Financial risks

The risk associated with investment in and construction of a CHP plant is primarily the risk associated with the underlying power generation technology. In most cases these technologies are proven and established and the technical risk should be extremely low. Newer technologies such as fuel cells are less well established and they do present a higher risk but for most applications the established technologies are going to be the most appropriate.

There can be some economic risk when CHP is being used in a situation where it has not previously been employed. Under these circumstances, heat and power demands need to be accurately assessed as well as the cost of installing and maintaining the CHP plant. A simple means of deriving the economic attractiveness of such an investment is to calculate the payback period. How long will it take to repay loans and recover the capital cost in savings from the new installation? If this is significantly less than the lifetime of the installation then the investment looks sound.

As with all power plant installations, the economics of CHP depend on the cost to install the power plant and the cost of the fuel. Table 5.2 lists the capital costs of the main CHP technologies. The figures in the table are applicable in the USA. Elsewhere, costs could vary. However they provide a useful means of comparing the different technologies.

As figures from Table 5.2 indicate, the gas turbine CHP plant is the cheapest overall, with installation costs in the range from $700 to $900/kW.

Table 5.2 CHP costs

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