6. Economic analysis

The CCHP system has drawn great interest because of its potential in prolonged economic benefit with short payback on initial capital investment. However, economic benefit is not a straightforward evaluation, which depends on the equipment cost, equipment efficiency, electricity and fuel cost, building electric demand, heating and cooling load, etc. These factors depends on the local climate condition, equipment variability, budget restriction, energy saving credits, and capital incentives to use any particular type of prime mover (PM) systems. Among those, the most significant ones that affects the economics of CCHP systems are the types of PM and weather zone effect on building load. Selecting a new PM for CCHP over a reference system is not always by simple payback period analysis, the building owners or investor may inclined toward a particular PM due to any favorable capital incentives offered

Figure 5. (a) SPP, (b) AS, and (c) IRR comparison of CCHP installed building types with the reference building [32].

by government entities. The economic benefits of the CCHP system can also be significantly affected by local climate conditions since it changes the building heating and cooling demand.

Generally, the parameters used to determine economic benefits are the simple payback period (SPP), annual savings (AS), internal rate of return (IRR), and equivalent uniform annual savings (EUAS). Previous research has shown that the CCHP system is able to satisfy the energy demands of a building when it is integrated with the electric grid to achieve positive values of EUAS, IRR, and AS [32]. Figure 5 shows the economic benefits for the three different prime movers in a case study conducted in Minneapolis, MN. The reciprocating internal combustion engine (ICE) demonstrated the greatest economic benefits overall across all building types. It also resulted in the best IRR values among the three prime movers. Moreover, the reciprocating ICE provided the maximum savings based on the EUAS values calculated. Based on the study, a fuel cell was the least economically advantageous and resulted in negative EUAS values for all building types. The reason for the net loss is attributable to the high capital cost of the fuel cell. However, the selection of a new prime mover for the CCHP generally depends on the analysis of economic parameters, as well as project details. Further, budget restrictions, credits for energy saving, and capital incentives need to be considered when selecting the prime mover.
