Economic analysis of cogeneration systems
Cogeneration systems are capital-intensive installations. Even if a cogeneration system has high-energy efficiency, it will not be possible to proceed with the investment unless it is also economically viable. The procedure for evaluation of the economic performance of cogeneration systems is presented in this chapter, supported with information about the various types of costs, definition of the most important of the economic parameters and measures used for evaluation, as well as examples of economic analysis. Two additional issues are also tackled: (a) the distribution of costs of a cogeneration system among its energy products and (b) the effect of the internalization of environmental externalities on the cost of covering energy needs either by a cogeneration system or by the conventional approach, that is separate production of work and heat. Care has been exercised so that the values of costs given here to be realistic. However, they can be considered indicative only, as they change with place and time. Consequently, the economic performance evaluation of any cogeneration project should be based on cost information obtained for the particular project.
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