Combined Heat & Power System Feasibility

This research explores the economic and technological viability of CHP systems in the context of escalating blackouts across areas of Great Britain due to global warming. It discusses the benefits of CHP systems, options for reciprocating engines, and the methodology of cost-benefit analysis. The results show the best option for high heat recovery ratio and positive cash flows. The document also provides an introduction to CHP plants and their benefits.

Combined Heat & Power
System feasibility
Abstract

This research construes the economic and technological viability of CHP systems, in the context
of escalating blackouts across areas of Great Britain; as an upshot of global warming. Harsh weather
conditions of snow and floods are alongside the escalating congestion and heat on the electricity
grid effectually curbing power efficiency; all these are apart the price volatility on the energy
market.
A Combined Heat and Power system arrests the offshoot of heat in the burn of fuel in heat
recovery ratios, used for making electricity or powering other forms of manufacturing cycles. This
feature incurs carbon saving and raises cost efficiency.
Options reviewed are all reciprocating engines with a capacity between 75kW and 25kW, at cost
spread of £45000 and £11500.
To determine a selection, these options are examined by way of Cost-benefit analysis. The
rationalisation of cost against benefit is a mechanism broadly used across institutions and
enterprise to enable the valuation of complex variables such as the policy tariff on carbon price
support and coefficient for health impact due fuel carbon footprint; or system reliability and
protection of revenue streams—which do not present in a singular equation and are in fact difficult
to quantify.
The benefits of the CHP System are outlined as: Energy efficiency with no transmission or
distribution system loss and carbon savings. Economic advantages include high fuel efficiency,
increased power generation and price stability.
Cost-benefit ratio of Option 1 is 6.9 and cost-benefit ratio for Option 3 is 7.6, while Option 2
defines the best cost-benefit ratio of eight. Computations presume price volatility escalating at
three percent year on year and apply the British inflation rate of 2.1.
Technical feasibility touches on the price competition of natural gas and its impact on the
electricity grid, yet highlights on ultimate industry efficiency. Other operating expenditures for
insurance, inspections, installations, integration with load shedding, etcetera; applies the rule of
thumb for industrial power plant per litre operating cost at £0.22. Electricity Retail Price Index or
RPI is pegged at £155.20 per MWh as of October 2018, CPS or carbon price support of £18 per tCO2;
and for health impact a coefficient 0.1507 per MWh/yr.
In conclusion, the second option is determined as best fit for high heat recovery ratio with NPV
and FIRR defining remarkable surplus in positive cash flows and breakeven point, for a two year
payback period. Cash flows on all three options defer the cost of investment by way of debt burden
and interest expense for ten years at an interest of seven percent.
Chapter 1 provides context and introduces the technology alongside its beneficial returns.
Chapter 2 explains the methodology Cost-benefit analysis. Chapter 3 presents the results which are
discussed in Chapter 4. Research summary findings are stated in the Conclusion which is the last
Chapter.
Contents
Combined Heat and Power System Feasibility | 2

Abstract................................................................................................................................................................................... 2
1.Introduction.......................................................................................................................................................................... 3
1.1 Combined Heat and Power Plants.................................................................................................................. 4
1.2 Benefits of the CHP System............................................................................................................................... 4
1.2.1 Energy efficiency.......................................................................................................................................... 5
1.2.2 No transmission or distribution loss.................................................................................................... 5
1.2.3 Carbon savings.............................................................................................................................................. 5
1.2.4 Economic advantage................................................................................................................................... 5
1.2.5 Protection of revenue streams................................................................................................................ 5
2.Methodology......................................................................................................................................................................... 5
3.Results..................................................................................................................................................................................... 6
3.1 Debt burden....................................................................................................................................................... 6
3.2 Carbon Price Support..................................................................................................................................... 6
3.3 Coefficient for Health Impact...................................................................................................................... 6
3.4 Electricity Retail Price Index....................................................................................................................... 7
3.5 Country Inflation Rate.................................................................................................................................... 7
3.6 Other Operating Expenditure..................................................................................................................... 7
Option 1 Reciprocating Engine 75 kW CHP Capacity.................................................................................... 8
Option 2 Reciprocating Engine 50 kW CHP Capacity.................................................................................... 9
Option 3 Reciprocating Engine 25 kW CHP Capacity..................................................................................10
4. Discussion........................................................................................................................................................................... 11
Net Present value...................................................................................................................................................... 11
Technical viability..................................................................................................................................................... 12
Industrial efficiency............................................................................................................................................. 12
Natural Gas Prices and Grid electricity............................................................................................................. 13
5.Conclusion........................................................................................................................................................................... 13
1. Introduction
England's Government is in frenzy search of innovative methods to deliver energy that is
affordable, sustainable and secure. Policy emphasis for new developments emphasis: ‘Be lean—be
clean—be green’, would mean using less energy, institutionalising energy efficiency and using
Combined Heat and Power System Feasibility | 3

renewable energy (Energy Planning, 2016). The average consumption of energy per capita in
England is 4795 kWh per person per year (Utility Week Live, 2019); together with a per capita
carbon footprint of roughly nine tonnes CO2 per person per year (Climate Stewards Ltd, 2019).
Answers to curb climate change have long been pursued with escalating obsession for the
benefit of generations next (Hawken, 2008). Adaptation to vastly changing meteorological
conditions is what is understood of climate change, that result of the accelerating exploit of earth
(EDF Energy, 2018). Gradual increases in temperature by a meagre 2°C can turn a quarter of
species extinct and raise ocean heights intolerably. Harsh conditions of flood, drought and heat
waves are expected (Becatoros, 2017).
Preparing for 2020, mankind's duty to mother earth is to radically shrink carbon emission by
transformation of the collective thought (Milman, 2013). A postulation puts down policy
instruments as the mechanism to deliver that change. Policy offers interpretive and questioning
touchstones to discern and reflect upon enforcement practices and outcomes. Policy seeks to create
specific, deliberate futures for communities, thus it is undertaken by government with the intent to
shape the meaning and forms of societal conduct. (Andrew, 2012).
Fundamental to this change is the Climate change Act that passed into Englishman Laws in 2008.
Legislation is thought to reform through: Behavioural change and social equity; accessibility and
managing demand; safety and technology; as well as administration and finance (Rooker, 2008). As
a matter of fact, the British budget includes £139 million for heat network infrastructure,
suggesting CHP plants (Energy Planning, 2016).
1.1 Combined Heat and Power Plants
Traditional system by-product of generating electricity is heat; that goes wasted has been
revolutionised by a number of energy concepts that utilise the heat off a reciprocating engine or
turbine generator (Hodge, 2010). For many years the traditional procedure disposes about two-
third of energy produced in simultaneous creation of heat. The facilitation of heat waste is
optimised for hot water or refrigeration, specifically in off-grid locations (Nazir, 2018).
Power plant systems that combine heat and electricity, noted as the CHP, are an adaptation of
effective method for cost and carbon savings (Hedman B.A., 2011). CHP simultaneously churns heat
and electricity from single fuel combustion. Fuel can be fossil fuel of either oil or natural gas, and
even renewable fuel of either biogas or biomass (Hutchingson, 2011). Typical emissions the
generation of heat comprise of NOx or generic nitrogen oxides, SOx or sulphur dioxide and CO2 or
Carbon dioxide; denoted as the carbon savings (Mandal, 2018). A topping cycle is the typical CHP
configuration for the combustion of fuel within the reciprocating engine for purpose of power
generation. By the production of power the heat waste if carried on to a second process that
generates thermal energy. Heat recovery absorbed of the exhaust stream can be utilised in the
generation of electricity otherwise sent into a heating system (Hedman B.A., 2011).
As an example, the combined cooling system and power plant situated in the vegetable
processing facility in Blythe, simultaneously generates 830 kW of electricity and 160 tons of 25°F
chilling. The plant is designed with two natural gas fired reciprocating engines
1.2 Benefits of the CHP System
No transmission of distribution loss; energy efficiency and carbon savings; low energy cost and
remarkable reliability; and protection of revenue stream; render as benefits from using the
Combined Heat and Power system (Granby, 2014).
Combined Heat and Power System Feasibility | 4

1.2.1 Energy efficiency
When comparing traditional ways of electricity generation versus Combined Heat and Power,
the CHP puts down 75 percent system efficiency. For instance, for the generation of 75 units of
electricity, the traditional system consumes 147 units of energy input, while the CHP consume 100
units of energy input (Das, 2017). Energy efficiency is also derived from the indirect benefit of
producing electricity off the grid which is congested to the point that the in-grid system heat during
peak hour result in further energy loss (DBEIS, 2018).
1.2.2 No transmission or distribution loss
CHP is off grid, thus there is no transmission or distribution loss that occur along the travel path
of electricity across power lines It is to note that the absorbed power loss goes up when the grid is
strained or when the system heat is high (Anders, 2014).
1.2.3 Carbon savings
A traditional five megawatt combustion-turbine engine utilising natural gas, discharges about 45
kilotons CO2 emission each year, in contrast the CHP system at high efficiency, discharges roughly
23 kilotons CO2 emissions each year (The Carbon Trust, 2010).
1.2.4 Economic advantage
CHP plants function off the power-grid that there is no expenditures on transmission and
distribution infrastructure. Safety and health risks are skirted in scenarios of irresponsible
electricity distribution companies. A lower effective energy rate results of the high level of
efficiency of the CHP plant at an average total system efficiency between 60 and 80 percent (Asian
Development Bank, 2018).
1.2.5 Protection of revenue streams
CHP plants are fully functional even in the event of a disaster or unexpected power interruptions
on the national grid. A CHP plant circumvents exposure to the volatility of energy rates (Granade,
2009).
2. Methodology
Cost benefit analysis or CB is a methodology to derive decision superiority by enterprises or
institutions in the evaluation of potential outcomes. Consequently, decisions that are well intended
can result in substantial loss when unforeseen outcomes develop (Peer, 2012). By so, decision
makers necessitate a sound frame of reference such to organise complex information into more
traceable and understandable.
Cost-benefit analysis has proven to significantly advance the decision making process by the
systematic weigh up of outcomes and resources using the same unit value or common metric
(Bootman, 2009). As such, the technology is proficiently measured over its useful lifetime, in
economic terms. All things equal, the more efficient project is to be selected over what presents to
be less efficient (European Commission, 2013).
Cost-benefit analysis is largely accepted across industries, institutions and organisations as the
methodology to rationalise investments (European Commission, 2015). Cost-benefit analysis utilise
inputs of values between benefit and cost. Parameters comprise of the discount rate and forecast
economic growth; as well as the quantification in monetary value some items that typically cannot
be measured. Values are expressed in year on year increments to simplify the time-streams for both
benefit and cost reviewed to a common time base to determine time-value of money (Naess, 2016).
Combined Heat and Power System Feasibility | 5

The typical duration of appraisal takes up a minimum of 20-30 years, while the UK Government
suggests longer. In fact the use of cost benefit analysis in British policy has influenced the setting of
taxes and alternative rules (Mackie, 2010).
Nonetheless, the academe has pointed out a number of faults featured of the cost-benefit
analysis. These comprise of the disputable computation methods to value soft variables such as the
quality of nature; the expected effect of the synergy and agglomeration across variables; omission
of uncertainties essential for spatial economic developments—given the intrinsic complexity in
quantifying these effects. It is important to note that trustworthiness and authenticity are crucial in
the rationalisation of cost-benefit analysis. Insight of experts is very important with the variances in
perceptions of decision makers (Olsson, 2012).
3. Results
Computations in the assessment use the following values where appropriate, as stated in this
section.
3.1 Debt burden
On capitalisation, payments are deferred in a ten year loan at 6.7 percent interest expense
(https://www.money.co.uk/loans/loan-repayment-calculator.htm 2019)
Option 1 for the capitalisation of £115,000 a monthly repayment of £1,135.61 with full amount
repayable of £ 136,273.20. Therefore the debt burden for option 1 costs the enterprise £36,273.2
Option 2 for the capitalisation of £82,000 a monthly repayment of £931.2 with full amount
repayable of £111,744. Therefore the debt burden for option 2 costs the enterprise £ 29,744
Option 2 for the capitalisation of £45,000 a monthly repayment of £511.03 with full amount
repayable of £61,323.6. Therefore the debt burden for option 2 costs the enterprise £16,323.6
3.2 Carbon Price Support
The British Government established the CPS or Carbon Price Support of £18 per tCO2, which is
computed to derive the value of CO2 Savings against all fuels including renewables and nuclear. A
reciprocating engine has no turbine therefore no CO2 Savings against modern Combined Cycle Gas
Turbines or CCGT is used (DBEIS, 2018)
3.3 Coefficient for Health Impact
The coefficient for health impact uses 0.1507 per MWh/yr to recognise the carbon footprint on
acute mortality assuming mean value 0.985 cases per 10ug/m3. This is computed against the
electricity generated and the price of diesel (Committee on Climate Change 2011).
3.4 Electricity Retail Price Index
Electricity Retail Price Index or RPI is pegged at £155.20 per MWh as of October 2018, which is
used as the baseline of diesel price of the first year in operation of the business enterprise
(Department of Energy and Climate Change 2018). Increases per annum to presume price volatility
uses an estimate of 3 percent.
Combined Heat and Power System Feasibility | 6

3.5 Country Inflation Rate
The British inflation rate is at an all-time low of 2.1 which is applied for calculation of Net
Present Value (BBC, 2019). As ancient as the 18th century, economist David Hume defined the
quantity theory to state price volatility to be determined by the volume of money. Other economists
define this as inverse of this ratio or the velocity of circulation. From that principle economists
conclusively determine the inflation rate as a reliable instrument for controlling movements of
price, prescribed at a rate tantamount to economic growth.
3.6 Other Operating Expenditure
Computations for other operating expenditures such as insurance, inspections, installations,
etcetera takes up on the average, for CHP system as derived from independent producers, to be at
$0.283 otherwise £0.22 per kilowatt-hour. This value is used as the rule of thumb in the
computations for economic viability (www.eia.gov/electricity).
This coefficient is computed against the generated electricity of each corresponding option and
subtracts the cost of fuel respectively.
Monitoring the implementation of energy policies on left
Developments with heat networks on right
(Crown Copyright 2016)
Combined Heat and Power System Feasibility | 7

Option 1 Reciprocating Engine 75 kW CHP Capacity
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
CHP capital costs
(115000
)
Costs
Debt burden with interest
expense (13627) (13627) (13627) (13627) (13627) (13627) (13627) (13627) (13627) (13627)
CHP fuel consumption (1149) (1149) (1149) (1149) (1149) (1149) (1149) (1149) (1149) (1149)
Impact coefficient on health (7788) (7788) (7788) (7788) (7788) (7788) (7788) (7788) (7788) (7788)
Carbon abatement on fuel use (11) (11) (11) (11) (11) (11) (11) (11) (11) (11)
Other operating expenditures,
insurance, inspections,
installations, integration with
load shedding etc.
(72111) (72111) (72111) (72111) (72111) (72111) (72111) (72111) (72111) (72111)
Benefits
Electricity generated 51682 53232 54829 56474 58168 59913 61711 63562 65469 67433
Useful heat recovered 89550 92237 95004 97854 100790 103813 106928 110136 113440 116843
Primary energy savings 77290 77290 77290 77290 77290 77290 77290 77290 77290 77290
Annual cost savings 14000 14000 14000 14000 14000 14000 14000 14000 14000 14000
CO2 Savings against all fuels
including renewables and
nuclear
378 378 378 378 378 378 378 378 378 378
CO2 Savings against modern
Combined Cycle Gas Turbines
(CCGT)
0 0 0 0 0 0 0 0 0 0
Cost (94687) (22576) (22576) (22576) (22576) (22576) (22576) (22576) (22576) (22576)
Benefit 232900 237137 241501 245996 250625 255394 260306 265365 270576 275943
Cost-benefit value (115000
) 138212 214560 218924 223419 228049 232818 237730 242789 248000 253367

Option 2 Reciprocating Engine 50 kW CHP Capacity
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
CHP capital costs
(82000
)
Costs
Debt burden with interest
expense (11174) (11174) (11174) (11174) (11174) (11174) (11174) (11174) (11174) (11174)
CHP fuel consumption (863) (863) (863) (863) (863) (863) (863) (863) (863) (863)
Impact coefficient on health (6034) (6034) (6034) (6034) (6034) (6034) (6034) (6034) (6034) (6034)
Carbon abatement on fuel use (9) (9) (9) (9) (9) (9) (9) (9) (9) (9)
Other operating expenditures,
insurance, inspections,
installations, integration with
load shedding etc.
(55897) (55897) (55897) (55897) (55897) (55897) (55897) (55897) (55897) (55897)
Benefits
Electricity generated 40042 41243 42480 43755 45067 46419 47812 49246 50724 52245
Useful heat recovered 62080 63942 65861 67836 69872 71968 74127 76351 78641 81000
Primary energy savings 54165 54165 54165 54165 54165 54165 54165 54165 54165 54165
Annual cost savings 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000
CO2 Savings against all fuels
including renewables and
nuclear
252 252 252 252 252 252 252 252 252 252
CO2 Savings against modern
Combined Cycle Gas Turbines
(CCGT)
0 0 0 0 0 0 0 0 0 0
Cost (73977) (18080) (18080) (18080) (18080) (18080) (18080) (18080) (18080) (18080)
Benefit 156538 159602 162758 166008 169356 172804 176355 180013 183781 187662
Cost-benefit value (82000
) 82561 141522 144677 147928 151275 154723 158275 161933 165701 169582
Combined Heat and Power System Feasibility | 9

Option 3 Reciprocating Engine 25 kW CHP Capacity
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
CHP capital costs
(45000
)
Costs
Debt burden with interest
expense (6132) (6132) (6132) (6132) (6132) (6132) (6132) (6132) (6132) (6132)
CHP fuel consumption (469) (469) (469) (469) (469) (469) (469) (469) (469) (469)
Impact coefficient on health (3321) (3321) (3321) (3321) (3321) (3321) (3321) (3321) (3321) (3321)
Carbon abatement on fuel use (5) (5) (5) (5) (5) (5) (5) (5) (5) (5)
Other operating expenditures,
insurance, inspections,
installations, integration with
load shedding etc.
(30771) (30771) (30771) (30771) (30771) (30771) (30771) (30771) (30771) (30771)
Benefits
Electricity generated 22038 22700 23381 24082 24804 25549 26315 27104 27918 28755
Useful heat recovered 33834 34849 35894 36971 38080 39222 40399 41611 42859 44145
Primary energy savings 30109 30109 30109 30109 30109 30109 30109 30109 30109 30109
Annual cost savings 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000
CO2 Savings against all fuels
including renewables and
nuclear
288 288 288 288 288 288 288 288 288 288
CO2 Savings against modern
Combined Cycle Gas Turbines
(CCGT)
0 0 0 0 0 0 0 0 0 0
Cost (40698) (9927) (9927) (9927) (9927) (9927) (9927) (9927) (9927) (9927)
Benefit 91269 92945 94671 96450 98281 100168 102111 104112 106174 108297
Cost-benefit value (45000
) 50571 83018 84744 86522 88354 90241 92184 94185 96247 98370
Combined Heat and Power System Feasibility | 10

4. Discussion
This section deliberates the technical and economic viability of each option analysed explaining
the impact of discount rate on technical feasibility and economic effectiveness. Natural Gas prices
effect on grid electricity in economic perspective in terms of energy savings, and the overall carbon
savings.
Net Present value
The idea of NPV is to look at the investment returns in the money value today, using he
summation of positive and negative values across ten years because these years come with debt
burden. In other words, what is invested today with year on year interest rate or r is valued at 1+r
in one year time. In principle the value is sensitive to the discount rate to cope with uncertainty.
NPV formula is stated below.
NPV = Rt
1+it
At the British Inflation rate of 2.1, the nominal discount rate of 15 percent has a real discount
rate of 12.6 percent which is used in the computations of Net Present Value. Details of Net Present
Value and FIRR/IRR Internal Return Rate for all three options are summarised on Table 1. NPV is a
tool to determine the excesses of positive cash flows, while FIRR looks into the breakeven point of
revenues and expenses. From the findings, it is sufficient to state that Option 2 has the highest
economic value with NPV 1.24 percent more than Option 1 and 1.69 percent more than Option 2.
That means there is more surplus in cash flow in Option 2. In the same way, Option 2 has the lowest
break even value that is 14.2 percentage points under Option 1 and 9.7percentage points under
Option 3.
Table 1: Summary of Economic Ratios
Option 1 Option
2 Option 3
NPV 748,374 929,829 547,665
FIRR 131 117 127
Payback in yr. 8 1.83 2
Maximum capital at risk £115000 £82000 £45000
Cost-benefit ratio 6.9 8 7.6
Correspondingly, the payback in years as stated in the project portfolio, Option 1 takes 8 years to
recover investment, Option to takes 1.83 years to recover investment and Option takes 2 years to
recover investment —that is more or less the same result with NPV and FIRR. Option 2 recovers at
a much faster rate with the given technical capacity.
This case boils down to the risk appetite of the enterprise, to take a small risk by investing less;
otherwise, it makes sense to choose Option 2 because the risk is less, the overall revenue and profit
across ten years is better.

CHP
capacity
kW
Electricity generated MW/yr.
Useful heat recovered MW/ yr.
0
100
200
300
400
500
600
700
0
500
0 1 2 3 4
Option 2
Option 1
Option 3
Technical performance (Authored)
A deterministic Cost-benefit ratio for option 2 is higher than that of Option 1 and Option 3. It can
also be said that he maximum capital at risk for Option2 of £82,000 is 29 percent less than Option 1
and 82 percent more that Option 3.
Technical viability
The figure below illustrates the technical performance of all there options. In here, the same
consistent behaviour that of economic viability with Option 2 showing high efficiency for
production of electricity and heat recovery; when compared with Option 1 that has a higher
capacity of reciprocating engine.
Heat recovery as a very prominent feature of CHP shows the recovery of heat energy is way
higher than the actual electricity produced, in all three options. While the proportion of heat to
power recovery is nearly the same for all three options, between 1.53 and 1.73; generation versus
capacity drives the production: 4.44 MW for every kW capacity for Option 1 and a production of
5.16 MW for every kW capacity for Option 2. In the case of Option 3, a high production versus
capacity is shown with 5.68 MW for each kW capacity.
The ability of a plant to recycle waste heat into clean electricity can be utilised for facility heating
or other industrial processes: Boiler feed water and building comfort heat; combustion air pre-heat
and steam ejectors; general process heat, ORC generator and wash water pre-heat.
The added revenue to the enterprise as a result of heat recovery varies as to the uses built in to
the CHP design. The British CHP tariff structure is important to note. A CHP plant with eligible heat
use can receive a CHP tariff of 4.29p/kWh.
Industrial efficiency
Cogeneration describes the concurrent production of valuable mechanical and thermal energy in
a single, integrated system (Kavvadias, 2010). In such system cycle, the fuel combusted produces
thermal energy that goes into some industrial process such as a furnace; and the wasted heat as the
by-product of the process is used in the production of electricity (Smith, 2011).
Combined Heat and Power System Feasibility | 12

To produce useful thermal energy or electricity by way of generation, sheer production of
mechanical energy can eliminate unnecessary fuel usage and considerably raise industrial
efficiency (Mago, 2013). What is thought of as industrial efficiency correlates with the price stability
by matter of self-generation, thus not relying on grid electricity. As a result, energy conservation is
achieved, effectually making further contribution to heat loss on the power lattice plus the
equivalent carbon savings (Knizley, 2014).
Natural Gas Prices and Grid electricity
Over the past four decades, the trend in the energy demand for grid electricity has been falling,
and yet it is still forecast to double by 2035 (Climate Change Committee, 2020). Natural gas is to
affect the energy market in terms of consumption and pricing; and for the following reasons:
Stagnation in the UK broadly by the grid that has aged with the needed upgrades insofar has not
been introduced, due to the fact that Government commitment to pursue renewable energy
(Committee on Climate Change, 2011).
The figure below of comparative prices of natural gas in advanced nations of England and
France, US, Germany and Japan for the past ten years in cents per kWh. Japan is at the helm of world
fuel prices, while England shows consistent increases across the decade as a net exporter of natural
gas (Department of Energy and Climate Change, 2011). Over 50 percent of the fuel consumption in
the UK is outsourced. Norway pipes in over 20 percent and Netherlands pipes in another 10
percent. Qatar ships another 20 percent in liquefied natural gas. These escalate the country
exposure to the tightening energy market (UNDP, 2009).
The climate change summit held in 2011reasonably forged the Global carbon revolution that is
to be in force by 2020 (International Energy Agency, 2011). This commitment is completely
comprehensive enough to entice many novel green technology innovators such as electric cars and
CHP plants, smart grids and low-carbon homes. It is thought that a large proportion of energy as
future electricity is to be carbon free (Feger, 2011).
5. Conclusion
This research finds sufficient evidence that the
investment for Combined Heat and Power Plants for all
options, exhibit rudiments of economic and
technological feasibility with benefits to exceed hurdle
rate. Therefore it is with reasoned judgment that these
options are concluded feasible.
Option 2 is considerably the best. Characterised
with a CHP capacity of 50kW at investment cost
amounting to £82000, the facility is saddled with debt
burden annually at £11,174 across ten years. Net
Present Value present a surplus in positive cash flows
to total £929,829 and payback in 2 years. FIRR at the
lowest breakeven point of 117 among all three options:
131 for Option 1 and 127 for Option 2.At maximum
capital at risk of £82000, the cost benefit ratio stands at
eight.
Combined Heat and Power System Feasibility | 13
Average Natural Gas Prices
(Energy Information Administration 2017)

Simulation arguments from the baseline indicate power generation for Option 2 is heat recovery
per MW generated is 1.55 compared to Option one heat recovery per MW generated of 1.75 but a
financial payback of 8 years, lesser surplus and high breakeven point. Summation of value creation
as a result of benefits derived from investing Option 2 is £5,628,309 for a ten year period.
All the same, while there are several techniques and methods to determine investment
feasibility, the use of Cost-benefit analysis is selected because there is no other outright equation
than can weigh up the benefits of complex variables such as heat recovery, reliability and carbon
savings.
These complex variables are unique to the Combined Heat and Power systems. CB Analysis
incorporated debt burden on capitalisation and tariff structure such for Carbon Price Support; a
coefficient for Health Impact and price volatility using the Electricity Retail Price Index; British
inflation rate for NPV evaluation and the rule of thumb for other operating expenditures. Other
indirect benefits of the CHP System account for energy industry efficiency, the elimination of
transmission or distribution grid system loss and protection of revenue streams.
Novel approaches and strategies to curtail carbon emissions compel creative thought, as
depicted in the CHP system. The rudimentary principle of recycling a by-product for purpose of
carbon reduction has ultimately raised industry efficiency, is not institutionalised mind set change.
The optimal use of energy inputs can be further enforced through spatial planning on infrastructure
arrangements such as smart grids. Thus devolving decisions and raising the capabilities of local
authorities. Despite the fact that there are several enabling technologies to influence behavioural
change, the furthermost impact stems from policy change.
Combined Heat and Power System Feasibility | 14