Uneconomical cogeneration

Michael Giberson

Cogeneration plants, which use a fuel source to produce both electric power and useful heat, can be very efficient projects. Whether particular projects are efficient will depend on the implementation, of course, and whether projects are profitable will depend on fuel and other costs and the revenues from selling power and heat.

From Syracuse, New York, the story of Project Orange illustrates some of the things that can go wrong on the business side of a cogen venture. My conclusion, based only on this and a few other news stories, is that the venture was well designed for the policy and regulatory foundations in place when the project went into operation in 1992 (especially, a PURPA-based contract to sell power to the local utility and a 40-year deal to sell cheap steam to Syracuse University), but regulatory rules-of-the-road changed.  The project wasn’t prepared to accomodate the changes. Litigation ensued.