A Feasibility Analysis helps you determine if CHP is a viable option not only technically (i.e. will it work) but also financially (i.e. is it worth the investment). It uses a detailed engineering and financial model or spreadsheet that preferably employs hourly load profiles (or at a minimum monthly load profiles and load duration curves).
The first step in a Feasibility Analysis is collecting data on your facility and its energy use. A walkthrough checklist can assist you. If all of the data requested in the walkthrough checklist is not readily available, a minimum of 12 months of electric and fuel bills as well as 12 months of steam use (where applicable) should be collected. (Note that bills for both delivery service for gas and electric and the commodity should be obtained - two sets of bills for each utility service.) The U.S. DOE CHP Technical Assistance Partnership can help you (at no charge) to analyze the results of your data collection.
A Feasibility Analysis typically involves:
- Electrical load profiling
- Thermal load profiling
- New utility rate structure analysis
- Unit sizing
- Thermal use determination (what to do with the heat)
- Installation cost estimations
- Permitting impacts
- Utility interconnection requirements
- Financial calculations (simple payback, ROI, etc.)
- Financing option availability
- Analysis of different ownership structures with recommendations as to project structure
- Discussion of design/construction models
All of these facets can be combined to create an hour-by-hour model of the output of a potential CHP system. The hourly fuel consumption, electrical output, useful thermal output, and the value of that output can then be calculated. This resulting cost/savings information can then compared to what your facility would pay if the CHP system were not installed.
This analysis can be used to determine if investing in CHP will meet your facility's long-term goals. Various financing options can be explored at this point to tailor the project to meet your goals.
The output of the Feasibility Analysis normally includes a detailed report on savings, installation costs, simple paybacks, cash flow, rates of return, and a conceptual one-line design including equipment sizing. Accuracy should generally be within 10-30%.
The U.S. DOE CHP Technical Assistance Partnership can provide this level of feasibility study, typically requiring a 25% cost share. Alternately, you can do an analysis yourself (for instance, using the free downloadable RETScreen software) or engage an engineering company with a CHP/energy efficiency specialty.
If the results of the Feasibility Analysis look promising, you would next continue to an Investment-Grade Analysis.
Next - Investment-Grade Analysis >