1. Dana ENergy and Industry Innovators COmpany
DANA ENERGY AND INDUSTRY
INNOVATORS COMPANY
Feasibility Study of Establishing Cogeneration
Power Plant (Power and Heating) (CHP)
NO. 3, AZIN DEADEND, NORTHERN KHAZAR, ELAHIYENO. 3, AZIN
DEADEND, NORTHERN KHAZAR, ELAHIYE ST., TEHRAN
TELL: +989(21)22600804
EMAIL: INFO@DENIICO.COM
MAY
2017

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 Distributed generation – description and characteristics
Distributed generation is a method which uses small scale technologies and generates the power at the place of the consumers or at its
vicinity. The idea behind the conventional power generation is to generate the power in a concentrated location with limited large scale
power plants and transmit the power to the consumers which might be located at several thousand kilometers away from the power
generation facilities. Beside low efficient power generation of this method, a noteworthy power loss occurs during the power
transmission and distribution. Furthermore, large scale power plant release greenhouse gases which pollute the environment. They also
require a broad and complicated transmission and distribution grid which is always vulnerable to the natural disasters and national
threats. On the other hand, the main idea behind the distributed generation is to use several small scale power plants at the location of
consumers or at their vicinity. The DG also tries to subside the need to the transmission and distribution grid.
The generation of power at the location of the consumers has several benefits which some of them are mentioned below:
1- The reduced power loss in transmission and distribution grids and therefore reduction of fuel and increment of efficiency.
2- Increment in power generation efficiency due to implementing special instruments (higher efficiency compared to the average
efficiency of large scale power plant).
3- The possibility of applying cogeneration technologies to generate power and heat (CHP).
4- Developing opportunities for small and large corporations, since the capital investment for small scale power plants are much
less than large scale power plants.
5- Significant reduction of power cuts due to possession of the generators.
6- Total improvement of the security of the national-wide electricity grid.
7- Significant reduction of environmental pollutants due to implementing new clean technologies in small scale generators used in
DG.
8- Creating the opportunity to use the natural gases in much portion of the country due to the efforts done by the Ministry of
Petroleum.

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 Technologies used in distributed generation plants
Nowadays, an extensive range of generators whit various characteristics are used in small scale power plants in the form of DG.
Some of most important features are mentioned below:
1- Gas engines
2- Diesel engines
3- Mini Steam/Gas turbines
4- Micro turbines
5- Micro wind turbines
6- Micro hydro generators
7- Solar system (Photovoltaic and Combustion)
8- Fuel cells
Regardless of the type of technology used in each generators, the common important advantages of these generators over the large
scale conventional power plants are: cheaper electricity, higher reliability, higher security and less environmental pollutions.

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 Applications
The applications of DG power plants can be summarized as below:
 The major electricity consumers are industries such as steel production, cement production, petroleum, aerospace industries,
refineries, casting and etc.
 Some industries are susceptible to power cuts such as: textile industries, hospital and care centers, livestock industries (fish
and chicken farms), food and compote industries, plastic industries, automobile industries, steel industries and casting
furnaces, publishing industries, pharmaceutical industries, paint industries and etc.
 Scientific and communication centers such as: universities, communicational infrastructures, data centers.
 Commercial centers such as: air ports, shopping malls, hotels, recreational centers and sport centers.
 Industry zones.
 Agricultural and greenhouse complexes.
 Residential complexes.
Considering the characteristics of DG and also the government’s enactments of comprehensive laws and guidelines and also the vast
support of responsible organizations, there is a great platform for investments on distributed generation of electricity by implementing
small scale generators. Like any other high tech facilities, the distributed generation of electricity requires consulting with experienced
companies as the first step and then it can be accurately engineered and designed. Finally the power plant can be established and it can
efficiently operate.

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 Combined heat and power generation system (CHP)
Nowadays, one of the solutions that energy ruler use as an effective tool in energy management is energy generation based on the
cogeneration of electricity, heating and cooling. Cogeneration which is a type of distributed generation is the simultaneous production
of two or more forms of energy (e.g., electricity, heating and cooling) from a simple primary resource (such as chemical energy of
various fuels).
In the conventional methods, the consumer must purchase its electricity demand from the national-wide electricity grid and furthermore
it must also undergo other expenses for its cooling and heating purposes. However, in the cogeneration procedures which is used in
the form of distributed generation, the consumer is isolated from national-wide electricity grid and it also benefits the maximum
possible heat value of the fuel (up to 90%), therefore the amount and the costs of the energies will be significantly reduced.
 The main components of cogeneration systems
CHP plants are composed of four main components: the prime mover, generator, heat exchanger and control system. In cogeneration
process, at first, the prime mover (gas engine or gas turbine) releases the fuel chemical energy and turns it into mechanical power. The
drive shaft is then coupled with a generator and electrical power will be generated. Waste resources of heat energy (including: waste
heat energy from the exhaust of the prime mover; jacket water and lubricating oil) will be identified and the wasted heat (applicable
high temperature heat) will be recovered using appropriate heat exchangers. With the ability to extract waste heat in the power
generation process, the unique characteristics of cogeneration systems of combined heat and power (CHP) will be achieved.
 The unique advantages of combined heat and power production
 Significant increment of efficiency
 Reliability increment of electrification
 An opportunity for private sector investment due to favorable economic feasibility of CHP plants
 Less constructional time and costs compared to the large scale power plants
 Free fuel for cogeneration
 Savings in capital investment and no need to special heating and cooling equipment

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 The capability of selling surplus generated power to the national-wide electricity grid
 Significant reduction in environmental pollutants
 Supportive policies of Ministry of Energy regarding the cogeneration power plants investors (small-scale power plants)
 Also, since the technology of cogeneration (CHP) is generally used in the form of distributed generation (DG), the special
advantages of distributed generation can also be added to the aforementioned.
 Conclusion
Nowadays, Cogenerations can be achieved through various methods and technologies, however the main idea has always been the
same: design and manufacturing of a high efficiency complexes to generate electricity besides recovering the wasted heat. The
recovered heat can be used either in district heating or in an industrial procedures.
Advanced technology of small scale generator beside effective recovery of wasted heat and also minimizing the losses due to the
transmission and distribution of electricity (Since CHP plants are usually established in the vicinity of customers) have improved the
efficiency of cogeneration systems up to a 90 percent.
In the current era, in which the energy crisis and high supplying costs are rising and also environmental pollutants are turning to be the
new serious challenge, applying the cogeneration process is an effective approach toward accurate management of energy resources
and therefore, reducing the costs.
Beside the issues regarding the energy crisis and the release of environmental pollutant, the economic feasibility of cogeneration plants
can solely attract the investors to a safe, secure and efficient investment in the energy segment of the country.

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 Project Financial Analysis
If the investors would have bought three 2,145 KW (MTU 20V4000 L63) generators by investing 3.075 M EUR, 49,254 MWh of
electricity would have been generated. The total generated electricity will be sold 0.0230 EUR/KWh to the national ministry of energy.
The CHP plant with an area of 2863.88 square meter is located at semnan industrial zone .There are several active industries around our
plant such as: Plastic, Polymer, chemical and etc. The nearest electrical substation is located 300 meter from our plant. A 20 MW CHP
Plant can be establish in the aforementioned location. The expected lifespan of the power plant is assumed to be 16 years and it benefits
the tax exemption and free fuel for the first 5 years of the operation. The summary of the assumptions are tabulated in the following
table:
UnitValueDescription
M EUR3.075Total fixed investment cost
KW6,435Plant’s nominal capacity
KW5,623Plant’s operational capacity
Percent92Plant’s Availability factor
MWh49,254Plant’s annual generation
EUR/m3
0.0205Fuel (Gas) fee (plant’s Tariff)
EUR/KWh0.0230Electricity sale fee in 2016 (to the national-wide electricity grid) (effective efficiency of 50%)
EUR/KWh0.0052Plant’s total cost of operation, maintenance in 2017

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Considering the aforementioned assumptions, the 16 years cash flow of the project will be as follows (all the prices are in the unit of
EUR):
87654321
Installation
year
Operating year
1,057,0761,068,4431,079,8091,091,1761,102,5421,113,9081,125,2751,136,6410Income
281,045281,045281,045123,659123,659123,659123,659123,6590
Fuel consumption
costs
551,128551,128551,128393,743393,743393,743393,743393,7430
Operation and
maintenance costs
418,371426,896426,896697,432708,799720,165731,531742,898-3,034,452
Net revenue
(considering 25%
tax)
161514131211109Operating year
1,047,5631,058,8271,070,0911,081,3561,092,6191,103,8841,115,1481,126,411
Income
281,045281,045281,045281,045281,045281,045281,045281,045
Fuel consumption
costs
551,128551,128551,128551,128551,128551,128551,128551,128
Operation and
maintenance costs
810,166419,684428,132436,580445,029453,476461,925470,372
Net revenue
(considering 25%
tax)

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 Financial indexes
Considering the aforementioned results, the financial indexes are as follows:
Percent19.2IRR
EUR5,762,725NPV
Month50Return period (since the start of operating phase)
M EUR3.03The total cost of EPC (6 MW power plant)
M EUR3.075The required investment
EUR118,616Pre-Production expenditures
Month12Constructing period