The Electrical Cost Threshold As a Measure of Economic Viability for Combined Heating and Power Applications
DOI:
https://doi.org/10.13052/dgaej2156-3306.2622Keywords:
Spark spread, CHP, economic viabilityAbstract
“Spark spread” refers to the difference between the cost of electricity and the cost of fuel on a per-MMBtu basis. This metric is often
used when considering the economic feasibility of Combined Heat and
Power (CHP) systems. A spark spread of at least $12 per MMBtu is considered the threshold for economic viability of CHP systems. However,
this study shows that increases in the electric or fuel utility rates have
an impact on the spark spread required to achieve economic viability
of a CHP project. This challenges the paradigm that a single value for
spark spread can be used as a “rule of thumb” for determining the
economic viability of CHP projects. There are five factors that must be
considered when using the spark spread threshold: (1) thermal energy
cost, (2) thermal energy recovery efficiency, (3) generator heat rate, (4)
installed equipment cost, and (5) desired payback. The combination of
these values into an electrical cost threshold provides a more reliable
indicator of the economic viability of a CHP system for a first-order
analysis. The minimal effort spent on better-defining the electrical cost
threshold is well worth the avoided cost of a CHP load analysis for a
system that turns out to have marginal economics.
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