The Confusing Allure of Combined Heat and Power: The Financial Attraction and Management Challenge of Reducing Energy Spend and Resulting Carbon Emissions Through Onsite Power Generation

Abstract

Sixty-one percent of global executives surveyed by McKinsey & Co. (in 2008) expect the issues associated with climate change to boost profits—if managed well. What these executives recognize is that new regulations, higher energy costs, and increased scrutiny by private gate-keepers (such as Wal-Mart) offer an opportunity to identify and implement more efficient practices in commercial and industrial environments. One of the most impactful solutions for the industrial sector—from the perspective of reducing energy spending and energy-related carbon emissions—is combined heat and power ("CHP"), sometimes referred to as cogeneration. However, the results of CHP deployment to date have been mixed—largely because companies do not fully appreciate the challenges of maintaining and operating a CHP system, optimizing its performance, and taking full advantage of the many benefits it offers. Despite these challenges, the slogan for CHP should perhaps be: "CHP, now more than ever".