Coal- and gas-fired power plants produce large amounts of waste heat. Cogeneration systems, also known as combined heat and power (CHP), capture excess heat from electricity production and put the otherwise-forfeited thermal energy to work. It can be used at or near the site for district heating or to create additional electricity. Cogeneration avoids greenhouse gas emissions to the extent that it reduces reliance on fossil fuels for heating and electricity.
Many of the cogeneration systems currently online are found in the industrial sector. In countries such as Denmark and Finland, cogeneration makes up a significant part of the energy mix largely because of its use in district heating systems. In Denmark, around 80 percent of district heating and more than 60 percent of electricity demand is met by CHP.
The opportunity to reduce emissions and save money through cogeneration is significant because of the inherent low efficiency of electrical generation. From a financial viewpoint, adoption makes sense for many industrial and commercial uses, as well as for some residential uses. Cogeneration makes it possible to produce more energy with the same amount, and cost, of fuel.
In 2014, cogeneration systems accounted for about 15 percent of global power generation. In terms of heat supply, cogeneration units represented 6.8 percent. The majority of currently installed cogeneration units are fueled by fossil fuels. Coal represents around 54 percent of total CHP electricity generation, natural gas provides 39 percent, and oil CHP generates 2.5 percent of electricity from cogeneration systems. However, this also depends on the application, as an increasing number of cogeneration systems utilize renewable energy sources. Globally, 55 percent of all CHP systems generating electricity are auto producers, while 45 percent are main activity producers.
This analysis focuses on auto producer CHP systems running on natural gas. This application of CHP currently represents around 3.2 percent of total electricity generation (718 terawatt-hours). The analysis in this solution is not looking at district heating, and discounts the potential for increase in diversified renewables as part of the CHP generation mix. The topics of district heating and the use of renewable energy sources in CHP plants are considered in other solutions.
- Plausible Scenario: This scenario follows a customized adoption trajectory derived from the average figures of the three reference scenarios. The Plausible Scenario projects that cogeneration’s market share of electricity generation could reach 5.67 percent by 2050.
- Drawdown Scenario: Because cogeneration is considered a bridge technology, the Drawdown Scenario assumes a similar growth as the Plausible Scenario, but peaks in 2030 and begins to decline as a share of electricity and heat generation until 2050, when natural gas CHP is assumed to be no longer required to meet demand.
- Optimum Scenario: Because cogeneration is considered a bridge technology, the Optimum Scenario assumes a similar growth as the Plausible Scenario, but peaks in 2030 and begins to decline as a share of electricity and heat generation until 2050, when natural gas CHP is assumed to be no longer required to meet demand.
The financial inputs used in the model assume an average installation cost of US$1,845 per kilowatt  with a learning rate of 2 percent; this also applies to conventional technologies cogeneration is replacing, including natural gas, coal, and oil power plants. An average capacity factor of 78 percent is used for CHP plants, compared to 55 percent for conventional technologies. Variable operation and maintenance costs of US$0.012 per kilowatt-hour and fixed costs of US$85.4 per kilowatt are considered for cogeneration, compared to US$0.005 and US$33.0, respectively, for the conventional electricity generation technologies, and fixed costs of US$19.89 per kilowatt for conventional boilers (oil) for heat production. Fuel prices are derived from the last nine years’ average of natural gas and fuel oil prices for industry (IEA, 2016).
Through the process of integrating cogeneration with other solutions, the total addressable market for electricity generation technologies was adjusted to account for reduced demand resulting from the growth of more energy-efficient technologies,  as well as increased electrification from other solutions like electric vehicles and high-speed rail. Grid emissions factors were calculated based on the annual mix of different electricity-generating technologies over time. Emissions factors for each technology were determined through a meta-analysis of multiple sources, accounting for direct and indirect emissions.
The results for the Plausible Scenario indicate that increasing cogeneration from 3.2 percent in 2014 to 5.67 percent of world electricity generation, while increasing the heat supply met by CHP from 1.7 percent to 2.9 percent by 2050, could cost an additional US$279.25 billion compared to the Reference Scenario. Net savings from cogeneration from 2020-2050 would be near US$566.93 billion, however, due largely to lower fuel use and costs.
Under the Plausible Scenario, cogeneration could reduce a cumulative 3.97 gigatons of carbon dioxide-equivalent greenhouse gas emissions from 2020-2050. However, it is considered to be a transitional solution since it still uses fossil fuels. In both the Drawdown and Optimum Scenarios, the peak and decline of natural gas CHP results in an increase in greenhouse gas emissions of 8.7 and 8.76 gigatons of carbon dioxide-equivalent over 2020-2050, respectively, when compared to a Reference Scenario. This is due to assumptions made regarding adoption trajectories, system dynamics analysis, and integration with other solutions.
The results of this study confirm that economic, energy, and climate benefits would result from the increased adoption of combined heat and power technologies. Due to better efficiency, cogeneration plants can produce the same amount of heat and power using less fuel than separate heat and power production systems can.
Development of the systems can be expensive in some cases, and cannot truly be deemed sustainable in the long term when they are used to extract efficiencies from fossil fuels. Nevertheless, using natural gas to replace current oil and coal CHPs, oil boilers, and conventional grid technologies brings significant reductions of greenhouse gas and air pollutant emissions.