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About CHP & Packaged Systems

CHP Basics

Combined heat and power (CHP), also known as cogeneration, produces both electricity and thermal energy on-site, replacing or supplementing electricity provided from a local utility and fuel burned in an on-site boiler or furnace. CHP systems can be designed to operate independently from the electric grid providing reliable power and thermal energy to keep critical facilities running during grid outages. CHP systems increase energy security by producing energy at the point of use, and are generally 40% to 60% more efficient than non-CHP energy. The deployment of CHP is driven by several factors, including:

CHP User Benefits CHP National/Regional Benefits
  • Decrease energy costs
  • Enhanced energy resiliency
  • Reduced risk from volatile energy prices
  • Increased economic competitiveness
  • Typically utilizes abundant domestic natural gas or opportunity fuels, such as biogas or wood waste
  • Increases energy resiliency of critical infrastructure and operations
  • Enhances electric grid reliability
  • Supports local economic growth and competitiveness

Combined heat and power (CHP) systems are a highly efficient form of distributed generation, typically designed to power a single large building, campus, or group of facilities. These systems comprise on-site electrical generators (primarily fueled with natural gas, but biomass-fed systems may be feasible in some locations) that achieve high efficiency by capturing heat, a byproduct of electricity production that would otherwise be wasted. The captured heat can be used to provide steam or hot water to the facility. Capturing and using the waste heat allows CHP systems to reach fuel efficiencies of 75% or higher, compared to about 50% for the combination of utility-delivered power and an on-site boiler (see Figure 1). This efficient operation is both environmentally and economically advantageous. CHP systems can use the existing, centralized electricity grid as a backup source to meet peak electricity needs and provide power when the CHP system is down for maintenance or in an emergency outage. If the electricity grid is impaired, a properly configured CHP system will continue to operate, ensuring an uninterrupted supply of electricity and thermal services to the host facility. More information on CHP basics and benefits can be found through the DOE's CHP Deployment Program and the EPA's CHP Technical Assistance Partnership.

CHP technology can be deployed quickly, cost-effectively, and with few geographic limitations. It has been employed for many years, mostly in industrial, large commercial, and institutional applications. There are currently about 4,400 CHP systems installed throughout the country generating up to 82 GW of electricity. The DOE CHP Installation Database provides information on the location, size, technology, and fuel type of these systems. Figure 2 shows the locations of U.S. CHP installations.


Figure 2. Locations of U.S. CHP Systems

In addition to current CHP installations, a recent DOE CHP Technical Potential Report identifies the estimated market size for CHP in the U.S., constrained by only technological limits. The report outlines market drivers for future CHP growth, as well as identifying CHP technical potential for 20 industrial and 24 commercial/institutional application types by state and estimated CHP size range.


The most common CHP system configurations are:

  • Reciprocating engine with heat recovery unit
  • Combustion turbine with heat recovery steam generator
  • Boiler with steam turbine


Figure 3. Combustion Turbine or Reciprocating Engine with Heat Recovery

In the configuration shown in Figure 3, the engine or turbine combusts fuel (typically natural gas, oil, or biogas) to generate electricity while heat is recovered and converted into useful thermal energy, usually in the form of steam or hot water.



Figure 4. Boiler with Steam Turbine

In a boiler/steam turbine CHP configuration, fuel is burned in a boiler to produce steam, which is then used to generate electricity and useful thermal energy for the host facility. Boilers can use a variety of solid, liquid and gaseous fuels.

More Information

The DOE CHP Technology Fact Sheet Series can provide more information on individual CHP technologies and a comparison of CHP characteristics for typical systems. Links to the individual technology fact sheets are listed below.

EPA's Catalog of CHP Technologies also provides an overview of how CHP systems work and the key concepts of efficiency and power-to-heat ratios. It also provides information and performance characteristics of five commercially available CHP prime movers. https://www.epa.gov/chp/catalog-chp-technologies For more information on CHP technologies, project development guides, policy documents, and a variety other resources, please visit the CHP for Resilience Planning Guide Resource Library page.


Packaged CHP

In the past, CHP installations required customized engineering and design, with the systems being constructed at the user site. This practice, known as “design-build”, is still commonly employed, especially for large installations with unique thermal requirements. However, as CHP technologies have become more established, many manufacturers have started producing standardized packaged CHP systems that eliminate many of the site-specific engineering requirements. These systems are engineered and assembled off-site, with heat exchangers, electronics and controls assembled in a complete package. This allows for project replicability while simplifying, shortening, and reducing the cost of CHP installations.

Packaged CHP systems can incorporate a variety of CHP technologies, including reciprocating engines, microturbines, and fuel cells. Instead of being defined by the type of prime mover, packaged systems are defined by their pre-installed components and turn-key functionality. Manufacturers design and build standardized systems that can be used in many different settings, rather than designing and engineering a new system for each location. These units are tested and pre-assembled, arriving skid-mounted or containerized with standardized installation requirements. This saves time and effort for end users compared with design-build systems, which are installed piece by piece. One of the biggest advantages of packaged CHP systems is the reduced cost and effort required for installation. With lower installation and engineering costs, packaged systems can provide a higher return on investment for small sites. The economic advantage for smaller generators, coupled with a more efficient installation process, is leading to an expansion of the U.S. CHP market. Since packaged CHP systems are designed, assembled, and tested prior to installation, costs can be significantly reduced compared to design-build systems. Standardized CHP packages can be easily installed in a variety of commercial and institutional applications with minimal on-site engineering required. Manufacturers and developers of packaged systems also tend to offer standardized maintenance contracts, which can help customers who may not have qualified staff on-site to operate and maintain the system. The standardization of packaged CHP systems and maintenance contracts could lead to high replicability in the commercial sector, which will be an important factor in expanding the CHP market.

Many developers of packaged CHP systems offer “own and operate” financing, which eliminates the burden of high capital costs. Small commercial facilities often do not have the capability to operate and maintain CHP systems, and they may not have the necessary capital to invest in a CHP installation. With the own and operate business model, the CHP developer or a third party financier will pay the cost to install and maintain the equipment, while the customer signs a long term contract with discounted energy rates (similar to a utility power purchase agreement). While the customer does not own the equipment themselves, they can take advantage of all of the benefits of CHP and on-site power production.