What CHP capacity does your business require? A practical calculation method

The most common question asked by business owners before implementing cogeneration is: “Which cogeneration unit should I install?”. In fact, this question boils down to two others: how to choose a cogeneration system specifically for your business, and how many kW of cogeneration capacity are required for the system to operate economically and pay for itself within the planned timeframe.

But the answer is not straightforward. A plant that is too small will not deliver the expected economic benefits, whilst one that is too large simply won’t pay for itself if it operates at less than full capacity. 

In this article, we have outlined a five-step process to help determine the optimal capacity of a cogeneration plant. This information will be useful to business owners, chief power engineers, and financial directors who are considering cogeneration as a means of achieving energy independence. 

Why it is important to choose the right power rating

Selecting the capacity of a cogeneration plant is one of the key factors that directly determines the economic viability of the entire project. An error in either direction costs money.

What happens if the CHP is too small?

If the capacity is underestimated, the system will not be able to meet the plant’s base load. Some electricity will still have to be purchased from the grid, and the savings will be significantly lower than they could have been. Furthermore, the heat generated by such a CHP unit is often insufficient even for basic needs — such as hot water supply or industrial processes.

What will happen if the CHP is too big?

The opposite situation is no better. An excessively powerful unit, with a margin ‘just in case’, operates at 30–50 per cent of its rated power most of the time, which means low efficiency under partial load. There is simply nowhere to put the excess heat — it is lost. As a result, the payback period is longer, and maintenance costs are higher, as the cost of servicing a large engine does not depend on how fully loaded it is.

The Golden Rule

Making the most of the heat generated significantly improves the economic efficiency of a cogeneration plant. It is technically possible to discharge some of the heat, but this must be taken into account when calculating the project’s economic model.

Ideally, a CHP plant should operate most of the time at 70–90 per cent of its rated capacity, with the heat generated being utilised as fully as possible to meet the plant’s needs. It is precisely this approach that enables the best possible economic efficiency to be achieved and forms the basis for the sound design of a cogeneration system.

Algorithm for calculating the power of CHP

The calculation of the capacity of the CHP consists of five consecutive steps — from analysing consumption to assessing the project’s cost-effectiveness.

Step 1. Analysis of electricity consumption

To begin with, you need to gather the relevant data: electricity bills for the last 12 months, an hourly consumption schedule (if available) and the maximum power rating specified in your contract with the regional electricity distribution company.

Based on this data, we calculate:

• average monthly hourly consumption in kWh; 
• average load (consumption divided by operating hours); 
• base load — the optimum level, which is always consumed, and peak load — the maximum. 

It is worth taking a separate look at the breakdown by time: day/night, weekdays/weekends.

Example: consumption of 150,000 kWh/month, operating 16 hours/day × 25 days = 400 hours. Average load: 150,000 / 400 = 375 kW. Base load (night-time minimum) — 250 kW, peak load — 500 kW.

Step 2. Analysis of heat consumption

Next, we collect gas bills for heating, hot water and process heat, monthly heat consumption data and a temperature chart for the heating season.

We calculate annual heat consumption in Gcal or kWh, the base heat load (domestic hot water, process heat, i.e. what is required all year round), the seasonal heating load, and assess the potential for heat recovery in summer.

An important technical point. Most modern gas CHPs produce approximately 0.9–1.2 kW of thermal energy per 1 kW of electrical power, depending on the model and operating mode. A ratio of 1:1 is usually used for preliminary calculations. 

Example: heating — 800 kW in winter, 0 kW in summer; domestic hot water — 100 kW all year round; process requirements — 200 kW all year round. Base heat demand — 300 kW, peak heat demand — 1,100 kW.

Step 3. Selecting the operating mode

There are three questions to be answered here: how many hours a year will the plant actually operate, is off-grid operation required, and are there plans to sell surplus electricity?

The rule is simple. A CHP plant pays for itself when it operates for more than 4,000 hours a year, and the optimal range is 6,000–8,000 hours a year. For more details on the specifics of operation in the Ukrainian context, read our article on cogeneration in Ukraine in 2026.

Step 4. Selecting the power rating based on the limiting factor

There are two approaches. The first is based on electricity: CHP = 70–90% of the base electricity load, with the remainder covered by the grid (peaks, reserve). The second is based on heat: CHP = the base heat load, and any surplus electricity is sold back to the grid.

Which approach to choose depends on the balance of requirements: if you need less heat than electricity, we base the calculation on heat to avoid any surplus; if you need more heat, we base the calculation on electricity, and the boiler makes up for any shortfall in heat.

Example: base electricity demand — 250 kW, base heat demand — 300 kW. As the heat demand exceeds the electricity demand, the calculation is based on the electrical load. The recommended CHP capacity is 200–250 kW; the heat generated by the plant covers 65–85 per cent of the base demand.

Step 5. Checking the finances

The final step is to calculate the payback period. You need to take into account the capital expenditure (CAPEX), savings on electricity and heating, and annual gas and maintenance costs.

Net savings = (electricity + heat) – (gas + maintenance). Payback period = CAPEX / net savings. A payback period of 3–5 years is considered normal. Current guidelines on equipment costs can be found in the article ‘How much does a cogeneration plant cost in Ukraine’.

If the estimated payback period exceeds 6 years, it is worth reducing the capacity of the CHP unit, increasing its operating hours, or checking whether the heat is being fully utilised.

Formula for calculating the power of CHP

At the preliminary assessment stage, the recommended electrical output of a cogeneration plant is determined as the lower of the following two values:

• the permissible proportion of the base electrical load;
• the base useful heat load, converted to electrical power, taking into account the characteristics of the specific model of the heat recovery unit.

Example

The plant’s base electrical load is 300 kW, and its base thermal load is 240 kW. For the selected CHP unit model, the ratio rₜ/ₑ = 1.0, and the coverage factor k = 0.8.

Calculation:

• based on the electrical load: 0.8 × 300 = 240 kW;
• based on the thermal load: 240 / 1.0 = 240 kW.

Therefore, the recommended electrical power for the CHP is 240 kW.

Important: this formula is used for preliminary assessment only. The final selection of a cogeneration plant is based on hourly electricity and heat consumption profiles, the plant’s operating modes, seasonal load fluctuations and the technical specifications of the selected equipment model.

Typical CHP capacities for various enterprises

The table below will help you quickly estimate how many kW of cogeneration capacity are required by different types of businesses. The final decision on the capacity of a cogeneration plant is always made following an analysis of the electrical and thermal loads. 

There are specific solutions available for small and medium-sized businesses that enable them to implement cogeneration without excessive investment — for more details, see the article “Cogeneration for Small and Medium-Sized Businesses“.

Calculation examples

Example 1: Dairy plant

Electricity consumption — 120,000 kWh/month, operating 24/7. Average load — 165 kW, base load — 140 kW. Heat consumption (hot water and pasteurisation) — 180 kW continuously.

Electricity: 140 × 0.8 = 112 kW. Heat: 180 kW. Electricity is always the limiting factor. The recommended capacity is 100–120 kW; the heat generated by the system covers 55–65 per cent of the demand, with the remainder provided by the boiler.

Example 2: A hotel with a swimming pool

80 rooms, electricity consumption — 80,000 kWh/month. Average load: 110 kW; base load: 70 kW. Heating: 50 kW for domestic hot water + 80 kW for the swimming pool + 150 kW for heating in winter. Base heating load: 130 kW.

Electricity: 70 × 0.8 = 56 kW. Heat: 130 kW. The limiting factor is electricity. The recommended capacity is 50–70 kW, or more (up to 100 kW) if the surplus is to be sold.

Example 3: Shopping centre

Floor area — 20,000 m², electricity consumption — 198,000 kWh/month. The shopping centre operates 12 hours a day. The average electrical load during operating hours is 550 kW, whilst the base (night-time) load is 350 kW. Thermal load: heating — 400 kW in winter, hot water supply — 30 kW; cooling demand for air conditioning in summer — approximately 500 kW of cooling capacity.

Calculation:

• Electricity consumption: 350 × 0.8 = 280 kW.
• Heat consumption in summer: just 30 kW, which is not enough to make full use of the heat.

Solution: the use of trigeneration, whereby heat from a cogeneration plant is used to produce cooling via an absorption chiller. Recommended cogeneration plant capacity: approximately 300 kW in combination with an absorption chiller.

A similar approach was examined in detail in the case study on a combined heat and power plant for a shopping centre and in the article on reliable energy supply for shopping centres.

Taking the island mode into account

If you need standalone mode

Where off-grid operation is critical to a business, the power supply system must be capable of handling the critical load with an additional margin of 20–30 per cent to account for inrush currents. A prioritisation system for non-critical loads should also be put in place.

Example

Critical load — 200 kW. Taking into account inrush currents: 200 × 1.3 = 260 kW. The minimum power output of the generator set for island operation is 260–300 kW.

One large CHP or several smaller ones?

One CHP

A simpler system, lower capital expenditure, but with no backup — in the event of a breakdown, the company is left without its own power generation.

Cascade (2–3 CHP)

Several smaller units provide redundancy. If one fails, the others continue to operate. A cascade system handles variable loads more effectively, although the capital costs are higher and control is more complex.

When to choose a cascade

A cascaded configuration is worth considering when equipment redundancy, flexible operation under variable loads, or the phased expansion of generating capacity are important. This approach is particularly relevant for large enterprises and facilities where even a brief interruption to in-house generation can lead to significant financial losses. A cascade configuration should also be chosen if a single unit cannot cover at least 50 per cent of electricity consumption based on its rated capacity.

Common mistakes when selecting power ratings

Over the years of implementing projects, the Pro-Energy team has analysed dozens of scenarios for selecting cogeneration plants. Most problems arise even before construction begins — at the capacity determination stage. The most common mistakes are listed below.

• Focusing solely on peak load. If a gas turbine is selected based on maximum consumption, it will operate at only 30–50 per cent of its capacity for most of the time. This reduces efficiency, increases fuel costs and extends the payback period.
• Failure to take the heat balance into account. Cogeneration is only efficient if the heat produced is utilised in full.
• Failure to take seasonal variations in consumption into account. In winter, thermal energy is required for heating, whilst in summer demand may fall significantly. If this is not taken into account at the design stage, the plant will operate less efficiently. For such facilities, it is worth considering trigeneration or other methods of heat recovery.
• An overly optimistic forecast for the company’s development. Sometimes, the capacity of key equipment is selected with a view to future expansion of production, which may not materialise. As a result, the equipment operates at a constant underload, and the project’s payback period is extended.
• Start-up currents are not taken into account when operating in island mode. If the power generation unit is to provide an autonomous power supply, a power reserve must be provided for starting pumps, compressors, refrigeration equipment, and other machinery. Without such a reserve, the system may operate erratically.
• Lack of hourly load analysis. Average monthly consumption does not reflect the true picture. It is the hourly graphs that make it possible to determine the base load, select the correct CHP capacity, and avoid overspending on equipment.

For more on other practical challenges involved in implementation, see the article on the challenges of cogeneration in Ukraine.

A brief overview of the key points

The optimum capacity of a combined heat and power (CHP) unit is 70–90 per cent of the base load, determined by the limiting factor: electricity or heat, depending on which resource the enterprise requires less of. Calculating the CHP capacity involves five steps: electricity analysis, heat analysis, determining the operating mode, selecting the capacity, and checking the economic viability.

The typical payback period is 3–5 years, assuming more than 4,000 hours of operation per year. For off-grid operation, allow for a 20–30 per cent margin, and for high-capacity systems, consider a cascade configuration.

To obtain an accurate CHP capacity calculator tailored to your business, please contact the engineers at Pro-Energy — they will carry out a comprehensive analysis of your energy profile and select the optimal solution.