A Low-carbon future is here: combined heat and power (CHP) systems vs. onsite generation


It’s no secret that every institution plays a critical role in the fight against climate change. And while integrating renewable energy sources such as wind, solar, and hydro have become go-to options for many institutions, there is another, often overlooked solution: combined heat and power (CHP).

CHP, also referred to as cogeneration, has been quietly providing highly efficient electricity and process heat to vital industries, employers, urban centers, and campuses for decades, as noted by the U.S. Office of Energy Efficiency and Renewable Energy. Cogeneration is a proven, cost-effective tool for reducing emissions and furthering sustainability goals.

So, what does CHP entail, and how does it compare to onsite methods of heating and powering buildings?

CHP is an efficient process that combines the production of thermal energy (used for both heating and cooling) and electricity into one process. CHP systems can be configured differently, but they usually consist of a few key components: a heat engine, generator, heat recovery, and electrical interconnection, which are configured into an integrated whole.

Key facts about CHP systems:

  • CHP systems can be located at an individual facility, building, or campus. They can also be combined with district energy or utility resource.
  • CHP is typically employed where there is a need for electricity and thermal energy.
  • All CHP systems involve recovering otherwise-wasted thermal energy to produce useful thermal energy or electricity.
  • As a result, CHP systems require less fuel to produce the same energy output as conventional systems, emitting fewer greenhouse gases and air pollutants.

Although CHP is used in over 4,400 facilities across the U.S., many operations are still powered with conventional separate heat and power (SHP) systems. Unlike CHP, SHP systems are not integrated, meaning they obtain fuel from several sources, such as central fossil-fueled power plants and onsite natural gas heating systems.

To get the complete picture of how CHP compares to SHP, let’s dive into the facts across a few key areas of focus.

Energy efficiency

  • According to the United States Environmental Protection Agency, the average efficiency of fossil-fueled power plants in the United States is 36%. This means that 64% of the energy used to produce electricity at most power plants in the United States is wasted in the form of heat discharged into the atmosphere. 
  • Overall, SHP is 50–55% fuel-efficient. Alternatively, CHP systems typically achieve total system efficiencies of 65-80%, by recovering and using the otherwise-wasted heat from on-site electricity production.
Diagram showing CHP as 45% more efficient than onsite generation.
How CHP systems compare to SHP systems

Cost savings

  • According to the U.S. Department of Energy and the EPA, installing 40 GW of new CHP capacity would save U.S. businesses and industries $10 billion each year in energy costs. These agencies estimate that such an investment would cost about $40 to $80 billion and could pay for itself within four to eight years.
  • CHP systems also reduce energy bills because of their high efficiency. Recurring costs are further reduced because the CHP output reduces the need for electricity purchases.


  • In their CHP Guide, the EPA explains that because CHP systems require less fuel to produce the same energy output as SHP systems, CHP can reduce emissions of greenhouse gases and air pollutants such as nitrogen oxides (NOx) and sulfur dioxide (SO2).
  • A CHP system can operate on various fuel types, such as natural gas, biogas, biomass, and more sustainable alternatives as they become widely available.
  • Currently, the emissions prevented by a single 5 MW CHP system are equivalent to the annual emissions of more than 5,400 passenger vehicles.
Graphic showing C02 emissions comparison of conventional generation vs. combined heat and power
This diagram from the EPA illustrates the CO2 emissions output from electricity and practical thermal energy generation for two systems: (1) a fossil-fuel-fired power plant and a natural gas-fired boiler and (2) a 1 MW reciprocating engine CHP system powered by natural gas.

Growth potential

  • There is enormous growth potential for the CHP market: Global Market Insights forecasts revenue generation within the market to increase from $20 billion in 2016 to over $45 billion by the end of 2024.
  • Investing in CHP systems can also help stimulate local, state, and regional economies through job creation and market development. Demand for raw materials and construction, installation, and maintenance services can create green jobs and develop markets for future sustainable technologies.
  • The potential capacity for CHP also cannot be understated: a U.S. Department of Energy study identified nearly 14 GW of additional technical potential for CHP across more than 5,000 U.S. colleges and universities alone.
Chart showing CHP capacity additions over time
Forecast of potential CHP capacity additions through 2026

Reliability and resiliency

  • CHP systems are more efficient and more resilient, and reliable than conventional methods, especially when configured as part of an advanced microgrid. These systems can be designed to operate independently from the electric grid to enhance facility reliability.
  • Through the onsite generation and improved reliability, facilities can continue operating in the event of a disaster or an interruption of grid-supplied electricity.

A low-carbon future is here

Major U.S. cities like Boston, Cambridge, and Philadelphia are already reaping the benefits of CHP. CHP is integrated with local district energy networks in these communities, delivering low-carbon thermal energy to buildings and campuses across the cities’ urban core.

By leveraging existing district energy infrastructure and CHP, these cities are leading the way in America’s adoption of this powerful technology and forging ahead towards a zero-carbon future.

Learn more about our electrification plan in our white paper.

Vicinity Energy White Paper - Revolutionizing Urban Sustainability

Bella Pace

Isabella Pace is a Marketing Specialist for Vicinity Energy and is based in Boston, Massachusetts. She writes about topics related to decarbonization, district energy, and creating a clean energy future.