Energy and Power Engineering, 2011, 3, 630-640 doi:10.4236/epe.2011.35079 Published Online November 2011 (http://www.SciRP.org/journal/epe) Copyright © 2011 SciRes. EPE A Comparative Study of the Economic Feasibility of Employing CHP Systems in Different Industrial Manufacturing Applications Chad A. Wheeley, Pedro J. Mago, Rogelio Luck Department of Mechanical Engineering, Mississippi State University, Oktibbeha County, USA E-mail: wheeley@me.msstate.edu Recieved August 26, 2011; revised September 29, 2011; accepted October 5, 2011 Abstract Extensive research work including multiple methodologies and numerous simulations have been completed in order to determine the economic effectiveness of employing CHP at commercial and residential sites. In contrast to the above, very few attempts have been made to develop methodologies to study the feasibility of CHP systems at industrial manufacturing facilities. As a result, practical opportunities for CHP at industrial sites are often not realized or even investigated. It follows that there is a need in the CHP related literature for an analysis that is explicit and yet general enough to determine the economic viability and potential for success of CHP systems at industrial manufacturing facilities. Therefore, the purpose of this paper is to clearly outline a methodology to determine the economic effectiveness of installation and operation of a CHP system at industrial facilities that have a need for space or process heating in the form of steam. The effect on the CHP system economic performance of several parameters, such as the project payback, internal rate of return, net present value, etc., are considered in the proposed methodology. The applicability and generality of the methodology is illustrated by examples including four different manufacturing facilities. The effects of the variability of factors such as annual facility operational hours during which both process heat and elec- tricity are needed, facility average hourly thermal load, cost of utility supplied electricity, and CHP fuel type and associated fuel cost, on the outcome of the economic analysis are also examined. Keywords: CHP Systems, CHP for Industrial Manufacturing Facilities, Economic Feasibility Study 1. Introduction When considering a base-load combined heat and power (CHP) system for an industrial manufacturing facility, a number of different parameters must be examined and addressed before one can determine its estimated eco- nomic viability and potential for success. The most widely accepted parameter that is used to estimate the feasibility of any proposed CHP project is known as spark spread, which is essentially the difference in the cost of utility supplied electricity and the fuel cost asso- ciated with production of electricity on site [1]. A spark spread of $12/MMBtu ($0.041/kWh) is typically consid- ered to be the threshold that is representative of an eco- nomically attractive CHP project, meaning that projects that exhibit spark spreads in excess of $12/MMBtu ($0.041/kWh) will have a good potential for low payback periods and overall economic success [1]. Graves et al. [2] developed a more sophisticated method that incorpo- rates generator heat rate, thermal recovery efficiency, equipment cost, and acceptable payback period, allowing for a more accurate indication of CHP viability. In a similar manner, Smith et al. [3] developed a detailed model, based on the spark spread, which compares the electrical energy and heat energy produced by a CHP system against equivalent amounts of energy produced by a traditional, or separate heating and power (SHP), system. In addition, they introduced an expression for the spark spread based on the cost of the fuel and some of the CHP system efficiencies as well as an expression for the payback period for a given capital cost and spark spread. However, for industrial manufacturing facilities, in addition to the spark spread, there are other factors that must be considered when analyzing the economic feasibility of a CHP system, such as the type of prime mover, the fuel availability and cost, operation hours, among others. Typically prime movers used in manufac- turing facilities include, but are not limited to: steam