1.Introduction

In today's pursuit of energy efficiency and carbon neutrality, Combined Heat and Power (CHP) has become a proven and efficient solution. The CHP system can achieve up to 80% fuel efficiency by generating both electricity and usable Heat from a single fuel. This is much higher than the comprehensive efficiency of around 50% of the traditional power supply and boiler heating. This paper will systematically describe the definition, working principle, technology type, economic and environmental benefits, typical application scenarios, existing challenges and future trends of CHP. To help facility owners, policymakers and investors determine whether CHP is worth the investment. 

2.What is Combined Heat and Power (CHP)?

CHP is an integrated system which simultaneously produces electric power (or mechanical energy) and available thermal energy in the process of primary energy conversion. Unlike conventional thermal power plants, which discharge waste heat into the environment, CHP converts heat from exhaust, cylinder liner water or lubricating oil into steam, hot water, cold water (via absorption refrigeration) or direct process heat, which greatly reduces energy waste and power transmission and distribution losses, it is a typical form of distributed energy.

3. How does CHP work?

The CHP system consists of three functional modules:
Prime mover—generating shaft power by burning fuel
Generator—converting shaft power into electrical energy
Waste heat recovery loop—captures waste heat from exhaust gas, cylinder liner water, etc., and raises it to a usable temperature.
Typical gas CHP workflow:

• Natural gas is burned in an internal combustion engine or gas turbine;
• High-temperature and high-pressure gas drives the engine/turbine to generate electricity, with an efficiency of 35%-42%. 
• Exhaust gas at 400–550 °C enters the waste heat boiler or heat exchanger, producing steam or hot water at 90 °C.
• The low-grade heat in engine coolant and lubricating oil is further used for heating or preheating feed water.
• Ultimately, only 10-20% of the input energy is lost in the form of non-recyclable exhaust fumes or heat dissipation, and the comprehensive energy utilization efficiency reaches 80-90%.

4. Classification of CHP Systems

Small-scale CHP: The capacity is usually below 100kW.
Medium-scale CHP: The capacity is between 100kW and 10 MW.
Large-scale CHP: The capacity is more than 10MW.

5. The Benefits of the Combined Heat and Power

• High combustion efficiency: 80-90%.
• Low operating costs: Local power generation avoids retail electricity price, and thermal energy is almost free.
• Significant emission reduction: It can reduce CO₂ by 30–40% compared to coal-fired power and boilers per MWh.
• Safety: Enables islanded operation, ensuring power supply for key loads such as hospitals, boilers, and data centers. 
• Relieve the pressure on the power grid: peak power distribution, grid congestion reduction. 
• Fuel flexibility: natural gas, biogas, renewable natural gas, green hydrogen, liquid biofuels.

6. Application Scenes of Combined Heat and PowerHospital: 24-hour power, disinfection steam, and domestic hot water, investment payback period 4-6 years. 

• Data center: high electric load and absorption refrigeration demand.
• Industrial process: chemical food, paper, paper Pharmaceutical requires a lot of steam and electricity.
• University/airport: covering multiple Buildings for cooling and heating.
• Residential/commercial: Micro 5kW CHP units have been widely used in Japan, South Korea, and some European countries.

7. Challenges and Limitations

• High initial investment: approximately 1000–2500USD/kW, higher than purchasing electricity and boilers
• CHP requires stable heat load; otherwise, its economic efficiency will be poor.
• Complex grid-connection rules: standby capacity fees, relay protection, etc. may erode profits.
• Environmental protection approval: Problems such as NOx, CO emissions, noise, and chimney siting.
• Fluctuations in fuel prices: risks increase, especially when the natural gas market prices fluctuate significantly.

8. Conclusion

By doubling fuel efficiency, reducing emissions and enhancing energy security, CHP not only contributes to corporate ESG goals, but also serves the national carbon-neutral strategy. Although initial investment and on-site heat demand are still the main thresholds, driven by rising energy prices, maturity of low-carbon fuels and enhanced policy incentives, The exploitable market for CHP continues to expand. For facilities with both power and thermal requirements, now is the best time to evaluate CHP.
 If your enterprise or facility is facing the demand for coordinated supply of electricity and heat, or wishes to optimize the energy structure and advance sustainable development goals through CHP technology, please feel free to contact us at any time.

FAQ

Q1: What fuel does CHP use?
It is most commonly used natural gas, but also biogas, renewable natural gas, green hydrogen, biomass, and even diesel or coal, depending on the type of prime mover.
Q2: How does CHP efficiency compare with conventional power plants?
CHP comprehensive efficiency of 80-90%, coal-fired power plants about 35%, gas-fired combined cycle power plants about 55% , has not been included in the boiler loss.
Q3: Can CHP obtain carbon credits or subsidies?
Most regions provide incentives such as feed-in tariffs, investment tax credits, accelerated depreciation, or one-time subsidies for high-efficiency CHP.