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CHP Basics & Benefits

Integrated systems for CHP in buildings are beneficial to the building owners as well as the society in general and the nation.

Benefits to building owners for deploying CHP systems for buildings include the following:

These systems help the society and the nation in many ways, including:

The CHP systems can be economically attractive for many types of buildings, including, but not limited to the following:

Educational facilities
Office buildings
Data Centers
Nursing homes

Refrigerated Warehouses
Retail stores
Ice Arenas

Information in this section is divided into two parts:


Energy is the most significant driving force of our economy. All buildings need electric power for lighting and operating equipment and appliances. One of the major consumers of energy in buildings is the equipment for space conditioning. Most commercial and institutional buildings for businesses, education, and healthcare require space conditioning for cooling, heating, and/or humidity control.

Two-thirds of all the fuel used to make electricity in the U.S. is generally wasted by venting unused thermal energy, from power generation equipment, into the air or discharging into water streams. While there have been impressive energy efficiency gains in other sectors of the economy since the oil price shocks of the 1970's, the average efficiency of power generation within the U.S. has remained around 33% since 1960. The average overall efficiency of generating electricity and heat by conventional systems is around 51 percent.

A 1 MW natural gas reciprocating engine in a combined heat and power application produces 35 units of electricity and 50 units of heat with only 100 units of fuel. Losses amount to 15 units of energy. With conventional generation, the losses are more substantial: 165 units of fuel are needed to produce the same amount of useful electricity and heat, with total losses of 80 units of energy.

Integrated systems for cooling, heating and power (CHP) systems significantly increase efficiency of energy utilization, up to 85%, by using thermal energy from power generation equipment for cooling, heating and humidity control systems. These systems are located at or near the building using power and space conditioning, and can save about 40% of the input energy required by conventional systems. In other words, conventional systems require 65% more energy than the integrated systems, as shown in the above diagram.

Commercial buildings, college campuses, hospital complexes, and government facilities are good candidates for benefiting from integrated systems for CHP for buildings.



Many benefits to building owners for deploying CHP systems for buildings include the following:

Reduced energy costs

Building owners can reduce their energy costs by deploying CHP systems because compared to conventional systems these systems provide the following advantages:

  • Increased energy efficiency
  • Reduced demand charge
  • Reduced peak electric energy costs

As discussed in the section on Basics, CHP systems can offer much higher energy efficiency than conventional stand-alone equipment items for similar degree of power reliability, comfort cooling, heating and indoor air quality. Because of the higher energy efficiency of the CHP system, it consumes nearly 40% less fuel than conventional systems. The reduced fuel consumption can significantly reduce energy costs.

The cost of electricity to buildings is generally based on power demand (measured in kW) and electric energy usage (measured in kWh). The power demand charge is generally a monthly charge ($/kW) based on the peak/maximum power used during a month for a specified period, generally 15 minutes to 30 minutes. Power demand charge rates can vary with time-of-year. CHP systems reduce power demand in two ways: 1) by generating some of the power at site, and 2) by using thermal energy from power generation equipment, instead of electricity, for operating cooling, heating and/or humidity control equipment.

The charge for electric energy usage generally varies with the time-of-year and the time-of-day. This charge is the highest during peak periods, generally from 9AM until 3PM, and the least during off-peak period, generally from midnight until 7AM. Therefore, primary reduction in electric energy cost savings for using CHP systems comes from avoiding purchase of electric energy during peak periods.

Reduced life-cycle costs

Even though the initial cost of CHP systems for buildings is higher than purchasing all electric power needs and using conventional chillers and boilers for cooling, humidity control and heating needs, the life-cycle cost of the CHP systems is often lower because of the energy cost savings over its useful life of more than 20 years.

Attractive return on investment

As discussed above, on an overall basis, CHP systems can reduce energy costs for buildings. If the incremental installed cost of CHP systems over conventional systems is treated as an investment, and the annual savings in its energy costs are treated as the return on that investment, the return can be very attractive.

Improved power reliability

Economic losses due to power outages in the U.S. have cost American businesses billions of dollars. The following table shows the economic impact of power outages on some industries.

Industry Average Cost of Power Outage,

Brokerage Operations  


Credit Card Operations


Airline Reservations     


Telephone Ticket Sales


Cellular Communications


Since CHP systems generate power on-site or near-site, these systems improve power reliability by either reducing or eliminating a building's dependence on the electric power grid, and by providing an additional power option to the building. Also, because CHP systems are located at or near buildings, power outages experienced because of losing a distribution line are improbable.

The higher the number of buildings that use CHP systems, the lower the demand on the electric grid will be. In areas where the grid is at or near capacity, the reduced demand provided by CHP will result in increased grid reliability.

Improved economics for enhancing indoor air quality

Controlling humidity of indoor air is an important aspect of enhancing indoor air quality in building. It is important to keep humidity in the indoor air to below 60% to prevent growth of mold, mildew and bacteria.

Traditionally, humidity reduction is accomplished using chillers that lower the temperature of incoming air to below the dew point temperature and condensing out the moisture and then sometimes reheating the air to bring it back to a comfortable temperature. This approach requires a lot more energy than using a desiccant system that reduces humidity without reducing air temperature.

Desiccant systems use a medium that directly removes the moisture from the air and then uses low-energy heat to regenerate the medium so that it can be reused. The heat available from the exhaust gases of power generation equipment in the CHP system can be used to regenerate the desiccant. Therefore, deployment of CHP systems that incorporate desiccant systems, improve the economics of enhancing indoor air quality.

Improved environmental quality

Integrated systems for CHP for buildings improve efficiency of energy utilization to as much as 85% compared to that of about 35% for conventional systems. Increased efficiency of energy utilization decreases the amount of fossil fuel consumed per unit of energy used and leads to 45% reduction in air emissions compared to conventional centralized power plants.

Also of increasing interest, is the relationship of indoor air quality to our health. In order to prevent the growth of mold, mildew and bacteria, it is important to keep humidity in the indoor air to below 60%. CHP for buildings can help improve indoor air quality by supporting the use of a desiccant dehumidification system to dry the air. Desiccant systems use a material that directly removes the moisture from the air then use heat, such as that provided by the exhaust gases of the power generation equipment in the CHP system, to regenerate the desiccant. This provides a very energy efficient and cost effective method of dehumidifying indoor air, rather that using an air conditioner to "over cool" the air to remove humidity.

Reduced energy consumption

As discussed above, integrated systems for CHP for buildings increase efficiency of energy utilization from 51% for conventional power generation systems to as much as 85%. Therefore, the use of these systems reduces the consumption of fossil fuels, for a unit of energy required for a building, by about 40% of that used by conventional systems. In other words, conventional systems require 65% more energy than the integrated systems, as shown in the diagram in the section on basics. This is important for prolonging the period of availability of our scarce fossil fuel resources (natural gas, oil and coal) and reducing our dependence on imported fuel and on nuclear energy.

Homeland Security

Besides the lost revenues, hazardous conditions, and inconveniences, a major blackout, similar to that which occurred in August 2003 in the northeastern part of the U.S., represents a threat to homeland security. High-voltage transmission centers and large central power plants have already been identified as vulnerable targets for terrorist attacks. Therefore, all systems that reduce the potential for future major blackouts or reduce the impact of such blackouts improve homeland security.

Since overloading of grids is one of the primary reasons for major blackouts, CHP systems improve homeland security because the facilities that use CHP systems generate some power on-site and thus, reduce the load on the electric power grid. Since CHP systems also reduce our dependence on large-capacity central generation plants, these systems improve homeland security by reducing the impact if a large central power plant is shutdown.

In the event of a major gird failure or the loss of a large capacity central generating station, for any reason, including a terrorist attack, CHP systems reduce the impact of such failures because the facilities that use CHP systems can continue to operate to the extent of their on-site generation capacity. For example, during the August 2003 blackout, over 30 hospitals in the region that use CHP systems were able to continue some level of routine operations.




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