Cogeneration versus natural gas steam boiler: A techno-economic model

Energy usage can constitute a substantial operational expense for corporations. To reduce expenses, corporations may seek out decentralized solutions for generating electricity, based on sustainable energy or on conventional energy resources. The main goal of this research is to resolve an organization's dilemma regarding whether to adopt a cogeneration system or to replace a conventional diesel steam boiler with a boiler fueled by natural gas. We analytically calculate the total expected initial setup and operational costs under the two models, and determine which model is preferable. We numerically show that implementation of a cogeneration system may yield rapid return-on-investment and may lead to cost sayings of more than 25%, as compared with the conventional system. However, low electricity tariffs or high operation costs lead to slower return-on-investment and the conventional model becomes significantly better for short-term processes. Furthermore, low uncertainty of steam demands leads to profitability of the cogeneration model. On the other hand, if the total expected demand of one type of product (electricity or steam) is significantly greater than that of the other, then the conventional model becomes preferable. (C) 2014 Elsevier Ltd. All rights reserved.