Management decisions for cogeneration : a survey analysis

Abstract

This study explores the underlying factors in the decision by private, private non-profit, and public sector facility owners to invest in cogeneration technology. It employs alpha factor analysis techniques to develop factors with maximum generalizability to the universe of variables which potentially explain the decision to invest. Data for this study come from a survey of commercial, industrial, and institutional electric energy consumers who used more than 750 KW demand in any one month of 1981 for a selected electric utility in the Boston area. There were 129 usable responses to the survey(32.2 percent).

Cogeneration is the sequential production of thermal energy and electricity at one facility. A technology advocated for its high thermodynamic efficiency compared to separate production of steam and electricity, cogeneration represents an opportunity for a facility owner to substitute capital expenditure today for future operating expenditures. For the past six years, projections of increased cogeneration of electricity and steam consistantly occurred in the literature. In reality, output of steam and electricity from cogeneration plants has declined over the past decade. In the face of contradictions between thermodynamic based projections of cogeneration potential and the reality of declining actual use, most reports offer anecdotal references to market imperfections and non-economic decision variables to justify the contradiction.

This study confirms that a number of factors other than purely economic considerations may prevent use of cogeneration technology at the present time. These factors include: Uncertainty caused by regulatory action, Desire for energy self sufficiency by the organization, Financial flexiibility, Experience with electricity cogeneration or self generation, Capital budget planning methods

Second, this study provides a ranking of the factors involved in the cogeneration decision explaining most variance to least variance. However, the ranking of factors provides no measure of the "importance" of these factors in the decision to adopt or not adopt cogeneration technology.

Finally, the results of this study can be used to provide a rough estimate of capacity (KW) and energy (KWH) available from potential cogenerators. This study projects a maximum potential of 106 1MW and 559,000 tIWH of cogenerated electrical energy in the utility service territory between 1982 and 2002.