Cogeneration (also combined heat and power, CHP) is the use of a heat engine or a power station to simultaneously generate both electricity and useful heat.

Conventional power plants emit the heat created as a by-product of electricity generation into the environment through cooling towers, flue gas, or by other means. CHP or a bottoming cycle captures the by-product heat for domestic or industrial heating purposes, either very close to the plant, or — especially in Scandinavia and eastern Europe — for distribution through pipes to heat local housing. This is also called decentralised energy.

In the United States, Con Edison produces 30 billion pounds of steam each year through its seven cogeneration plants (which boil water to 1,000°F/538°C before pumping it to 100,000 buildings in Manhattan — the biggest commercial steam system in the world.

By-product heat at moderate temperatures (212-356°F/100-180°C) can also be used in absorption chillers for cooling. A plant producing electricity, heat and cold is sometimes called trigeneration or more generally: polygeneration plant.

Cogeneration is a thermodynamically efficient use of fuel. In separate production of electricity some energy must be rejected as waste heat, but in cogeneration this thermal energy is put to good use.

Thermal power plants (including those that use fissile elements or burn coal, petroleum, or natural gas), and heat engines in general, do not convert all of their available energy into electricity. In most heat engines, a bit more than half is wasted as excess heat (see: Second law of thermodynamics). By capturing the excess heat, CHP uses heat that would be wasted in a conventional power plant, potentially reaching an efficiency of up to 89%, compared with 55% for the best conventional plants. This means that less fuel needs to be consumed to produce the same amount of useful energy. Also, less pollution is produced for a given economic benefit.

Some tri-cycle plants have utilized a combined cycle in which several thermodynamic cycles produced electricity, and then a heating system was used as a condenser of the power plant's bottoming cycle. For example, the RU-25 MHD generator in Moscow heated a boiler for a conventional steam powerplant, whose condensate was then used for space heat. A more modern system might use a gas turbine powered by natural gas, whose exhaust powers a steam plant, whose condensate provides heat. Tri-cycle plants can have thermal efficiencies above 80%.

An exact match between the heat and electricity needs rarely exists. A CHP plant can either meet the need for heat (heat driven operation) or be run as a power plant with some use of its waste heat.

CHP is most efficient when the heat can be used on site or very close to it. Overall efficiency is reduced when the heat must be transported over longer distances. This requires heavily insulated pipes, which are expensive and inefficient; whereas electricity can be transmitted along a comparatively simple wire, and over much longer distances for the same energy loss.

A car engine becomes a CHP plant in winter, when the reject heat is useful for warming the interior of the vehicle. This example illustrates the point that deployment of CHP depends on heat uses in the vicinity of the heat engine.

Cogeneration plants are commonly found in district heating systems of big towns, hospitals, prisons, oil refineries, paper mills, wastewater treatment plants, thermal enhanced oil recovery wells and industrial plants with large heating needs.

Thermally enhanced oil recovery (TEOR) plants often produce a substantial amount of excess electricity. After generating electricity, these plants pump leftover steam into heavy oil wells so that the oil will flow more easily, increasing production. TEOR cogeneration plants in Kern County, California produce so much electricity that it cannot all be used locally and is transmitted to Los Angeles.

Topping cycle plants primarily produce electricity from a steam turbine. The exhausted steam is then condensed, and the low temperature heat released from this condensation is utilised for e.g. district heating.

Bottoming cycle plants produce high temperature heat for industrial processes, then a waste heat recovery boiler feeds an electrical plant. Bottoming cycle plants are only used when the industrial process requires very high temperatures, such as furnaces for glass and metal manufacturing, so they are less common.

Large cogeneration systems provide heating water and power for an industrial site or an entire town. Common CHP plant types are:

    * Gas turbine CHP plants using the waste heat in the flue gas of gas turbines
    * Combined cycle power plants adapted for CHP
    * Steam turbine CHP plants that use the heating system as the steam condenser for the steam turbine.
    * Molten-carbonate fuel cells have a hot exhaust, very suitable for heating.

Smaller cogeneration units may use a reciprocating engine or Stirling engine. The heat is removed from the exhaust and the radiator. These systems are popular in small sizes because small gas and diesel engines are less expensive than small gas- or oil-fired steam-electric plants.

Some cogeneration plants are fired by biomass, or industrial and municipal waste (see incineration).

"Micro cogeneration" is a so called distributed energy resource (DER). The installation is usually less than 5 kWe in a house or small business. Instead of burning fuel to merely heat space or water, some of the energy is converted to electricity in addition to heat. This electricity can be used within the home or business or, if permitted by the grid management, sold back into the electric power grid.

"Mini cogeneration" is a so called distributed energy resource (DER). The installation is usually more than 5 kWe and less than 500 kWe in a building or medium sized business. (See our manufacturer: www.schmitt-enertec.com)

Current Micro- and Mini-CHP installations use five different technologies: microturbines, internal combustion engines, stirling engines, closed cycle steam engines and fuel cells.

Perhaps the first modern use of energy recycling was done by Thomas Edison. His 1882 Pearl Street Station, the world’s first commercial power plant, was a combined heat and power plant, producing both electricity and thermal energy while using waste heat to warm neighboring buildings. Recycling allowed Edison’s plant to achieve approximately 50 percent efficiency.

By the early 1900s, regulations emerged to promote rural electrification through the construction of centralized plants managed by regional utilities. These regulations not only promoted electrification throughout the countryside, but they also discouraged decentralized power generation, such as cogeneration. They even went so far as to make it illegal for non-utilities to sell power.

By 1978, Congress recognized that efficiency at central power plants had stagnated and sought to encourage improved efficiency with the Public Utility Regulatory Policies Act (PURPA), which encouraged utilities to buy power from other energy producers.

Cogeneration plants proliferated, soon producing about 8 percent of all energy in the U.S. However, the bill left implementation and enforcement up to individual states, resulting in little or nothing being done in many parts of the country.

In 2008, Peter Kindt, chairman of the company Alfagy Ltd, said that "We think we could make about 19 to 20 percent of U.K. electricity with heat that is currently thrown away by industry."

Outside the U.K., energy recycling is more common. Denmark is probably the most active energy recycler, obtaining about 55% of its energy from cogeneration and waste heat recovery. Other large countries, including Germany, Russia, and India, also obtain a much higher share of their energy from decentralized sources.