Cogeneration, also known as Combined Heat and Power (CHP), is the on-site production of two kinds of energy – usually electricity and heat – from a single source of fuel. Cogeneration often replaces the traditional method of acquiring multiple forms of energy, such as purchasing electricity from the power grid and separately burning natural gas or oil in a furnace to produce heat or steam.While the traditional method of purchasing electric energy from the grid is convenient, it is very inefficient and wastes more than two-thirds of the energy in the original fuel due to production and transportation losses. Utility customers, of course, pay for those losses in their electric rates – and always have.On-site cogeneration systems not only generate electricity more efficiently than central power stations (40-percent efficient vs. less than 30-percent efficient), they capture and use nearly all of the heat that is normally wasted by central power stations. Depending on the application, the integration of power and heat production into one on-site cogeneration system can often produce savings of up to 35 percent on total energy expenditures. If your facility is a big energy user, installing a cogeneration system can pay those kinds of savings in less than 10 years.When considering choices, ask yourself the following questions:Is your facility a candidate for cogeneration?The first step in deciding whether a cogeneration system is right for your facility is to perform a brief analysis of your energy use. This analysis can be reduced to a few simple questions. If you answer “Yes” to all the questions, then you may be a good candidate for a more comprehensive analysis.Have you taken all reasonable steps to reduce both electric and heat energy consumption at your facility?Obviously, if you can make improvements in the way you use energy in your facility, these will translate into lower operating costs and perhaps reduce the size of the cogeneration system needed and your investment.Is the average electric load at your facility greater than 100 kW?While CHP systems incorporating smaller generators are available, facilities with larger energy needs can generate proportionately larger savings and a shorter payback period. To make sure your CHP system is running at full capacity most of the time, only plan on generating a portion of your total electric and thermal needs. You’ll still need a utility connection to supply some portion of your load and an on-site boiler to handle peaks in your thermal demand.Is the average thermal load at your facility equivalent to 1 million BTU/hr or more?This could take the form of low-pressure steam, hot water, an absorption chiller load – or a combination of all three. Facilities with a greater thermal load than an electrical one may find that a bank of microturbines or a single large gas turbine offer a better ratio of heat output to fuel input than reciprocating engine-driven generators. On the other hand, excess electrical power is a salable commodity that can often be fed back into the grid for additional savings. Heat production is necessarily restricted to on-site or district heating use. Excess heat is usually released as waste heat, lowering overall efficiency.Is the duration of your simultaneous need for heat and electric power greater than 4,000 hours per year?While some applications are feasible when simultaneous electric and thermal demand is around 2,000 hours per year, economics favor systems that operate at least half the year. Thermal processing loads tend to be rather constant; whereas, space heating or space cooling loads tend to be alternately seasonal. Facilities with substantial space heating needs in the winter and space cooling needs in the summer are generally good candidates for CHP systems.Are local electric rates high in relation to the local cost and availability of natural gas?Known as the “spark-spread,” the greater the differential between the price of electricity and the price of natural gas (on an equivalent BTU basis), the greater the likelihood that a CHP system will provide substantial savings. Also, if you envision installing an on-site generator capable of producing more electric power than can be consumed on premises, it helps to be serviced by a utility that buys excess power fed back into the grid.Is your physical site suitable for the installation of a CHP system?You’ll need sufficient space to house the generators, heat-exchangers, switchgear, and control systems. Small systems can be located outdoors in special drop-over or ISO-type containers; however, larger systems may need their own room or freestanding building. There should also be a supply of natural gas to the facility; or, in the case of diesel engine driven systems, sufficient fuel storage capacity on-site. Environmental factors should also be considered, such as state and local air quality standards and noise ordinances relating to engine exhaust and cooling fans.Is electric service reliability a major economic concern?Many businesses today need electric service with reliability nearing 99.9999 percent – the so-called Six Sigma goal. In many areas of the country, utilities are incapable of delivering that kind of reliability on a regular basis. In contrast, on-site CHP power systems, when designed with sufficient redundancy, standby generators, and Uninterruptible Power Supply (UPS) systems, offer significantly better reliability than local utilities. They are less vulnerable to storm damage, transformer, or transmission line failures, and, with proper maintenance, will offer decades of reliable operation.If your answers to these questions are affirmative, then your facility is a likely candidate for a CHP system. The next step in determining the viability of a CHP system for your facility is to do a simple cost analysis and calculate the number of years for such a system to pay for itself.Factors that should go into the calculation are:Average retail electricity costs per kWh.Cost of natural gas (or diesel) per million BTU.Number of anticipated hours of operation per year.Installed cost of the CHP system per kW of capacity (electrical and thermal).Based on various formulas, these numbers combine to yield an annual cost savings and payback period.Tom Easterday is director of Gas Business at Cummins Power Generation (http://www.cumminspowergeneration.comminspowergeneration.com), Fridley, MN; (800) 888-6626.