A decision support model for combined heat and power economic evaluation

Many European states support Combined Heat and Power (CHP) investments and provide better selling tariffs for the electricity produced. In this paper, a model was developed that can help energy planning and decision-making for CHP investments in an unstable energy market. The model uses as variables state subsidies, natural gas and electricity selling price. Five different scenarios from Greek economic reality had been used in order to evaluate their economic viability and the investment risk. Finally, a sensitivity analysis was carried out, having as variables the natural gas price and the State subsidy. The sensitivity analysis of the natural gas price showed that although profits decrease as natural gas price increases, the investment remains viable for almost twice the current natural gas price. This means that small fluctuations of natural gas price do not affect the investment to a crucial degree.

► A comprehensive model was developed to estimate the economic viability of CHP investments.
► A methodology is presented allowing determination of the optimum NG selling price for CHP.
► A sensitivity analysis was carried out, having as variables the NG price and the state subsidy.
►  Fluctuations of NG prices do not influence the investment viability.