Combined Heat and Power Systems

This page last reviewed April 23, 2010


Combined heat and power (CHP) systems, also referred to as cogeneration, generate electricity and useful thermal energy in a single integrated system.  By simultaneously reducing fuel requirements for on-site generators and centralized electricity generation, CHP systems represent the most energy-efficient and cost-effective form of distributed generation.  Conventional distributed generation is inherently inefficient, converting only about one-third of a fuel's chemical energy into usable energy with the balance lost in the form of heat.  By producing both electricity and usable heat, CHP systems convert as much as 90 percent of a fuel's chemical energy into usable energy, resulting in cost savings and significant greenhouse gas emission reductions.  A well-designed and operated CHP system will provide much better efficiency than centralized power generation, leading to energy and cost savings and reduced greenhouse gas emissions.

The development and use of additional CHP systems would primarily affect California's commercial, institutional, and industrial sectors.  There are 9,130 megawatts (MW) of active CHP systems operating at 776 sites in California, with the largest share of CHP capacity used in the oil fields for enhanced oil recovery.  Half of the State's existing CHP capacity consists of larger systems concentrated in the food-processing, refinery, metal processing, pulp and paper, and chemical production industries.  Two-thirds of the remaining market potential for CHP systems in California is estimated to be available in the commercial and institutional sectors, with the most potential in education, office, health care, and hotel facilities.  Much of the remaining CHP market potential is also expected to be comprised of smaller systems.

Based on the capacity and number of existing CHP systems operating in California, increasing the state's CHP systems capacity by 1,966 MW would potentially involve 165 additional businesses and institutions (2005 Integrated Energy Policy Report).

In addition to the entities that develop and use CHP systems in their facilities, the energy savings of increased CHP could potentially affect power generation, service, and transmission providers, load serving entities, irrigation districts, and other electricity service providers.  Additional CHP system development could also potentially affect the administrative and regulatory responsibilities of several state agencies, including the California Energy Commission (CEC), the California Public Utilities Commission (CPUC), and the California Integrated Systems Operator (Cal-ISO).

In addition to the energy cost savings and greenhouse gas emission reduction benefits, the development and use of additional CHP systems in California offer numerous other environmental and power generation/distribution benefits:

  • Provide an alternative to new central station fossil-fuel generation and reduce the need for new transmission and distribution infrastructure.
  • Improve the efficiency, reliability, and security of the State's electricity system and reduce losses at peak delivery times.
  • Provide valuable protection against supply outages and brownouts, especially at oil refineries.
  • Provide more efficient fuel use, reduced energy costs, and the most efficient and cost-effective form of distributed power generation.