In a typical power plant delivering electricity to consumers, about one-third or 33% of the energy content of the primary energy source or fuel, such as coal or natural gas, reaches the consumer give or take 10% depending on the age of the plant. The rest is lost as heat to the atmosphere. In contrast, an MCCHP system converts 25% to 40% of the primary energy to electricity, and the remaining energy to heat, which is captured for hot water or space heating. In total, as much as 85-90% of the heat from the primary energy source goes to useful purposes when heat production does not exceed the demand. A typical CHP system consists of a prime mover to generate electricity, a heat recovery system to capture heat, a control system, an exhaust system, and an acoustic enclosure. CHP technologies and systems are well understood, and have been in use since the first days of US commercial power production. For three decades, larger CHP systems have been more economically justifiable than micro-CHP, due to the economy of scale. In the last decade, however, micro-CHP has become cost effective in many markets around the world, due to rising energy costs, particularly in Japan. The development of micro-CHP systems has been facilitated by recent technological developments of small heat engines.
A particular advantage of distributing power generation locally at the end-user rather than a remote power plant is that it can reduce the need for new power plant installations and free-up transmission line capacity for other uses (e.g. solar energy or wind turbine farms). There is also the advantage of it reducing long-range power transmission losses. Avoiding transmission line losses and power plant construction reduces costs, energy consumption and pollution for everyone. In a fully realized distributed power generation scenario, micro-CHP offers a reliable answer to the less predictable generation provided by other alternative energy sources and can, therefore, increase grid reliability.
In conventional power systems like the utility grid, thirty to forty percent (30- 40%) of the fuel used to produce energy is delivered to the household. The rest, or sixty to seventy percent (60-70%), is lost to the atmosphere as heat in the production or transmission of the electrical power. This contributes to global warming and the green- house effect.