Combined heat and power (CHP) refers to generating electricity at or near the building where it is used, and then "recycling" the waste heat and using it for space heating, water heating, process steam for industrial steam loads, humidity control, air conditioning, water cooling, product drying, or for nearly any other thermal energy need. The end result is significantly more efficient than generating cooling, heating, and power separately.
The heat from most conventional large-scale power plants is wasted. This is because electricity can be sent over long distances but the heat cannot. And since power plants are typically located far from population centers and far from buildings that could beneficially use the heat, that thermal energy is instead just vented to the surrounding environment.
On the other hand, small-size power plants can be located close to or even within facilities which can make good use of the heat resulting from electricity generation, thereby raising the net efficiency of generating electricity by a factor of two or more and saving substantial energy and money.
To make them most economical and practical, CHP systems need to have a relatively high and constant thermal load so it can match the heat output of the generation process. Generally, it is most cost-effective to size CHP systems to supply the facility’s “base” heating load rather than to size the system based on the electrical load. Keep in mind that in addition to supplying heat for hot water, low pressure steam for heating, sterilizing, and sundry industrial needs, CHP systems can also supply cooling energy via absorption chilling equipment.
Most sites stay connected to the utility grid for back-up power during periods of maintenance or malfunction, although the utility charges standby fees for this. A number of sites also sell their electricity back to the grid when generating more than is needed.
In Colorado and four other western states, the US DOE Intermountain Clean Energy Application Center provides free feasibility analysis, technical assistance, and expert advice, as well as information on available grants and incentives. The EPA CHP Partnership is another good resource.
Financial assistance can often be found for installing CHP systems, since they have substantial energy efficiency benefits. The DSIRE Database is a good place to search for funding opportunities for CHP and other energy efficiency measures.