Spark spread - A screening parameter for combined heating and power systems

Combined heating and power (CHP) systems may be considered for installation if they produce savings over conventional systems with separate heating and power. For a CHP system with a natural gas engine as the prime mover, the difference between the price of natural gas and the price of purchased electricity, called spark spread, is an indicator as to whether a CHP system might be considered or not. The objective of this paper is to develop a detailed model, based on the spark spread, that compares the electrical energy and heat energy produced by a CHP system against the same amounts of energy produced by a traditional, or separate heating and power (SHP) system that purchases electricity from the grid. An expression for the spark spread based on the cost of the fuel and some of the CHP system efficiencies is presented in this paper as well as an expression for the payback period for a given capital cost and spark spread. The developed expressions allow determining the required spark spread for a CHP system to produce a net operational savings over the SHP in terms of the performance of system components. Results indicate that the spark spread which might indicate favorable payback varies based on the efficiencies of the CHP system components and the desired payback period. In addition, a new expression for calculating the payback period for a CHP system based on the CHP system capital cost per unit of power output and fuel cost is proposed.