Economic justification of cogeneration systems for industrial steam users and utility systems

Abstract

Cogeneration can provide attractive investment options to energy intensive process industries. The economic assessment of cogeneration must adequately consider both industry and utility viewpoints and roles. The paper presents a novel technique to study the economic justification of cogeneration systems for industrial steam users and utility systems. An adequate analytical and statistical model is developed to simulate the dynamic nature of loads by representing the daily chronological data of the steam and electric demands by probability distribution functions instead of the currently used central estimates. It is necessary to use probability functions since the use of central estimates could lead to opposite decisions. Production simulation models are used to simulate the optimum operation problem of different cogeneration alternatives and the utility generation systems. A long term cash flow analysis is employed to provide economic measures of project worth such as the net benefit/investment ratio for industry and the net annual cash flow for the utility. Sensitivity analysis for the most significant parameters in the economic evaluation is performed to justify the optimum cooperative strategy between industry and utilities which can lead to the implementation of the optimum cogeneration systems.