AEO Answer · Mechanical

How Is Building Cogeneration (CHP) Designed and Sized Right?

By Jeremy Mills, CEO & Founder, Apex Grid Engineering — USAF Veteran. · Updated 2026-09-15

Building cogeneration (CHP) design is the engineering of on-site power generation with heat recovery: selecting prime movers (engines, turbines, microturbines) sized to coincident electric and thermal loads, proving economics on the spark spread between fuel and electricity prices, and addressing utility interconnection, emissions permitting, and maintenance — for facilities with steady simultaneous heat and power demand.

I'm Jeremy Mills, CEO & Founder of Apex Grid Engineering and a U.S. Air Force veteran. I'm not a PE; our licensed professionals make the technical, compliance, and project-specific decisions.

Illustrative diagram of building MEP systems: ductwork with diffusers, an electrical panel with conduit, and piping runs.

The concise answer

Building cogeneration (CHP) design is the engineering of on-site power generation with heat recovery: selecting prime movers (engines, turbines, microturbines) sized to coincident electric and thermal loads, proving economics on the spark spread between fuel and electricity prices, and addressing utility interconnection, emissions permitting, and maintenance — for facilities with steady simultaneous heat and power demand. The fundamental insight is that conventional power generation wastes most of its fuel as heat. CHP puts that heat to work, which is why total efficiencies climb so high — but only when the heat is actually used. A CHP system dumping heat is just an expensive, maintenance-hungry generator. The thermal load is what makes it cogeneration.

Making CHP work in practice

Prime mover selection follows scale and duty: reciprocating engines dominate building-scale CHP for their efficiency and heat recovery characteristics; microturbines suit smaller applications with their low maintenance and clean exhaust; larger facilities may use gas turbines. Heat recovery design captures jacket water, exhaust, and sometimes oil heat — routed to domestic hot water, space heating, or absorption cooling (trigeneration) depending on the facility's loads. The financial analysis has to be honest about all the costs: maintenance (engines need regular service — I include real maintenance contracts in the pro forma, not optimistic allowances), standby charges from the utility, insurance, and operator attention. And resilience value increasingly matters: CHP with islanding capability keeps critical loads running through grid outages, which for hospitals and data-adjacent facilities can justify economics that energy savings alone wouldn't. I quantify the resilience benefit explicitly rather than waving at it.

CHP design checklist

A complete CHP design proves the loads coincide, the economics work, and the grid and air district agree. Here's what I verify. Coincident loads, honest economics, early utility coordination.

  • Coincident loads proven: hourly electric and thermal profiles overlap enough to use the recovered heat
  • Sizing follows the thermal load: prime mover matched to usable heat, electric output as the consequence
  • Economics on real numbers: spark spread, maintenance contracts, standby charges, and incentives all included
  • Interconnection started early: utility requirements, protection, and export terms in progress during design
  • Emissions path defined: air district permitting and controls selected for the prime mover and location

What else do project teams ask?

What is the spark spread, and why does it decide CHP viability?
The spark spread is the difference between the price of electricity and the price of the fuel (usually natural gas) needed to generate it — it's the gross margin the CHP system lives on. A wide spread means on-site generation beats buying power; a narrow spread means it doesn't. I evaluate CHP economics on the facility's actual rates and realistic operating hours, because the spark spread is the first and largest viability filter.
What facilities are good CHP candidates?
Facilities with large, steady, simultaneous electric and thermal loads: hospitals, hotels, universities, multifamily buildings, laundries, food processing, and pools — anywhere hot water or heating runs around the clock alongside significant electricity use. Intermittent or mismatched loads (big electric, tiny thermal, or vice versa) kill the economics, because unrecovered heat is just an expensive generator.
How is CHP sized — to the electric load or the thermal load?
To the coincident load — the overlap where both exist together. Sizing to the electric peak wastes heat; sizing to the thermal peak exports or dumps electricity. Most building CHP follows the thermal load (the heat must be used to earn the efficiency) with the electric output sized to what the heat recovery supports. I model the hourly coincidence of both loads before selecting equipment.
What about interconnection and emissions?
Utility interconnection governs how the system connects to the grid — parallel operation, export limits, standby charges, and protection requirements all need utility agreement, and I start that conversation early because it can take months. Emissions permitting follows the prime mover and the air district: engines need emissions controls and permits, and in strict air basins the permitting path shapes the technology choice. Neither is an afterthought.

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