Industrial cogeneration: its prices and risks

The economic and practical differences between power and steam generation are reviewed to explain why the trend has been to separate the two businesses--and to explain the costs and risks involved with overselling or mandating cogeneration. The nature of utility regulation discourages industrial power generation, while the limited range of steam distribution discourages utility investment. The author concludes that industrial rather than utility ownership is best for cogeneration if the definition is broadened to include the production of mechanical energy as well as steam. Pricing systems under three conditions of ownership are compared when regulated and nonregulated industries are involved, and when government and industry are involved. Several policy objectives are outlined to expedite this cooperation.