CHP Performance Management

Issue 4 and Volume 115.

The secret to long-term savings and achieving maximum plant efficiency

By Michelle Kleiber-Viglione, Division Manager of Asset Operations, EPS Corp.

Editor’s note: This article was selected for a Best Paper Award at POWER-GEN International in Orlando last December. This is part of our occasional series of publishing outstanding papers from the conference.

Faced with competitive pressures to cut costs and reduce carbon emissions, owners and operators of industrial and commercial facilities are actively looking for ways to use energy more efficiently. As electrical prices rose in recent years, the allure of combined heat and power (CHP) grabbed many people’s attention.

CHP, also known as “cogeneration” or “distributed generation,” is the simultaneous production of two types of energy—thermal and electricity—from one fuel source, most often natural gas, or in some cases biogas derived from methane producing waste by-products from the manufacturing process. The ability to create two forms of energy from a single source offers tremendous efficiency and thus both cost savings and environmental benefits if managed correctly.

Facilities with cogeneration systems use them to produce their own electricity and use the unused excess (waste) heat for process steam, hot water heating, space heating and other thermal needs. They may also use excess process heat to produce steam for electricity production.

A typical small cogeneration system consists of an engine, steam turbine or combustion turbine that drives an electrical generator. A waste heat exchanger recovers waste heat from the engine and/or exhaust gas to produce hot water and/or steam. Cogeneration produces a given amount of electric power and process heat with 10 to 30 percent less fuel than it takes to produce the electricity and process heat separately.

CHP, when properly developed and managed, can provide very compelling financial results and operational advantages for industrial facilities compared to conventional methods, including:

  • Increased energy efficiency: generating energy with less input fuel
  • Reduced demand charge from the local utility
  • Reduced peak electric energy costs
  • Lower greenhouse gas emissions
  • Having a secondary or back-up supply of energy when necessary in some cases. 

The “Green Button” Theory 

While the promise of cogeneration is quite attractive, small to medium CHP systems often fall short of the expected benefits because many industrial owners/operators do not understand and address the complexities of these operations.

Many new CHP owner/operators are running their plants under the Green Button Theory, a belief that the only requirements for a successful CHP are:

  • Engineer and construct the plant
  • Push the start button
  • Reap the benefits of a completed CHP. 

Operating on this false premise, many businesses do not adequately plan for the extensive maintenance requirements and ongoing capital investments necessary to achieve maximum efficiency in their CHP plants, causing the savings to erode over time. As this happens, many CHP owners become frustrated with the results, try insufficient “quick fixes” and in some cases choose to turn off their plants and go back to the grid. This is an unfortunate situation that, with some appropriate attention and simple changes, can easily be avoided. 

Eliminating the Performance Gap 

The performance gap between a CHP running at maximum efficiency vs. an inefficient one can be quite significant. For example, equipment availability on reciprocating engines at a well-run CHP plant is typically in the 92 to 94 percent range, whereas many plants in the industry are operating at levels in the 70 to 75 percent range. A gap of this size can be a key contributor to a CHP’s failure to deliver the desired performance results and financial savings.

Yet a low-performing plant, even one with older equipment, can be turned around. As an example, a CHP plant at a manufacturing facility on the East Coast was able to improve from a 70 percent availability figure on its engines to consistently operate at 88 percent by making appropriate changes to the way it operated and maintained the facility. Similar impressive results have been achieved at cogeneration facilities that had been shut down due to poor performance.

What is the secret to achieving maximum efficiency at CHP plants so they deliver or even exceed the target savings levels? How do you turn around an existing sub-performing cogeneration plant?

The answer, as with any well-run manufacturing facility or piece of equipment, is to properly design, manage and maintain the plant with the appropriate level of attention and focus. Specifically, the following are some of the key variables that differentiate the most efficient CHP facilities from the sub-performing ones:

  • Design the plant with operations and maximum efficiency in mind
  • Adopt the right mindset about your CHP
  • Develop a data-driven operations plan
  • Measure and track performance in real-time
  • Properly trained and accountable personnel
  • Operate using a continuous improvement approach
  • Conduct preventative maintenance regularly. 


For companies that are just considering adding a CHP facility, the process of maximizing the performance starts before the plant is even built. You want to design the facility with operations and maximizing cost saving benefits in mind. Yet more often than not, the developer of the project takes a 30,000-foot approach, which usually does not consider the daily operations. This can be easily addressed by including the CHP operation team or people who have proven expertise at running a CHP facility early in the development and construction planning.

The following are some key issues to consider with regard to optimal design:

Develop a system with realistic goals and expectations. Many companies make the mistake of opting for larger engines or turbines than necessary. Yet bigger is not always better; a larger plant operating at reduced capacity usually experiences efficiency short-comings. So companies considering a CHP should take a closer look at their load profiles, in particular the seasonal fluctuations and the variations tied to different production shifts, rather than relying just on average load factors.

Make sure the modeling for the CHP is correct. Understanding the electrical and thermal demand requirements is critical. Historical utility demand requirements over a long time period at small time intervals is essential to the accurate design and sizing.

Design redundancy into the system as backup for critical auxiliary equipment and design and configure the plant to allow for easy access to the equipment. Providing a reasonable access component to the design will keep maintenance costs and downtime low. This may add more cost upfront but will reduce life-cycle costs. Many pieces of large equipment need to be removed during the life cycle of the equipment for repairs, including the engine and/or turbine. 

Mindset and Approach 

The first critical factor to turning around an existing cogeneration facility or starting your operations on the right foot is to change the way you look at CHP. Instead of viewing it as just another piece of equipment that supports the manufacturing process throughout the facility, think of the CHP as its own manufacturing plant, which produces electricity, steam and/or hot water.

The operator must look at their plant as the primary source of these products, as if the CHP plant is the utility, making it mission critical to the manufacturing operations. By changing this mindset the team starts looking at the plant differently. When one starts viewing the plant as a small isolated manufacturing plant, then lean manufacturing principles can be deployed. 

Data-driven Operations Plan 

The next step is to develop and implement a robust operation plan. Despite the large investments made in developing and constructing a CHP plant, surprisingly many companies (particularly those that were set up under the green button theory) lack a solid operating plan on how to actually run them.

The starting point for the new plant owner or operator to develop the operating plan is to understand what criteria were utilized in the initial CHP pro-forma. The assumptions made are components for laying out the specifics of the operation plan in a manner to maximize the savings and meet financial expectations.

In more efficient CHPs, the first year of the plan will be developed off the proforma specifications and assumptions with the utility tariff being the base. Knowing the key times that electrical rates change and how each utility’s demand structure is critical to developing a plan that is appropriate to your CHP and that will in turn maximize the savings. Equally important, your operating plan must also factor in the host plant’s manufacturing schedule and load profile.

The operation plan should include at a minimum the following data metrics broken out by month: Equipment availability, plant load availability, dispatch factor, electrical and thermal production goals, demand goals and financial goals.

With all these components, it is easy to see that the operation plan becomes a living document that changes as the profile of the plant changes. It is easy to make small adjustments during the year if the operator is managing all aspects of the plant, not just the mechanical components of the plant. They must know when the plant utilizes all the steam, the daily profile of their electric load.

Another important aspect that the operations plan needs to also address is the best time to do predictive and preventative maintenance. The question needs to be asked when one can schedule the monthly, semiannual and annual maintenance events in a manner that has the least impact on savings. An annual maintenance schedule needs to be developed around the run time on the equipment, the electrical tariffs schedule and, in some cases, the weather. 

Measure and Track Performance 

Another factor that often separates the well-run CHP plants from inefficient ones is the ability to measure the key performance metrics as outlined in the operations plan in real time. Best practice companies have appropriate meters and software in place that enable them to collect and view the operations and performance metrics that are at the core of the operations plan.

By contrast, many companies that fell prey to the green button theory do not have the ability to capture and track the critical trend data over time as it pertains to the performance of the plant. As a result, they have no idea which steps need to be taken to improve the performance to the desired levels to ensure they are meeting the financial targets that the project was initially approved on. Companies in this situation need to invest in metering and front-end software. Fortunately, this is an area that can be addressed easily and fairly quickly with appropriate energy monitoring software available today. 

Properly Trained Personnel 

Regardless of how well the facility was designed and constructed, you cannot run a CHP operation to maximum efficiency without a properly trained and experienced operator. Whether the operation calls for a part time or full time operator, management needs to invest in training that person in the specifics of effectively running a CHP plant. Management also needs to allocate enough time in that operator’s daily routine, along with the appropriate tools and materials to allow them to do the job effectively. Once the operator is set up properly to do the job and the plant performance targets have been communicated with them, management should hold them accountable for the production metrics of the CHP facility as outlined in the operating plan. 

Continuous Improvement 

Continuous improvement, a key component to Lean Manufacturing, is the continual effort of exposing and eliminating the root causes to problems. Most of the time, it involves many increments or small improvement over time. Metrologies such as failure mode (FMEA), statistical process control (SPC) and total productive maintenance (TPM) can help the team proactively manage the plant.

Once the operation plan is developed, the operator is trained and a front end monitoring is set up, the “infrastructure” for an efficient CHP plant is in place. To achieve a reliable and efficient CHP system, the company must fully incorporate a continuous monitoring approach to the way it operates the facility. Common continuous monitoring capabilities among best practice CHP plants include:

Remote 24-hour monitoring. Key attribute that provides the operator the capability to collect the critical data to make daily operations decisions.

Daily trending and analysis. This enables the operator to continually manage the goals and be proactive in dealing with problems that arise or gaps in performance.

Monthly reports for each system monitored. A key component to detailing the outputs generated by the systems, including electricity, steam and/or hot and chilled water, which will showcase the gaps and give the operation team the ability to adjust operations to mitigate any items that are running out of specification.

Annual performance assessments and plans to address gaps. These are critical so the team can adjust next year’s operation plan for the seasonal trends and gaps that require a more robust solution. An example may be where more items may need to be added to the hot water loop to ensure all the waste thermal energy is used.

Ongoing communications between the CHP operator and the owner or host of the facility. This final point is critical in the successful operation of a CHP plant; it drives a partnership between all interested parties that impact the unit’s successful uptime.

Furthermore, it is important to streamline the day-to-day routines and activities, making sure simple steps are repeatable, thereby minimizing the chance that a small error can bring the system offline. Simple tasks, like unloading urea, require standard operating procedures so environmental regulations can be adhered to and the system in not in jeopardy of being taken offline while completing a routine task during peak performance hours. 

Preventative Maintenance 

Preventative maintenance is without question a critical factor for any CHP plant. If not properly managed, maintenance costs and lost savings due to breakdowns can be a co-gen project killer.

As with other equipment, a solid preventative maintenance program is vital for the long term success of any operation. Instead of planning around just manufacturing schedules, CHP maintenance planning must be done around the utility rate schedules and the manufacturing schedules of the plant so that preventative maintenance is performed at times that minimizes the impact to savings. For example, electricity from the utility during peak hours can cost up to $111/MWh versus $45/MWh off peak, meaning that every minute down during peak hours has a negative impact on the savings. As a best practice approach, each operator should keep a utility rate schedule in the control room for reference so they can plan their preventative maintenance accordingly.

As with any other larger mechanical equipment, things fail outside routine maintenance schedules, or items start fluctuating outside there normal parameters. When these types of issues arise the operator may need to make repairs or adjustment that may risk turning off the engine during off hours. When possible, all work that risks turning the engine off must be completed during non-critical hours. It is also best to have a good inventory of spare parts on-hand at your cogeneration plant so repairs can be done in a timely manner, minimizing down time.

Preventative maintenance events cannot be taken lightly. A poorly planned event can reduce one’s annual savings. Each scheduled maintenance event, small or large, should have a detailed plan in place. An operator should look at it as if they are running a project with a budget and schedule. Unless unforeseen problems are found the schedule needs to be tightly adhered to. Every minute the unit is down, the host is losing money. 

Reducing Cost/Increasing Revenue 

In recent years, CHPs have been able to qualify for some new revenue streams such as Renewable Energy Certificate (REC) accounting systems and forward capacity markets in some regions. These programs were developed to nurture the demand for renewable energy generation. With these vehicles, the clean energy market gives many small to mid-sized CHP operators a way to offset their maintenance costs and fund system wide improvement. In effect this is a like a bonus available to CHP owners, so each CHP plant should look into the opportunities available in their region.

The key to these incremental CHP revenues or cost-offset opportunities is that they are based on the efficiencies of the CHP system. Therefore, the good habits put in place to operate the CHP efficiently, as outlined above, will have a direct impact on a plant’s ability to realize the benefits of these REC and Forward Capacity market opportunities. In effect, they are the icing on the cake of an efficiently run CHP plant.

The promise of cogeneration is alluring. And achieving the full benefits from this source of alternative energy is possible when approached and implemented with the proper mindset and proper level of attention and continuous management. A CHP should be considered its own manufacturing plant, used to support the operations of the entire facility. The key is a systematic, methodical approach that manages the facility to the initial expectations to deliver the desired returns.

A well-maintained cogeneration plant can be extremely cost effective and efficient, but requires well-trained personnel working on it on an ongoing basis and proactively maintaining the engine. In order to properly budget for, plan and manage maintenance, as well as design intelligent procurement strategies for commodities and quantify the return, common metrics must be used. For example, cents/kW and run-hours should be translated into “annualized maintenance costs” for communication to operations. And continuous monitoring is critical. The ability to collect, analyze and act on real-time energy information makes the difference between a successful plant and one that falls victim to the “green button theory.”

With this measured, well-planned approach, the initial promise of a cogeneration plant can be a sustained reality. 

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