Combined heat and power (CHP), also called cogeneration, produces electricity and useful heat from a single fuel source on site. A conventional power plant rejects most of the fuel's energy as waste heat. A CHP system captures that heat and uses it for space heating, domestic hot water, process loads or absorption cooling.
Because both outputs are used, overall fuel utilization can reach roughly 65 to 85 percent, compared with the separate purchase of grid electricity and boiler heat. Whether that translates into cost savings or carbon reductions depends heavily on the facility's load profile, local utility rates and, in Canada, the carbon intensity of the provincial electricity grid.
How CHP works
A CHP system has three main parts:
- A prime mover that burns fuel, usually natural gas, and drives a generator.
- Heat recovery equipment that captures heat from engine jacket water, lubricating oil and exhaust gases.
- Integration with the building's electrical service and heating system, including controls, switchgear and thermal storage where used.
Prime mover types
| Prime mover | Typical size range | Recoverable heat | Notes |
|---|---|---|---|
| Reciprocating engine | Tens of kW to several MW | Hot water from jacket and exhaust | Most common in commercial buildings; good part-load performance |
| Microturbine | About 30 kW to a few hundred kW (modular) | Hot water or low-pressure steam from exhaust | Low emissions, fewer moving parts, lower electrical efficiency |
| Gas turbine | About 1 MW and up | High-temperature exhaust, steam | Common on campuses, hospitals and district plants |
| Fuel cell | Tens of kW to MW | Low to medium temperature water | High electrical efficiency, high capital cost |
For most commercial facilities, reciprocating engines dominate because they offer good electrical efficiency at modest sizes and deliver hot water at temperatures suitable for building heating systems.
Which facilities suit CHP
CHP pays off when a building has a steady, simultaneous demand for electricity and heat for a large number of hours each year. Good candidates usually share these traits:
- Long operating hours, often 24/7
- A year-round heat load, not just winter space heating
- Significant electrical base load
- A need for resilience or on-site power during outages
- High electricity prices relative to natural gas prices
Typical examples include hospitals, long-term care homes, universities and campuses, large hotels, indoor pools and recreation centres, multi-unit residential buildings with central domestic hot water, and some industrial and food processing facilities. A typical office building, with a short heating season and low summer heat demand, is rarely a strong candidate on its own.
Sizing: follow the thermal base load
The most common sizing approach is to size the CHP unit to the facility's thermal base load, so that all recovered heat is used most of the time. If the unit is sized for peak heating, it will either run at low load for much of the year or reject heat it cannot use, destroying the efficiency advantage.
A practical process:
- Gather at least a full year of interval electricity data and monthly or interval gas data.
- Separate heating loads into space heating, domestic hot water, process and any reheat.
- Build an hourly thermal load profile and a load duration curve.
- Select a unit whose recoverable heat output matches the load the facility uses for most hours of the year, typically several thousand hours or more.
- Check that the electrical output can be used on site, or confirm the export arrangements with the utility.
Thermal storage, such as a hot water buffer tank, can smooth short-term mismatches between heat production and demand, and lets the unit run longer at efficient load.
Economics: the spark spread
The financial case for CHP depends on the spark spread: the difference between the value of the electricity generated and the cost of the fuel needed to generate it, after credit for the useful heat that displaces boiler fuel.
Key factors in a Canadian feasibility study:
- Electricity rates, including demand charges, time-of-use structure and any standby charges the utility applies to customers with on-site generation
- Natural gas price and its expected trajectory, including the federal and provincial carbon pricing that applies to fuel
- Avoided boiler fuel from recovered heat
- Maintenance costs, typically quoted per kWh generated, including scheduled engine overhauls
- Capital costs, including the unit, heat recovery, electrical interconnection, emissions controls, structural work and ventilation
- Incentives from utilities or governments, which vary by province and change over time
Provinces differ sharply. Where electricity prices are high and gas is relatively cheap, CHP may show attractive paybacks. Where electricity is low-cost, the case is weaker. A life-cycle cost analysis over 20 years or more, with sensitivity to energy prices, is the right tool.
Carbon: it depends on the grid
CHP burns fossil fuel on site. Its carbon benefit depends on the emissions intensity of the grid electricity it displaces.
| Grid profile | Typical provinces | CHP carbon effect |
|---|---|---|
| High fossil share | Historically Alberta, Saskatchewan, Nova Scotia | Can reduce total emissions compared with grid power plus boilers |
| Mostly hydro and nuclear | British Columbia, Manitoba, Quebec, Ontario (largely) | Usually increases emissions compared with grid power, especially versus heat pumps |
Provincial grid intensities are changing as coal is phased out and renewables grow, so a CHP system that reduces emissions today may not over its full life. Owners with net-zero or carbon reduction commitments should compare CHP against electrification options such as heat pumps and heat recovery chillers. Our guide to embodied and operational carbon discusses how to account for this.
Some facilities are exploring renewable natural gas or hydrogen blends as future fuels, but availability and cost should be confirmed before relying on them.
Design and code considerations
- Gas installation: CSA B149.1 governs natural gas piping and appliance installation. The authority having jurisdiction for gas, often a provincial safety authority, must approve the installation.
- Electrical interconnection: parallel operation with the grid requires utility approval and protection systems under the Canadian Electrical Code and the local utility's interconnection requirements.
- Emissions: provincial or municipal air permits may apply to engines and turbines, depending on size and location.
- Noise and vibration: engines need acoustic enclosures, vibration isolation and careful exhaust silencing.
- Ventilation and combustion air: plant rooms must provide adequate combustion and cooling air.
- Heat rejection: a dump radiator is usually needed so the engine can run when heat demand is low, but frequent use signals oversizing.
- Resilience: if the unit is to provide power during outages, it needs black-start capability and islanding controls. Life safety loads still require code-compliant emergency generators.
Operation and maintenance
CHP units require regular maintenance: oil changes, spark plugs, filters, valve adjustments and periodic overhauls based on operating hours. Many owners use long-term service agreements with the manufacturer or a specialist. Monitoring electrical output, heat recovered, fuel input and run hours lets you calculate actual efficiency and confirm savings, ideally using an M&V approach.
Frequently asked questions
Can CHP provide cooling?
Yes. Recovered heat can drive an absorption chiller, a configuration sometimes called trigeneration. It is most useful where summer heat demand is low but cooling demand is high, although absorption chillers have low COPs compared with electric chillers.
What is a realistic payback for CHP?
It varies too widely by province, rates and load profile to quote a general figure. A feasibility study using your facility's interval data and current utility tariffs is required.
Does CHP replace the need for boilers?
No. Boilers are still needed for peak heating and for backup when the CHP unit is down for maintenance.
Key takeaways
- CHP generates electricity and captures waste heat on site, with overall fuel utilization typically in the 65 to 85 percent range.
- It suits facilities with long operating hours and steady, simultaneous electrical and thermal loads.
- Size the unit to the thermal base load so recovered heat is actually used.
- Economics depend on the spark spread, utility standby charges, maintenance and incentives, which vary by province.
- Carbon benefits depend on the provincial grid; compare CHP with electrification options before committing, ideally through an energy audit and model.
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