Energy versus economic effectiveness in CHP (combined heat and power) applications: Investigation on the critical role of commodities price, taxation and power grid mix efficiency

Starting from PES (primary energy saving) and CSR (cost saving ratio) definitions the work pinpoints a “grey area” in which CHP (combined heat and power – cogeneration) units can operate with profit and negative PES. In this case, CHP can be profitably operated with lower efficiency with respect to separate production of electrical and thermal energy. The work defines the R-index as the ratio between the cost of fuel and electricity. The optimal value of R-index for which CHP units operate with both environmental benefit (PES > 0) and economic profitability (CSR > 0) is the reference value of electrical efficiency, ηel_ref, of separate production (national power grid mix). As a consequence, optimal R-index varies from Country to Country. The work demonstrates that the value of R corresponds to the minimum value of electrical efficiency for which any power generator operates with profit. The paper demonstrates that, with regard to the profitability of cogeneration, the ratio between the cost of commodities is more important than their absolute value so that different taxation of each commodity can be a good leverage for energy policy makers to promote high efficiency cogeneration, even in the absence of an incentive mechanism. The final part of the study presents an analysis on micro-CHP technologies payback times for different European Countries.