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Applied Thermal Engineering 27 (2007) 21662172

www.elsevier.com/locate/apthermeng

A comparison of combined heat and power feasibility models


L.R. Hinojosa a, A.R. Day
a

a,*

, G.G. Maidment a, C. Dunham b, P. Kirk

Department of Engineering Systems, Faculty of Engineering, Science and the Built Environment, London South Bank University,
103 Borough Road, London SE1 0AA, UK
b
SEA/RENUE, 42 Braganza Street, London SE17 3RJ, UK
Received 24 February 2005; accepted 25 July 2005
Available online 3 October 2005

Abstract
Carrying out feasibility studies for combined heat and power (CHP) in buildings systems is one of the most important steps in the
decision-making process. This paper compares the features of dierent software packages available in the market and some custombuilt models. It also discusses the advantages and disadvantages of building ones own application. The number of variables that
need to be considered will depend on the level of accuracy and exibility sought. Software packages are a good start, but they tend
to be either overly simple or extremely complicated, and sometimes not very exible. On the other hand, building custom-built generic models that include dierent technologies, unit sizes, control modes, market restrictions and benets, can be a complex and
laborious process, but will be more transparent to the user.
 2005 Elsevier Ltd. All rights reserved.
Keywords: CHP; Cogeneration; Feasibility models

1. Introduction
Under the Kyoto protocol the participating countries
committed themselves to reducing greenhouse gas emissions below 1990 levels by 2010. The installation of CHP
systems to displace less ecient separate means of power
and heat generation is an important part of the UK
strategy to reduce greenhouse gas emissions by 20% by
2010 [1].
A CHP, or cogeneration, system consists of the facility to simultaneously produce and use heat and power.
Prime movers generate power via their electric generators and use the by-product heat for space or process
heating. CHP schemes are usually more ecient than
conventional centralised power stations as they produce
electricity and heat locally, minimising the distribution

Corresponding author. Tel.: +44 20 7815 7656; fax: +44 20 7815


7699.
E-mail address: dayar@lsbu.ac.uk (A.R. Day).
1359-4311/$ - see front matter  2005 Elsevier Ltd. All rights reserved.
doi:10.1016/j.applthermaleng.2005.07.028

losses. In addition to the running cost savings associated


with higher eciency, the lower energy consumption
also produces environmental benets such as lower
CO2 emissions.
CHP schemes have been applied for over 100 yr and
have been used to provide electric power from 15 kWe
to 100 MWe [2]. In most applications, the main factor
which determines the economic viability of the CHP
scheme is a high simultaneous utilisation of heat and
power. As a rule of thumb, CHP plants must operate
for about 5000 h per year to be economic, although this
depends on the application [3].
Any feasibility study should include assessing the economics of a range of CHP sizes, the overall unit performance, the maintenance costs, the control strategy, the
possible changes in fuel and electricity prices, and the
site demands.
The aim of this paper is to compare existing CHP feasibility models with a new model being developed by
sustainable energy action (SEA/RENUE) and London
South Bank University (LSBU). Features such as

L.R. Hinojosa et al. / Applied Thermal Engineering 27 (2007) 21662172

2167

Nomenclature
CHP
DTI
ECA
ETS
IRR
KTP

combined heat and power


Department of Trade and Industry, UK
enhanced capital allowance
emissions trading scheme
internal rate of return
knowledge transfer partnership

exibility, accuracy, transparency and reliability will be


discussed.

LSBU London South Bank University


NPV net present value
ROCs renewables obligation certicates
SEA/RENUE sustainable energy action
SPB
simple payback
STOD seasonal time of day

for supplying energy to its customers at all times. Power


export could also be an option.
2.2. Fuel and technology

2. Feasibility modelling
The nancial appraisal tends to be the predominant
factor in any CHP feasibility study. But now trading
CO2 emissions and green certicates will improve the
economics of CHP. In order to asses the viability of
CHP for particular applications it is necessary to
model the system to a greater or lesser extent. Some
of the stages that should be included are discussed
below.
2.1. System denition
The estimation of demand proles (heat and power)
used by the system under analysis is of extreme importance, as all the subsequent calculations are based on
them. Demand proles can be estimated hourly,
monthly or seasonally. The level of detail needed will depend on the system under evaluation. Hourly proles
should be preferred for all year-round highly variable
loads. Monthly and seasonal gures should be used
for more steady systems. Monthly gures could lead to
miscalculations when used with hourly variable loads
as they do not actually show the simultaneous need
for heat and power [4]. The extent of this error has
not been reported in the literature.
Dening the boundaries and objectives of the application is crucial for the feasibility calculations. A single-owned system (e.g. a hospital) will aim to displace
as much heat and power as possible from the boilers
and the grid, to maximise the savings. In most cases,
there would be only one fuel supply and one electricity
contract. Power will be imported and the boilers will
be used to provide extra heat, when required. Exporting
any excess energy is not normally considered.
Another possible scenario is a community energy
scheme. Here an energy company supplies heat and
power to multiple customers. This is a more complex
scenario, and the aim would be to maximise the companys performance. The energy company is responsible

The fuels available for the application will more or


less dictate which CHP technologies could be used. Fossil fuels dominate, but alternative fuels are gaining
importance. Renewable fuels will become more important in the years to come and are likely to take the place
that natural gas occupies today [5]. Key factors in the
choice of fuel are quality of fuel, availability, cost and
delivery to site.
The range of CHP technologies is becoming wider for
units below 1 MWe, but reciprocating engines are still
the most used technology. The main reasons for this
are good part-load operation, proven technology, wide
range of sizes and fuels and ease of maintenance.
Other factors that inuence the selection of the CHP
unit are the amount of power needed, the quality of heat
(steam or hot water), the duty cycle, space constraints,
thermal needs, emission regulations, utility prices and
interconnection issues [6].
The CO2 emission savings will depend on the base
case scenario (i.e. grid electricity and boiler emissions).
In the UK, each kW h of electricity supplied from the
average fossil fuel power station results in the emission
of over 0.5 kg of CO2, while typically gas-red boilers
emit around 0.25 kg of CO2 per kW h of heat generated
[3].
2.3. Economic and nancial aspects
The economics of CHP are very sensitive to fuel and
electricity prices. In the UK the electricity prices have
been signicantly reduced in the last ve years, and on
the other hand natural gas prices increased. This situation has had a highly detrimental eect on the nancial
aspects of CHP [7]. Electricity prices can adopt dierent
tari structures (standard, day/night, seasonal time of
day), while fuel prices are normally xed. The variation
in prices over time is dicult to estimate, but a factor
should be included to test the sensitivity of these
changes.

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L.R. Hinojosa et al. / Applied Thermal Engineering 27 (2007) 21662172

Any potential carbon trading, renewable certicates


or levy exemptions should be included in the cash ow
analysis as this improves the economics of CHP and
makes these projects more attractive to investors. In
the UK, electricity generated from certain renewable
sources is eligible for green certicates (ROCs) that
can be traded with licensed electricity suppliers. Furthermore, the EU emissions trading scheme (EU ETS),
which allows CO2 trading, should benet ecient CHP
plants, but the impact on installed CHP capacity is difcult to quantify and considerable uncertainty exists
over the likely price of carbon [8].
The capital cost for the installation should include:
the CHP unit, any related equipment, any civil, mechanical and electrical work, the fuel supply system, and
planning permission and project development costs.
Parameters such as discount rate, ination, retail
price index, depreciation type, private loans, government grants, enhanced capital allowances (ECAs), corporate tax and others should be included in the nancial
appraisal. Simple payback (SPB) is the simplest and
most used result, but it is not the most suitable result
for a long term investment. Net present value (NPV)
and internal rate of return (IRR) are preferred
indicators.

are obtained from a summary sheet, but detailed results


can obtained from each individual section. The user
interface has been improved, but it is not intended for
inexperienced Excel users. User forms are being developed and will be incorporated on a later version.
3.2. CHP Sizer 2 [9]
This free software had its second version released in
May 2004. It is a simple tool, with an easy user interface,
to get a rst indication of the feasibility of installing and
using CHP in dierent applications such as hospitals,
hotels, leisure centres and student accommodations.
The program either estimates the load proles for these
buildings (based on real building data) or the user can
enter them manually. The built-in database is valid for
the UK only. The program has ve steps which are:
entering the building parameters, viewing of the load
proles, entering building services parameters, entering
fuel and electricity taris, and showing results. The results are shown for a range of units where heat led control is assumed, but this can be modied to electric led
control. A one-page result can be printed out or copied
to a spreadsheet.
3.3. Ready Reckoner 3.1 [10]

3. Applications review
At present, there are dierent applications available
in the market. Some of them exclusively dedicated to
the analysis of CHP installations and others incorporating CHP as an extra module within them. The software
packages considered in this paper are briey described
below.
3.1. SEA/RENUE model
Being developed under a UK knowledge transfer
partnerships (KTP) programme, this model is part of a
2 yr project between SEA/RENUE and LSBU. It is
scheduled to be completed by the end of 2005 and is currently powered by Excel.
The feasibility process is divided in the following
steps: load proles, fuel and electricity taris, CHP unit
information, capital cost and nancial information, and
main results. At present, the model only includes natural
gas reciprocating engines from 100 kWe up to 625 kWe,
and oers dierent control strategies such as: electric led
with heat rejection, heat led with power export, heat led
without power export and full load operation. Three different types of electricity taris are available: at rate,
day and night rates, and seasonal time of day (STOD)
rates. It also includes dierent nancial options such
as investment loans, capital grants, ination index, corporate tax, discount rates and others. The main results

This is also a free software and compares a base case


with a cogeneration scenario. The main steps followed
by the program are: general project information, denition of the benchmark case, denition of the cogeneration case, relevant nancial information and results. It
seems to have much more than ve steps because of
the way it interacts with the user.
The user should input the heat and power demand
proles. Cooling requirements could also be included
within the calculations. It includes a good database of
dierent prime mover technologies and fuels. Specic
engine manufacturers could be chosen. Export of electricity is assumed anytime the generation exceeds the demand. The results are extensive and can be up to 8 pages
if needed.
3.4. EnergyPro 3.2 [11]
This software is a modelling program that allows the
user to carry out a comprehensive, integrated and detailed technical and nancial analysis of energy projects
(not only CHP). It has three dierent modules: design,
nance and accounts. The design module includes the
design and optimisation of a specic operation year.
The nance module will allow extending the project
for a number of years, and detailed cash ows can be
obtained. The accounts module is for a deeper level of
nancial analysis (it includes taxes, depreciation and
others). In all these modules, the user must dene the

L.R. Hinojosa et al. / Applied Thermal Engineering 27 (2007) 21662172

Thermal Demand Profile


2.500
2.000

kWth

demand proles, the equipment, fuel and electricity


taris, and the plant control strategy.
It is more dicult to use than the other reviewed
applications, as it is intended for multiple scenarios of
energy generation. Experience with the software is
needed before meaningful results can be obtained.

2169

1.500
1.000
500

4. Application comparison
0

In order to compare the versatility of the dierent


models, ctitious load proles were used in all of the
applications (Figs. 1 and 2). Heat led, electric led and
full load strategies were tested and the results were compared. Table 1 summarises the main information input
in each application. Each model has a dierent number
and variety of inputs, with CHP Sizer being the most re-

Electrical Demand Profile


350
300

KWe

250
200
150
100
50
0
1

11

13

15

17

19

21

23

Time of Day
January

March

May

July

September

Fig. 1. Power demand.

November

11

13

15

17

19

21

23

Time of Day
January

March

May

July

September

November

Fig. 2. Heat demand.

stricted and EnergyPro the most extensive one. Some


of the features are discussed below.
EnergyPro and SEA models allow entering comprehensive heat and power demand proles. An extremely
detailed power prole (365 days every half hour, i.e.
365 48 entries) could be entered in CHP Sizer 2, but
the heat prole is limited to only monthly proles (3
time bands per month, i.e. 12 3 entries). Ready Reckoner allows only a maximum of 12 entries, which it is the
most restricted of all of them. EnergyPro is the only
application that allows entering several proles for heat
and power.
CHP Sizer is the only one that does not give an option for electricity export. On the other hand, Ready
Reckoner does not oer an option for controlling the
CHP output, i.e. the unit runs full load at all times,
exporting power and rejecting heat when required.

Table 1
Information entered in CHP feasibility models
Input information

SEA/RENUE

CHP Sizer 2

Ready Reckoner

EnergyPro 3

Analysis period
CHP availability
Power prole input
(Max No. of entries)
Heat prole input
(Max No. of entries)
No. of proles allowed
Fuel
CO2 emissions P. Plant/
N. gas kg/kW h
Boiler eciency
Discount rate
Loan amount, %
Tax rate
Depreciation
Nat. gas price, p/kW h
Electricity import price

20 yr
90%
Hourly for 1 typical
day per month (288)
Hourly for 1 typical
day per month (288)
1
Natural gas
0.43/0.19

20 yr
Not available
Every 1/2 h for
365 days (17,520)
3 time bands
per month (36)
1
Natural gas
0.43/0.19

20 yr
90%
Monthly consumption
(max 12)
Monthly consumption
(max 12)
1
Natural gas
0.43/0.19

20 yr
90%
Monthly consumption
(unlimited)
Monthly consumption
(unlimited)
Multiple
Natural gas
0.43/0.19

75%
10%
0%
0%
0%
1.1 p/kW h
Day 5.5 p/kW h;
night 2.5 p/kW h
3.0 p/kW h
0%

75%
10%
Not available
Not available
Not available
1.1 p/kW h
Day 5.5 p/kW h;
night 2.5 p/kW h
Not available
Not available

75%
10%
0%
0%
0%
1.1 p/kW h
4.0 p/kW h;
All day
3.0 p/kW h
0%

75%
10%
0%
0%
0%
1.1 p/kW h
Day 5.5 p/kW h;
night 2.5 p/kW h
3.0 p/kW h
0%

Electricity export price, p/kW h


RPI or ination

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L.R. Hinojosa et al. / Applied Thermal Engineering 27 (2007) 21662172

EnergyPro and SEA models can use simple and complex electricity tari structures. CHP Sizer 2 uses up to
three time bands (but not seasonally variable) and dierentiates between weekdays and weekends. Ready Reckoner only accepts a at rate electricity tari. Dierent
fuels could be used in EnergyPro and Ready Reckoner,
i.e. solid, gaseous and liquid for both, boilers and
CHP. SEA and CHP Sizer are mainly intended for natural gas.
Only Ready Reckoner and SEA have a database with
real CHP units. CHP Sizer uses nominal unit sizes and
EnergyPro needs the input from the user. The nancial
information requested varies with the level of information gathered by the user. EnergyPro and Ready Reckoner include an advanced level of nancial appraisal,
which is an optional module. SEA includes a medium
level of nancial parameters and CHP Sizer a low level
of nancial options.

After entering the demand proles and other parameters, results for three dierent control scenarios were
obtained in all the applications. The results are discussed
below and shown in Tables 24.
4.1. Heat led control strategy
Ready Reckoner does not allow load following,
therefore a heat led control strategy was not possible
be carried out in this software. The results obtained by
SEA and EnergyPro are similar, but only monthly gures were entered in EnergyPro, which explains the
slightly higher gures in NPV and IRR. On the other
hand, CHP Sizer gave much lower values for NPV,
IRR and CO2 savings than the other two, but this was
mainly because the CHP unit used by the programme
was less ecient. This ineciency aected the calculations over the 20 yr analysis period.

Table 2
Results for heat led operation
Heat led control

SEA/RENUE

CHP Sizer 2

Ready Reckoner

EnergyPro 3

Unit selected
Running hours
CO2 savings, Tonnes/yr
Capital cost, K
Net savings K/1st year
Simple payback, years
NPV (10%, 20 yr), K
IRR [20 yr], %
Detailed results
Transparent results

210 kWe
6386
328
143
40.9
3.5
205
28.4
13 pages
Yes, easy to follow

200 kWe
7300
180
143
27.8
5.1
81.4
N/A
1 page only
No, too many assumptions

Not available

210 kWe
7884
427
143
42.6
3.4
236
34.1
Extensive, +10 pages
Yes, easy to follow

Table 3
Results for electric led operation with heat rejection
Electric led control

SEA/RENUE

CHP Sizer 2

Ready Reckoner

EnergyPro 3

Unit selected
Running hours
CO2 savings, Tonnes/yr
Capital cost, K
Net savings K/1st year
Simple payback, years
NPV (10%, 20 yr), K
IRR [20 yr], %

210 kWe
7884
282
147
35.4
4.2
154
23.7

200 kWe
6500
220
147
30.6
4.8
103
N/A

Not available

210 kWe
7884
353
147
39.7
3.7
210
31.5

Table 4
Results for full output operation with heat rejection
Full load control

SEA/RENUE

CHP Sizer 2

Ready Reckoner

EnergyPro 3

Unit selected
Running hours
CO2 savings, Tonnes/yr
Capital cost, K
Net savings K/1st year
Simple payback, years
NPV (10%, 20 yr), K
IRR [20 yr], %

210 kWe
7884
308
147
41.1
3.6
203
27.8

Not available

210 kWe
7884
330
147
31.4
4.7
120
20.9

210 kWe
7884
391
147
46.3
3.1
269
37.6

L.R. Hinojosa et al. / Applied Thermal Engineering 27 (2007) 21662172

The lower running-hours were obtained by the SEA


model, less than 7000. Looking at the heat demand proles, the CHP unit should shut down during the night as
the heat load is lower than the minimum output of the
unit. This cannot be seen with the other two models, because only monthly average values were used in both of
them. This highlights the importance of using hourly
proles, as the model will follow the instantaneous need
of heat and power and will predict a more realistic
operation.
4.2. Electric led control strategy
In this case it was apparent that the minimum electrical output adopted by CHP Sizer was around 50%,
though this is not explicitly stated. This explains the
shorter running-hours obtained by this program in this
case. Apart from this issue, it can be seen that EnergyPro is still giving the highest values in terms of NPV,
IRR and CO2 savings. But the overall results are closer
that those obtained in the heat led strategy. In this scenario the units were operating at part load most of the
time, and power export was not allowed by the models.
The unit eciency and the average monthly proles are
still the main factors for the dierences in results.
4.3. Full output control strategy
This is the only case scenario where Ready Reckoner
could be tested, while CHP Sizer could not be used.
EnergyPro, as before, has the highest nancial and environmental benets. The CO2 savings are similar in each
case, but the savings are lower for Ready Reckoner. The
reason for this lies in the fact that this program only allows a at rate electricity tari (4.0p/kW h). All the units
include a 90% availability gure, allowing time for
maintenance.
In general, the calculations carried out by EnergyPro,
Ready Reckoner and SEA can be followed. But this is
not the case with CHP Sizer, where only main results
are shown and many assumptions are unknown. Extensive results are obtained from EnergyPro, Ready Reckoner and SEA models.
EnergyPro is by far the most complete software in
terms of modelling dierent scenarios. This is not only
intended for CHP, but for any type of energy generation
system with multiple units. Also EnergyPro allows prioritising in terms of which units operate rst, this is an
advanced capability that none of the others have. Because of this training is required before using this software, as it can be confusing for rst time users. All the
others are mainly focused on CHP and can be more easily followed.
The SEA model has a good potential to be expanded,
and already includes several features of other models. A
complete database of CHP units will be included, similar

2171

to the one in Ready Reckoner, which will be linked to


aspects such as fuel availability. The nancial options
will be expanded in order to include more advanced
options, and the user interface will be improved.

5. Conclusions
The detailed feasibility study of CHP applications involves many dierent variables which makes it a complex process. Understanding the diculty of the
feasibility and modelling of the system are essential.
CHP Sizer is a simple tool, only valid for the UK,
which allows carrying out feasibility studies in only ve
steps. It is only intended to give a rst feasibility indication. Ready Reckoner requests a great number of inputs,
which can be confusing for the user. It is very comprehensive in terms of fuel, CHP equipment and nancial
options, but it only allows a maximum of 12 entries for
each load prole, which it is not satisfactory with highly
variable proles. EnergyPro is a powerful and exible
application. Many dierent scenarios can be modelled,
but a good understanding of the system and the program
is fundamental. In order to model specic energy systems, training is required. The SEA/RENUE model is
at the early stage of development, but it is trying to incorporate the best features of the models herewith described.
It is relatively exible, comprehensive and easy to follow,
but the user interface is still modest.
Some free programs suer from lack of exibility and
transparency. They are excellent tools for a rst approach, but can be misleading as knowledge of the calculation procedure, or ability to input all the key
variables, is incomplete. Buying software is a valid option and a comprehensive testing by the user is desirable.
Some companies oer free fully operational demos and
others very limited ones.
The advantage of custom-built spreadsheets is that
they can be easily modied to respond to dierent scenarios and are transparent to their users. But due to
the number of operations involved, there is a high risk
of miscalculations which are normally dicult to nd.
Developing a complete generic model is a dicult and
time consuming process, requiring signicant technical
knowledge modelling skills. Condence in the model
comes from rigorous testing, both against other software
and using real data. However where an organisation
requires a exible, transparent and fully comprehendible
feasibility program, such in-house development may be
the preferred option.

Acknowledgements
Funding for this work was provided by SEA/RENUE and the UK DTI, under the KTP programme

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L.R. Hinojosa et al. / Applied Thermal Engineering 27 (2007) 21662172

No. 4368. The authors thank EMD for providing a


time-limited license for its software EnergyPro v3.1.
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