless budgetary pricing in the Level 1 Feasibility Analysis was very conservative, these site factors can result in substantial differences between budgetary pricing in the Level 1 and Level 2 Feasibility Analyses. Occasionally, this difference might lead to the project's ultimate cancellation. Unfortunately, there is no way to determine the impacts of the site on project costs without engaging in a fairly comprehensive review of site conditions.

Once a Level 2 Feasibility Analysis has been completed, the CHP Champion will need to ensure that it is thoroughly reviewed by the investor. The report should be comprehensive and sound, taking into consideration each of the following factors:

  • Site load profiles
  • System operational schedule
  • Capital cost
  • Heat recovery
  • Mechanical system components
  • System efficiency
  • Sound levels
  • Space considerations
  • System vibration
  • Emissions and permitting
  • Utility interconnection
  • System availability during utility outage
  • Availability of incentives
  • Maintenance costs
  • Fuel costs
  • Economic analysis including life-cycle analysis

In addition, if the Level 2 Feasibility Analysis is accompanied by a proposal for project execution, preliminary project schedule and financing options should be included.

To assist with this review, the Level 2 Feasibility Analysis Overview and Checklist (PDF) (7 pp, 86K, About PDF) is available.

<< Back to Stage 2 Stage 4: Procurement >>

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