When it comes to efficiency, there’s no doubt that micro combined heat and power (micro CHP) beats electricity supplied over the grid.

The electricity that comes to a typical single-family home in the U.S. is only about 33 percent efficient, according to the U.S. Environmental Protection Agency (EPA). That’s because the heat used to generate it in a coal- or gas-fired power plant is lost, as is some of the electricity itself during transmission over high-voltage power lines.

Compare that to micro CHP, which uses an on-site gas- or propane-fired engine to generate electricity while capturing the engine’s heat to produce hot water. These systems are typically 60 to 80 percent efficient, with some systems nearing 90 percent efficiency, according to the EPA.

Micro CHP is best suited for large, luxury homes with a high thermal load.

Micro CHP is already an established technology in Japan and Europe, but it has a much smaller share of the U.S. single-family market. That is primarily due to the systems’ cost. They currently run around $14,000 per kW installed, or $21,000 for a small, 1.5kW residential system, according to Fairfax, Virginia–based consultancy ICF. That per kW cost tends to go down as system size goes up; manufacturer Yanmar says its 5kW system typically costs between $40,000 and $60,000 installed, or $8,000 to $12,000 per kW.

There is a place for residential micro CHP, however. In fact, suppliers and builders who work with the technology say it can add up to considerable savings over time based on factors such as home size, location, and local electricity costs.

“I have it right on the side of my trucks: a payback of about five to seven years,” says Kent Thuesen, owner of Thuesen Mechanical in Mount Kisco, New York, who has installed about 20 CHP units over the last six years, including six propane micro CHP deployments. “For those projects where the numbers work, it’s hard to say no.”

Here are five factors to look at when considering whether micro CHP is right for a home.

Home size and thermal load

Micro CHP systems offer the best payback in areas where electricity costs are high. Shown is Yanmar’s CP5WN model.

The most likely residential candidates for micro CHP are large luxury homes of at least 3,000 square feet with a high thermal load, according to ICF. Amenities that contribute to the above-average thermal load include heated swimming pools, hot tubs, and spas, as well as heated driveways and walkways for snow removal.

“We want to utilize a minimum of around 60 percent of the available BTUs of heat that we produce,” says Michael Alfano, sales application engineer at Adairsville, Georgia–based Yanmar America. “To make it financially justifiable to install our 5kW system, somewhere between 5,000 and 7,500 square feet is usually our base on a residential application. Homes with radiant heat or hydronic heating work best.”

Local electricity costs

In the U.S., micro CHP has the best payback in areas that have high electricity costs.

The national average in September 2017 was 13.3 cents per kW hour, according to the EIA. Areas that typically exceed that average are the Northeast, California, Alaska, and Hawaii, as well as many large cities, according to Anne Hampson, principal in the distributed energy resources practice at ICF.

Keep in mind, too, that while a utility may report a lower-than-average per kW hour price, you’ll want to look at your client’s total electric bill to figure out what they’re actually paying.

“The utility might tell you that they’re selling a kilowatt at 6 cents [per hour], but when you take the entire bill and divide it by the kilowatts actually used, you find out that it’s closer to 21 or 22 cents,” Thuesen says. “Other service charges and taxes add up to a significant portion of the bill, which [the client is] not paying with CHP.”

Spark spread size

The spark spread, or the price difference between electricity and gas or propane in a given market, also comes into play. Using a lower-cost fuel source, CHP units can generate electricity at a cheaper rate than what the utility charges. “That’s a big key to the deployment of these systems,” Alfano says. “When you have a large spark spread, it becomes very viable to use a micro CHP system.”

Net metering options

States that allow net metering to spin a home’s electric meter backward when a micro CHP system generates excess power also help justify the cost. Yet while micro CHP combined with on-site battery storage is completely feasible for off-grid homes, that’s not where most systems are used.

“The majority of the systems we know about are still grid-connected,” Hampson says. “Those homeowners can run their systems to meter power back to the utility, and use that as another way to zero out their electric bill.

Power-loss potential

Other candidates for micro CHP are homes located in remote areas where extending utility service from the grid would be cost prohibitive, and those in areas where extreme weather events like hurricanes and blizzards could result in prolonged power outages. Propane’s advantage as an off-grid fuel is especially compelling as a power source for micro CHP at these types of homes. And unlike backup generators, which can fail after extended continuous use, micro CHP units are designed to run 24/7, if needed.

“One of the sweet spots for micro CHP is a large custom home in an area where the grid goes down, such as hurricane and tornado zones, or regions that experience big snowstorms and high winds,” says David Goswick, CEO of Houston-based HOUZE Advanced Building Science Inc., which has built four homes powered by micro CHP. “Think about [the impact of] Superstorm Sandy on Long Island, or Hurricane Harvey here in Houston.”

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Joe Bousquin