Applied Thermal Engineering 114 (2017) 14031413

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Applied Thermal Engineering

journal homepage: www.elsevier.com/locate/apthermeng

Research Paper

The prospects of the expanded diffusion of cogeneration to 2030 Study

on new value in cogeneration
Daisuke Tomofuji , Yoshinori Morimoto, Eitaro Sugiura, Toshiyasu Ishii, Atsushi Akisawa
Advanced Cogeneration and Energy Utilization Center Japan, 1-16-4, Toranomon, Minato-ku, Tokyo, Japan

h i g h l i g h t s g r a p h i c a l a b s t r a c t

The power source value of the Power source value calculation result BCP value calculation result

cogeneration in Japan was Calculation examples

/kWh
Approx. 8-49 US
Power sales price conversion (USD/kWh)
Up to 1,500 US/year/kW
Significant value comparable to energy cost reduction
*Not including the wheeling unit price
quantitatively evaluated. Short term
Peak
Day
0.49
0.14 - 0.2
Items of BCP value
Assessment results
USD/year/kW
(2016) (1) Avoidance of damage due to outage 28 - 775
0.08 - 0.11

The relationship between BCP value
Night
(2) Avoidance of damage due to request
Medium and Peak 0.49 - 0.5 Direct
for power conservation (supply restrictions)
123 - 488
BCP
long terms Day 0.09 - 0.21 value

and beneficiaries generated was

(3) Increase in real estate value 76 - 225
(2030) Night 0.11 - 0.1
(4)Assurance of the functions of disaster centers - 9

kW Total, (1) (4) About 225 1,500

shown. Pumping up
Power sources to be replaced by
cogeneration
3,000
Secondary BCP value
(not quantified in this study)
2,500
Peak time Image of 2030

By installing cogeneration, BCP value
USD/year/kW
CostBenefit

Oil-fired thermal power Annual Load Curve 2,000

Daytime
1,500 Direct

was quantitatively evaluated. LNG-fired thermal power

Nighttime
1,500
1,000
About 710
USD/year/kW
BCP
value
225
Coal-fired thermal power

BCP value as the example of the urban

Energy
Operating cost
500 940 cost
reduction 940
Hydro power
Initial cost
0
development model were shown. Nuclear power Yearly operating hours
Additional cost(C)
High case Low case
Additional benefit(B)

The technical recommended Time

Prospective power sources for replacement by cogeneration systems

Short-term (2016) Long-term (2030)

Fuel Power Emergency: power outage
Total floor
periods Warm / chilled
CHP water area: About

requirements for cogeneration to Peak time Conventional oil-fired thermal power

Conventional LNG-fired thermal
Conventional oil-fired thermal power
Sample
calculation
(major city
Newly built
Power 300,000
square
New MACC/ office1 Existing office2 meters
Daytime power/

realize BCP were shown. Conventional oil-fired thermal power model) Scale of
Conventional oil-fired thermal power
Public road

Existing cogeneration
Conventional coal-fired thermal power/ New IGCC/ hotel
Nighttime input: GE
Existing MACC Conventional coal-fired thermal power
Steam Existing office3 4,000kW 2
MACC: More Advance Combined Cycle,IGCC: Integrated coal Gasification Combined Cycle

a r t i c l e i n f o a b s t r a c t

Article history: In light of the situation after the Great East Japan Earthquake, new attention has been focused on cogen-
Received 8 April 2016 eration for its value as a distributed power source (i.e., power source value) and as a means enabling busi-
Revised 28 July 2016 ness continuity even in times of grid power supply shortage and emergencies (i.e., BCP value). The study
Accepted 13 September 2016
of expanded diffusion of cogeneration to 2030 examined these forms of value and considered their sub-
Available online 14 September 2016
stance and quantitative assessment.
In connection with its power source value, cogeneration can be rated in terms of reduction in the total
Keywords:
power cost resulting from replacement of superannuated power plants. The study recognized a certain
Cogeneration
Distributed power source
value for this effect.
BCP As for its BCP value, the study discovered a methodology for quantitative assessment in terms of the
Non-energy benefit monetary value of loss avoided by cogeneration. Furthermore, a trial calculation of BCP value using this
methodology suggested that cogeneration could yield a value equivalent to the ordinary effect for reduc-
tion of energy use.
2016 Elsevier Ltd. All rights reserved.

1. Introduction The Advanced Cogeneration and Energy Utilization Center

JAPAN (A.C.E.J.) launched the Advanced Cogeneration (AC)
The Strategic Energy Plan determined by the Cabinet in April Research Group with the cooperation of both industrial and com-
2014 explicitly states the aim of expanded installation of cogener- mercial users of cogeneration systems, experts in the field, and
ation systems. other concerned parties for studies from October 2012 to March
2014. The Group estimated the cogeneration capacity that could
possibly be installed by 2030, identified tasks for this installation,
Corresponding author. and made related proposals. It also conducted examinations on
E-mail address: tomofuji@ace.or.jp (D. Tomofuji). the worth and value of cogeneration system installation, which is

http://dx.doi.org/10.1016/j.applthermaleng.2016.09.071
1359-4311/ 2016 Elsevier Ltd. All rights reserved.
1404 D. Tomofuji et al. / Applied Thermal Engineering 114 (2017) 14031413
a key point for expanded diffusion, with a particular focus on value
as a type of distributed power source and contribution to BCPs.1
The following is an outline of the results of the studies on cogener-
ation value.
2. Summary of the worth and benefits of cogeneration
installation
Producing both thermal and electrical energy, cogeneration sys-
tems also help to conserve energy and reduce CO2 emissions. Their
value as such is widely recognized, and is summarized as follows,
along with other elements.
2.1. Systems for effective use of power and heat that also conserve
energy and reduce CO2 emissions
Energy conservation and reduction of CO2 emissions may be
regarded as the basic point of installing cogeneration systems.
Through efficient use of power and heat, the user obtains the value
of energy conservation and CO2 emission reduction. The effects for
saving energy and lowering CO2 emissions may be expected to rise
even higher with future improvement of machine efficiency and
technology for utilization of exhaust heat. In addition, efforts to
procure more low-cost fuel, increase machine efficiency, and
reduce costs constitute approaches to assuring economic merit
without detracting from the value of energy conservation and
CO2 emission reduction.
2.2. Distributed power sources contributing to the power supply
demand balance
The installation and operation of cogeneration systems making
full use of exhaust heat enable a high-efficiency supply of power. In
addition, as compared to large-scale power sources, cogeneration
systems take less time to install and can function as instantaneous
means of relieving tightness in the power supply. To further
heighten these effects demands additional improvement in sys-
temic aspects, to allow smoother grid connection and the flow of
power back into the grid.
2.3. Energy systems enabling the continuation of economic activities
and urban & life functions (BCP)
Cogeneration systems enable construction of energy systems
for use of the power and heat produced by them in units of entire
offices, buildings, or districts, for high levels of efficiency and
autonomy even in emergencies. These systems will help to assure
the continuation of economic, urban, and life activities even in
emergencies. The worth of cogeneration system installation is
likely to rise higher along with the development of area-wide
energy systems2 such as smart cities and smart communities, and
the formation of mechanisms attaching importance to the continuity
of business and urban functions (BCP).
Since the Great East Japan Earthquake, there have been stronger
desires to alleviate tightness in the power supply and assure the
continuation of economic activities and urban & life functions even
in emergencies. Under these circumstances, power source value as
a distributed power source and BCP value, i.e., ability to assure the
continuation of economic activities, are attracting additional atten-
tion as new values of cogeneration. We consequently decided to
1
Business continuity plans; these plans lay down activities, methods, and means to
be undertaken in ordinary times to enable the continuation or prompt resumption of
main business even in the event of damage from disasters or accidents [29].
2
Networking of areas with a spatial expansion such as facilities, buildings, and
districts, for interchange and joint use of energy.
examine these items as elements which will have substantial sig-
nificance for the subsequent diffusion of cogeneration systems
(Fig. 1).
3. Study of power source value
In the Strategic Energy Plan, distributed power sources are posi-
tioned as systems that contribute to the supply-demand balance
through mutual complementation with centralized power sources
[1]. In addition, immediately after the Great East Japan Earthquake,
distributed power sources are used as a power supply capacity in
the summer and winter [2]. It is projected that, as of 2030, about
40 GW [3] in thermal power plant capacity (coal- and LNG-fired
sources combined) and 25 GW [4,5] in nuclear power station
capacity will have been in operation for at least 40 years. In this sit-
uation, cogeneration systems, which can be installed and started
up in a short time, will conceivably have kW value for supply capa-
bility. Furthermore, the effective operation of cogeneration sys-
tems also has economic benefits in the form of energy
conservation and reduction of fuel costs and CO2 emissions. The
systems are therefore thought to also have a power source value
(kW h value), in that they can help to reduce the total power cost
through replacement of superannuated thermal power. The cogen-
eration that is high power generation efficiency, large capacity to
meet the heat demand, and transfers the surplus power to the
commercial system exerts power source value [6]. There are high
hopes in society as a whole for the effects of cogeneration systems
for reducing energy costs, conserving energy, and reducing CO2
emissions. We therefore considered quantification based on the
concept of avoidable cost as a method for assessing this value.
More specifically, we decided to assess and quantify its cogenera-
tion value in terms of the cost that can be avoided by the shutdown
of other power sources that would presumably remain in operation
if there were no cogeneration systems, in each time of day.
Fig. 2 shows the assumed mix of power sources for replacement
in each time period. Table 1 shows that calculations were made on
the basis of data from the Cost Estimation and Review Committee
[7,8]. In the case of existing thermal power, for example, the calcu-
lation assumed that figures would stay on the current level for
items such as unit construction cost, operation & maintenance
(O&M) cost, and transmission-end efficiency. For new thermal
power facilities, it adopted data for MACC and IGCC systems, and
took account of a future increase in efficiency. As for long-term fuel
prices, it assumed oil and coal costs would stay on the current
level, and LNG costs would be two-thirds as high as the current
level, in light of the prospects for cost reduction along with input
of shale gas and the diversification of supply sources.
The calculation results are shown in Table 2. Although the
results differ depending on the time period, the value reaches
40 yen/kW h (;0.49 USD/kW h) at maximum in the peak period.
The average unit price set by ordinary electric power companies
in power sales generated by the conventional cogeneration sys-
tems has been low at about 5 yen/kW h (;0.06 USD/kW h) [6].
For this reason, promotion of installation of cogeneration requires
return of a value commensurate with the power source value. With
proper evaluation, cogeneration may be expected to play a role in
replacement of many thermal power sources, which are becoming
superannuated, over the medium and long terms.
4. Study of BCP value
4.1. Description of benefit related to BCP value
The Great East Japan Earthquake caused a power source
shortage that led to power unavailability and requests for power
 D. Tomofuji et al. / Applied Thermal Engineering 114 (2017) 14031413 1405

Value Value as a system for effective use of Basic value of

recognized power and heat, that also saves energy and cogeneration systems
from the past for saving energy
reduces CO2 emissions

Power source value as a type of BCP value as an energy system

distributed energy system contributing
to the power supply-demand balance
Value as power supply and for
New value of reduction of power costs (fuel costs)
cogeneration through replacement of superannuated
systems thermal power plants etc.
Quantitative assessment of the costs
avoided due to the shutdown of power
sources replaced by cogeneration
(avoidable prime cost) as the power
source value of cogeneration.
enabling the continuation of
economic activities and urban & life
functions
Value in the aspects of avoidance of
damage from outages and supply
restrictions, improvement of real estate
value, assurance of the functions of
disaster centers, and ripple-effects for
local economies. It should be noted,
however, that such value (benefit) will
not necessarily return to the investor.

Fig. 1. Conceptual diagram of cogeneration system value.

Fig. 2. Prospective annual load curve in 2030 and assumptions regarding power source types that could be replaced by cogeneration.

conservation (in effect, supply restrictions). This experience reaf-
firmed the importance of assuring autonomous power sources for
BCP and BLCP (business & life continuity plans). This, in turn, led
to recognition of the value of cogeneration systems in this aspect.
The value of cogeneration includes not only the avoidance of
direct loss/damage such as the cost of material damage, lost earn-
ings, and opportunity loss due to outages and supply cuts, but also
secondary value such as the economic ripple effects of investment,
and the rises in the value of real estate. As this suggests, cogener-
ation is projected to have a secondary value based on approaches
to BCP. These values are collectively termed BCP value herein.
To promote cogeneration installation, it is important to clarify
these values and take measures for a proper return of the same
to investors. Thus far, nevertheless, there have been few studies
1406 D. Tomofuji et al. / Applied Thermal Engineering 114 (2017) 14031413

Table 1
Cost calculation of alternative power source.

C heavy oil LNG Coal

Conventional type New model (MACC) Conventional type New model (USC) Conventional type
2010s thermal power plant
fuel import price USD/BBL 84.16
USD/t 584.37 584.37 113.91 113.91
a
unit construction cost USD/kW 2375 1500 1500 2875 2875
operation & maintenance costa USD/kW/year 68.9 43.5 43.5 86.3 86.3
transmission-end efficiencyb % 37.2% 50.0% 38.4% 39.4% 36.4%
fuel costc USD/kW h 0.18 0.10 0.13 0.06 0.06
CO2 emission factor kgCO2/kW h 0.69 0.356 0.463 0.828 0.896
2030s thermal power plant
fuel import priced USD/BBL 84.16
USD/t 389.58 389.58 113.91 113.91
unit construction costa USD/kW 2375 1500 1500 3593.75 2875
operation & maintenance costa USD/kW/year 68.9 43.5 43.5 107.8 86.3
transmission-end efficiencyb % 37.2% 55.9% 38.4% 45.0% 36.4%
fuel costc USD/kW h 0.18 0.06 0.09 0.05 0.06
CO2 emission factor kgCO2/kW h 0.69 0.318 0.463 0.724 0.896

Note: The above figures are converted to USD from JPY as 1 USD = 80 JPY.
a

Unit construction cost and operation & maintenance cost are refered to Ref. [7].

Unit construction cost and operation & maintenance cost of conventional type (LNG and Coal) are assumued as the cost of 2010s new model.
b

The transmission-end efficiency of all new model and conventional type of C heavy oil is refered to Ref. [7].

The transmission-end efficiency of conventional type of LNG is average value of effiency of LNG steam power generation of Ref. [8].

The transmission-end efficiency of conventional type of coal is average value of the plant less than average coal-fired thermal power efficiency of Ref. [8].
c
Fuel cost is calculated from fuel import price ,transmission-end efficiency,and Petroleum and Coal Tax.
d

Fuel import price of crude oil CIF price and steam coal CIF price in 2030 is assumued as the 2010s average price.

Fuel import price of LNG CIF price in 2030 is assumued as two-thirds of the 2010s average price.

Table 2
Results of assessment of cogeneration power source value.

Calculation examples kW valuea kW h valueb Value for reduction of CO2 Power sales pricec
(USD/kW/year) (A) (USD/kW h) (B) emissions (USD/kW h) (C) (USD/kW h) (D) = (A)/hours of operation + B + C
Short term (2016)
Peak 68.9 0.18 0.00125 0.49
Day 43.568.9 0.130.18 0.00050.00125 0.140.2
Night 86.343.5 0.060.1 0.0021250 0.080.11
Medium and long terms (2030)
Peak 68.9 0.18 0.001250.0175 0.490.5
Day 106.5d68.9 0.060.18 00.0175 0.090.21
Night 258.8d86.3 0.050.06 0.018750.0275 0.110.1

[Peak time]: Summer (Jul.Sept.), weekdays (including Saturdays) 1:00 p.m.4:00 p.m.
[Daytime]: Weekdays except summer (including Saturdays, but excluding designated year-end, New Year and a succession of holidays in early May) 8:00 a.m.1:00 p.m.;
4:00 p.m.10:00 p.m.
[Nighttime]: Time zones other than those mentioned above
[Exchange rate]: 1 USD = about 80 JYP (the average rate over the months JanuaryMarch 2012)
[Estimated hours of operation of concentrated power sources]:

Peak periods: 225 h/year.

Daytime periods: 4074 h/year.

Nighttime periods: 7008 h/year (applying an 80% operating rate (availability factor) on the assumption of periodic inspection and other times of outage during the 8760
annual operating hours).
[CO2 emission reduction value]: Calculation based on addition of a unit value of 3 USD/ton of CO2 (the latest price applied in CO2 transactions) over the short term and 40
USD/ton of CO2 [7] over the long term for the amount of CO2 emission reduction in the case of comparison between the conventional system (gas burner plus alternative
power source) and gas cogeneration (2-MW GE and 10-MW GT types).
a
Value for reduction of O&M cost & construction cost.
b
Value for reduction of fuel costs.
c
Power sales price doesnt include the wheeling unit price.
d
Converting the construction costs of the centralized power sources into annual costs, using the conditions that the operating life is 40 years and the discount rate is 3%.

in this area, and methodology for assessing BCP value has not been
established.
In the present study, besides defining this value of cogeneration
from a common perspective with respect to each item while taking
account of the independence of each, we also set forth the
main recipients of that value (see Table 3). In the aspect of BCP
value, there is also a benefit for local communities, whose recipi-
ents include community residents. It must be borne in mind that
the benefit will not necessarily be returned to the investing
principals.
In addition, we examined methodology for quantitative assess-
ment under each item related to BCP value from the perspective of
impact cost,3 and made trial calculations for a major-city model.
Furthermore, cogeneration presumably has a supply value for both
power and heat, but in the present study, the examination focused
3
The term impact cost refers to the monetary damage incurred because of power
outage and supply restriction. It varies with factors such as the type of customer,
region, season, duration and frequency, and presence or absence of advance notice
and reserve sources.
 D. Tomofuji et al. / Applied Thermal Engineering 114 (2017) 14031413
Table 3
Outline of benefit items and recipients.
Benefits Major benefit
recipients
(1) Avoidance of damage due to outage Building users
(2) Avoidance of damage due to request
for power conservation (supply
restriction)
(3) Increase in real estate value Building users and
land & property
owners
(4) Assurance of the functions of disaster Local governments
centers and residents
(5) Ripple-effects for local economies Local governments
and residents
on the power generation function in consideration of use in emer-
gencies. Further, Fig. 3 shows technical recommended requirements
for the continued operation of cogeneration in emergencies. In this
chain of studies, cogeneration would be equipped with the mini-
mum conditions (1-a, 3-k, and 4-m of Fig. 3) required for an
autonomous source.
4.2. Methodology for assessment of BCP value
We examined methodology for quantitative assessment of
value under each item of benefit identified above. For the ripple
effect for local economies, however, the study was confined to a
qualitative assessment, because it was not possible to quantify this
effect.
In the present study, we assessed the impact cost in the event of
occurrence of a single disaster during a period of 15 years, which is
equivalent to the design service life of cogeneration systems. In
addition, the damage caused by the power outage affects the
power outage duration. So we assessed the power outage duration
was from actual average duration (8.6 h [9]) in the year when the
Great East Japan Earthquake occurred, to the duration (72 h [10])
in local governmental disaster-prevention plans. Table 4 shows
the premises of the assessment. The following is a description of
the assessment methodology.
4.2.1. Avoidance of damage due to outage
Impact cost can be avoided by installation of facilities to address
it (cogeneration systems and normal generators). This benefit can
be assessed using the equation shown below. Here, the term im-
pact cost refers to the monetary damage incurred because of
power outage and supply restriction. It varies with factors such
as the type of customer (industrial classification, etc.), region, sea-
son, duration and frequency, and presence or absence of reserve
sources. A range of values was calculated for each industry using
data from an existing study by the Electric Power System Council
of Japan [11].
B1;avoid Bimpact  P1;avoid  T1;fail  Rexpected
B1;avoid : avoidance of damage due to outage yen=year
Bimpact : cost of the impact of outage yen=kW h
P1;avoid : power for avoidance of outage kW
T1;fail : outage duration h=time
Rexpected : projected frequency of occurrence times=year
1407
Outline of benefits

Avoidance of damage in the event of outages and requests for power conservation (lost
profit, lost opportunities, etc.)

Including loss due to decline in corporate value

Value of avoidance of damage by building users as summarized in (1) and (2)

Conceivable value due to alleviation of real estate risks (associated with increased
vacancy rates, regulations, etc.) as benefits beyond the above

Functions expected to serve as disaster centers for employees and residents in surround-
ing areas

Effects secondary to benefits noted in (1)(4), such as increases in consumption and
profit accompanying the increase in employee population due to the economic ripple-
effects and vacancy rate improvement resulting from investment
The impact cost includes not only the direct damage in forms
such as physical damage as well as lost profit and lost opportunity
but also loss due to indirect decline in corporate value, in forms
such as loss of credibility among customers.
4.2.2. Avoidance of damage due to requests for power conservation
(supply restrictions)
As in the case of avoidance of damage due to outage, the impact
cost which could be avoided by installation of compensatory facil-
ities (cogeneration systems and normal generators) is assessed by
the equation shown below. The amount of impact cost per unit of
power use is estimated to be the same as in the case of avoidance
of damage due to outage.
B2;avoid Bimpact  P2;avoid  T2;fail  Rexpected
B2;avoid : avoidance of damage due to power conservation yen=year
Bimpact : cost of the impact of power conservation yen=kW h
P2;avoid : power for avoidance of power conservation kW
T2;fail : power conservation duration h=time
Rexpected : projected frequency of occurrence times=year
If there is a request for conservation of grid power supply by a
certain percentage (X), the power required for avoidance of this
conservation using cogeneration is equivalent to the amount of
reduction in the contract power by installation of a cogeneration
system (Fig. 4), and can be calculated by the following equation.
P2;avoid PCHP  X
P2;avoid : power for avoidance of power conservation kW
PCHP : installed cogeneration capacity kW
X : Power conservation rate %
As noted in Table 4, the rate of reduction on the power use basis
was set at 4.6% in summer and 1.7% in winter in the case of
requests for power conservation (at rates of 15% [12] in summer
and 10% [13] in winter)[14]. This setting is based on the perspec-
tive shown in Fig. 5, in light of the actual figures for power demand
by time of day in fiscal 2010.
1408 D. Tomofuji et al. / Applied Thermal Engineering 114 (2017) 14031413

Fig. 3. Technical recommended requirements for the continued operation of cogeneration in emergencies.
 D. Tomofuji et al. / Applied Thermal Engineering 114 (2017) 14031413 1409

Table 4
Methodology for BCP value assessment and premises.

Benefit Assessment methodology and premises

(1) Avoidance of damage due to outage
(2) Avoidance of damage due to request for power
conservation (supply restriction)
(3) Increase in real estate value
(4) Assurance of the functions of disaster centers

Estimated on the basis of existing studies (by the Electric Power System Council of Japan) on the impact
cost in the event of outages and requests for power conservation (lost profit, lost opportunity, decrease in
corporate value, etc.)

Trial calculation as impact cost in the event of occurrence of 1 disaster in 15 years, the design service life
of cogeneration systems (the same perspective as insurance cost in the event that no disaster occurs as
things turn out)

Outage duration: estimated on actual average duration (8.6 h) in FY2010 (when the disaster struck) -
duration in local governmental disaster-prevention plans (72 h)

Supply restriction duration: 50 days  11 h (9:00 a.m.8:00 p.m.) on summer weekdays, 62 days  12 h
(9:00 a.m.9:00 p.m.) on winter weekdays

Supply conservation rate: estimates 4.6% in summer and 1.7% in winter, based on trial calculation of the
rate of decrease in the amount of power use during the above seasons and time periods, in the event of
request for reductions of 15% in summer and 10% in winter relative to the peak power (based on actual
power demand figures in FY2010)

The power corresponding with disaster-prevention load was not included in the calculations under (1)
and (2)

Value of avoidance of damage by building users as summarized in (1) and (2)

Other benefits: value of alleviation of real estate risks (associated with high vacancy rates, regulations,
etc.) estimated on the basis of data from a questionnaire in the real estate field (Results of the 8th Real
Estate Market Survey, conducted in October 2011 by the NLI Research Institute)

Cogeneration contribution rate (share of the entire value increase occupied by cogeneration): 10% (setting
based on the value system in the DBJ BCM Rating Loan Program)

Estimates based on the survey on amounts which residents in areas affected by planned power outages
are willing to pay (e.g., surveys conducted by the Center for Low Carbon Society Strategy, Japan Science
and Technology Agency)

Trial calculations ranging from a low case (8.6 h) to a high case (72 h) for use of disaster centers in times of
outage, etc. (evacuation sites accommodating people who cannot return to their homes from the com-
pany, etc.)

may be expected to yield earnings on a stable basis, because of the

Request
decline in various risks as well as the increase in earnings along
Power

for power with rental or leasing fee increase.
[kW] conservation Extent of avoidance
due to cogeneration The increase in net earnings along with the rise in rental or leas-
installed capacity
Grid power ing fees is presumably included in the assessments of avoidance of
damage due to outage and avoidance of damage due to requests for
power conservation (supply restrictions). Here, it was therefore
Grid power
decided to assess the effect for avoidance of earnings decline deliv-
Cogeneration ered by the lessening of risks.
power

B3;improve Pprice  Rpremium;avoid  Cratio

Without cogeneration With cogeneration B3;improve : increase in real estate value yen
Rpremium;avoid : risk premium avoided %
Fig. 4. Perspective on avoidance of damage due to power conservation (supply
restriction). Cratio : cogeneration contribution rate %

4.2.3. Increase in real estate value
The following equation could basically be used for assessment
of real estate profitability in real estate appraisals.
Pprice Rnet =Crate
Pprice : earnings price yen
Rnet : net earnings yielded by the real estate price yen
Crate : real estate capitalization rate %
Return yield is an indicator used for assessment of revenue risks
(associated with increased vacancy rates, regulations, etc.) of the
property in question. This yield declines along with the level of
income risks, i.e., in the case of properties offering more stable
net earnings and high profitability. Real estate with excellent fea-
tures in respect of resistance to disasters and energy conservation
Here, net earnings were estimated to be about 80% as high as
the rental/leasing income. This is because costs associated with
O&M, repair, public taxation, nonlife insurance, and other items
generally come to between 10 and 20% of this income [15]. The
return yield was set with consideration of the results of an existing
survey conducted by the Japan Real Estate Institute [16].
Risk premium is an indicator of the latent uncertainty in the
real estate investment market. It is lower for real estate with a high
stability. As shown in Fig. 6, the return yield is obtained by adding
this risk premium to the government bond yield (non-risk yield)
[17].
The avoided risk premium was put in the range of 0.10.3% in
the present study, in light of the results of a questionnaire survey
[18] conducted by the NLI Research Institute with business persons
and experts in the real estate field. In this survey, the top response
to a question about the level of risk premium for real estate with
excellent features in respect of resistance to disaster and energy
conservation relative to the return yield of real estate without such
1410 D. Tomofuji et al. / Applied Thermal Engineering 114 (2017) 14031413

7,000
Power use (tens of thousands of kW)

No particular

Amount of power subject to reduction
consideration
when requests are made for power
6,000 [kWh]
conservation (kWh)

5,000

4,000

3,000
Power conservation
time period
2,000

1,000 Uncertain

0
10:00
11:00
12:00
13:00
14:00
15:00
16:00
17:00
18:00
19:00
20:00
21:00
22:00
23:00
0:00
1:00
2:00
3:00
4:00
5:00
6:00
7:00
8:00
9:00
9:00

Fig. 7. Results of the survey on real estate risk premium.

Fig. 5. Calculation of the power conservation rate on the power use basis.
kW h (;0.3410.6 USD/kW h), in consideration of the power tariff
in normal times (about 27 yen/kW h ; 0.34USD/kW h).
This study applied the outage avoidance power (the power sup-
Environmental plied on a priority basis to disaster centers) to the figure corre-
Portion of avoidance
Real estate yield

risk
due to BCP assurance sponding to the power load ratio items requiring maintenance
Risk premium of Market risk of functions (life protection, safety assurance, evacuation support,
real estate Risk premium of etc.), in reference to the study [21] of the Institute for Building
with ordinary Business risk real estate with
specif ications BCP assurance Environment and Energy Conservation (Figs. 8 and 9).
Other risk
Government
bond yield
4.3. Sample results of B/C assessment taking account of BCP value
Fig. 6. Diagram of real estate risk premium in BCP value assessment.
We attempted a quantitative assessment of BCP value for items
(1)(4) in Section 4.2, using the major city model shown in Fig. 10
(extended floor area of about 300,000 square meters, cogeneration
features was consideration of a decline in the range of 0.10.3% capacity of 4000 kW  2). The total floor area was a reference to
(Fig. 7). the national average floor area of district heating and cooling
In quantification, the rate of cogeneration contribution to value [22], and the power and thermal load of each building was a refer-
(the share of the rise in value occupied by cogeneration) was put at ence to design manual of cogeneration [23].
10% in the hard aspect, based on the assessment system Further, to exert a BCP value, it is necessary to ensure power for
in the BCM Rating Loan Program of the Development Bank of BCP. The prime mover was a gas engine with high power genera-
Japan [19]. tion efficiency in order to ensure the power (about 50% of peak
power) required to BCP, and use up the waste heat of cogeneration
4.2.4. Assurance of the functions of disaster centers during the lowest heat demand season(autumn and spring). The
Facilities such as evacuation sites and shelters accommodating cogeneration ensuring necessary power for BCP can exert BCP
people unable to return home in the event of disaster are expected
to function as disaster centers for community residents, etc. in
times of power outage due to disaster. If cogeneration systems
Legend
are used to maintain their functions by continued supply of a por-
: 1) Items requiring maintenance of functions
tion of their power needs, their value to the community welfare : 2) Items whose functions should be maintained by BLCPs
may be assessed by the following equation. : 3) Items with functions whose maintenance is advisable in BLCPs
: 4) Items whose functions should be maintained if possible
: 5) Items whose functions need not be maintained in emergencies
B4;disaster centers Pwillingness  P4;avoid  T4;fail  Rexpected
B4;disaster centers : assurance of the functioning of disaster centers
yen=year
Pwillingness : amount local localresidents are willing to pay
yen=kW h
P4;avoid : power for avoidance of outage kW
T4;fail : outage duration h=time

The amount which residents are willing to pay for avoidance of

outage is in the range of 546853 yen/kW h (;6.810.7 USD/
kW h), according to a questionnaire survey conducted by the Cen- 1. Offices 2. Collective 3. Commercial 4. Hotels 5. Hospitals
housing facilities
ter for Low Carbon Society Strategy, Japan Science and Technology
Agency (assuming a planned outage of two hours, with advance Fig. 8. Power load shares by demand type in emergencies (supply suspension on
warning) [20]. This amount was put in the range of 27853 yen/ the order of a few hoursone day due to planned outages, etc.).
 D. Tomofuji et al. / Applied Thermal Engineering 114 (2017) 14031413 1411

Legend
: 1) Items requiring maintenance of functions
: 2) Items whose functions should be maintained by BLCPs
: 3) Items with functions whose maintenance is advisable in BLCPs
: 4) Items whose functions should be maintained if possible
: 5) Items whose functions need not be maintained in emergencies
1. Offices 2. Collective 3. Commercial 4. Hotels 5. Hospitals
housing facilities
Fig. 9. Power load shares by demand type in emergencies (supply suspension for a
long duration due to earthquakes, etc. until resumption of ordinary service (for
several days after occurrence)).
Fuel Power Emergency: power outage
value even if the capacity (ex. 370 kW) is smaller than the capacity
of this present study [24].
Using a case without cogeneration as the baseline and taking
account of the improvement in efficiency, reduction of cost [24]
by 2030, and cost of energy infrastructure (heat pipe[25] and
power line[26]), we quantified the additional cost (C) and addi-
tional benefit (B) in the event of cogeneration installation, and
assessed the B/C ratio. The calculation assumed office and hotel
net earnings at about 8000 yen/month/m2 (;100 USD/month/
m2). The capitalization rate was assumed to be 4.3% for office
buildings and 6.2% for hotels. Table 5 and Fig. 11 outline the calcu-
lation results [27]. Table 6 presents the detailed figures [28].
In the case of this model, the BCP value per kW of cogeneration
capacity was evaluated as an economic value of about 18,000
120,000 yen/year/kW (;2251500 USD/year/kW), and the B/C ratio
reached the range of 1.43.0. Therefore, cogeneration is thought to
have a BCP value with a sufficient impact for the value delivered by
operation in normal times (an energy cost reduction of about
75,000 yen/year/kW ; 940 USD/year/kW). In addition, the B/C
value rises substantially as a result. It must be noted, however, that
the size of the BCP value has a certain range of variation, because it
differs depending on diverse items of the individual principals
receiving the benefit, such as size, type of industry, business model,
and value outlook including desire to avoid risks as well as condi-
tions related to the occurrence of disaster.
In addition, as mentioned above, the BCP value is not necessar-
ily returned to the investing parties. For this reason, in order to
promote cogeneration, more studies are necessary on ways to

Warm / chilled
CHP water Sample calculation Secondary BCP value
Power (major city model) (not quantified in this study)
CostBenefit (USD/year/kW)

Newly built
Direct
office1 Existing office2 2,500 BCP value (4)9
(3)225
2,000
Public road

Energy cost (2)488

Existing reduction
hotel 1,500
About 710 (1)775 (3):76
Steam Existing office3 1,000 USD/year/kW (2):123
(1)28
Construction of a new building in the area of an 500 Operating cost*2 940 940
existing large office building and existing hotel Initial cost*1
0
Total floor area: About 300,000 square meters High case Low case
Scale of cogeneration input: GE 4,000kW 2 Additional Additional benefit(B)
Supply of exhaust cogeneration heat (steam, and cost(C)
warm /chilled water) to the buildings in the area Note: The above figures are converted to USD from JPY as 1USD=80JPY
*1: The initial cost is a 15-year average value.(The service life of cogeneration
Business form: An energy service business is 15 years)
(specified supply (or specified electricity) *2: The operating cost consists of fuel costs, maintenance costs, tariffs for
business, or heat supply business) power supply to supplement on-premise generation, and ancillary charges.

Fig. 11. Results of calculation of BCP value and B (additional benefit)/C (additional
Fig. 10. Major city model. cost) based on a major city model.

Table 5
Results of evaluation of BCP value in a major city model.

Items of BCP value Assessment results

USD/year/kW
Direct BCP value (1) Avoidance of damage due to outage 28775
(2) Avoidance of damage due to request for power conservation (supply restrictions) 123488
(3) Increase in real estate value 76225
(4)Assurance of the functions of disaster centers 9
Total (1)(4) About 2251500
Secondary value delivered by BCP approaches Not quantified in this study
1412 D. Tomofuji et al. / Applied Thermal Engineering 114 (2017) 14031413

Table 6
Results of evaluation of BCP value in a major city model (details).

Preconditions of equipment Unit Office 1 Office 2 Office 3 Hotel Total

Installed cogeneration capacity: CCHP kW 8000 8000
Installed capacity of emergency generators kW 1000 1000 600 400 3000
Peak power load kW 5000 5000 3000 2000 15,000
Total floor area m2 1,00,000 1,00,000 60,000 40,000 3,00,000
Type of industry Information & Real estate Service Restaurants &
communications hotels

Low case Unit Office 1 Office 2 Office 3 Hotel Total

Total BCP value USD/year/ 78 68 60 20 225
kW
(1) Avoidance of damage/loss due to outage
A: Cost of impact due to outage USD/kW h 50 40 73 33
B: Power for avoidance of outage kW 2600 2600 1500 1000 7700
C: Outage duration h/time 8.6 8.6 8.6 8.6
D: Projected frequency of occurrence Times/year 6.7% 6.7% 6.7% 6.7%
BCP value: A  B  C  D/CCHP USD/year/ 9 7 8 2 28
kW
(2) Avoidance of damage/loss due to request for power conservation
A: Cost of impact due to request for power USD/kW h 50 40 73 33
conservation
B: Power for avoidance of power conservation kW 2700 2700 1600 1100 8000
C-a: Power conservation rate (summer) - 4.6% 4.6% 4.6% 4.6%
C-b: Power conservation rate (winter) 1.7% 1.7% 1.7% 1.7%
D-a: Period of electricity conservation (summer) h/time 550 550 550 550
D-b: Period of electricity conservation (winter) h/time 740 740 740 740
E: Projected frequency of occurrence Times/year 6.7% 6.7% 6.7% 6.7%
BCP value: A  B  (C-a  D-a + C-b  D-b)  E/CCHP USD/year/ 41 34 36 11 123
kW
(3) Increase in real estate value
A: Net earnings USD/year 9,12,50,000 9,12,50,000 5,50,00,000 3,62,50,000
B: Yield 4.3% 4.3% 4.3% 6.2%
C: Risk premium avoided 0.1% 0.1% 0.1% 0.1%
D: Cogeneration contribution rate 10% 10% 10% 10%
BCP value: A/B  C  D/CCHP USD/year/ 26 26 16 7 76
kW
(4) Assurance of functions of disaster sites
A: Amount residents are willing to pay USD/kW h 0.34
B: Power for avoidance of outage kW 300 300
C: Outage duration h/time 8.6
D: Projected frequency of occurrence Times/year 6.7%
BCP value: A  B  C  D/CCHP USD/year/ 0.0 0.0
kW

High case Unit Office 1 Office 2 Office 3 Hotel Total

Total BCP value USD/year/ 450 438 513 98 1500
kW
(1) Avoidance of damage/loss due to outage
A: Cost of impact due to outage USD/kW h 175 163 350 86
B: Power for avoidance of outage kW 2200 2200 1300 890 6600
C: Outage duration h/time 72 72 72 72
D: Projected frequency of occurrence Times/year 6.70% 6.70% 6.70% 6.70%
BCP value: A  B  C  D/CCHP USD/year/ 225 225 288 46 775
kW
(2) Avoidance of damage/loss due to request for power conservation
A: Cost of impact due to request for power USD/kW h 175 163 350 86
conservation
B: Power for avoidance of power conservation kW 2700 2700 1600 1100 8000
C-a: Power conservation rate (summer) 4.6% 4.6% 4.6% 4.6%
C-b: Power conservation rate (winter) 1.7% 1.7% 1.7% 1.7%
D-a: Period of electricity conservation (summer) h/time 550 550 550 550
D-b: Period of electricity conservation (winter) h/time 740 740 740 740
E: Projected frequency of occurrence Times/year 6.7% 6.7% 6.7% 6.7%
BCP value: A  B  (C-a  D-a + C-b  D-b)  E/CCHP USD/year/ 138 138 175 29 488
kW
(3) Increase in real estate value
A: Net earnings USD/year 9,12,50,000 9,12,50,000 5,50,00,000 3,62,50,000
B: Yield 4.3% 4.3% 4.3% 6.2%
C: Risk premium avoided 0.3% 0.3% 0.3% 0.3%
D: Cogeneration contribution rate 10% 10% 10% 10%
BCP value: A/B  C  D/CCHP USD/year/ 79 79 48 23 225
kW
 D. Tomofuji et al. / Applied Thermal Engineering 114 (2017) 14031413
Table 6 (continued)
Preconditions of equipment Unit
(4) Assurance of functions of disaster sites
A: Amount residents are willing to pay USD/kW h
B: Power for avoidance of outage kW
C: Outage duration h/time
D: Projected frequency of occurrence Times/year
BCP value: A  B  C  D/CCHP USD/year/
kW
Note: The above figures are converted to USD from JPY as 1 USD = 80 JPY.
transfer and distribute this value (e.g., value assessment schemes
and measures of support for investors).
5. Summary and future issues
The results of this study may be summarized as follows.

The power source value of cogeneration can be assessed by
avoidable cost methodology. It may be regarded as the value
of reduction of the total power cost by replacement of supply
from superannuated thermal power plants, etc.

For BCP value, the study examined a method of quantitative
assessment. This assessment identified benefit items and recipi-
ents, used existing data and survey results as reference figures,
and took account of impact cost. It also applied an urban devel-
opment model, and assessed both the BCP value and benefit (B)
for cost (C). The findings suggested that cogeneration could
have a BCP value with a sufficient impact for the value delivered
by operation in normal times, and that the B/C ratio could rise
substantially (B/C ; 1.43.0).

The size of the BCP value has a certain range of variation,
because it differs depending on the individual principals receiv-
ing the benefit and the conditions of disaster occurrence. In
addition, owing to its nature, the benefit yielded does not neces-
sarily return to the investors.
This concludes this report on the study of cogeneration value.
Particular tasks for future studies are better methods for assess-
ment of BCP value and assessment of the value of heat supply,
which has not been completely assessed. Furthermore, besides
ways of heightening recognition of this BCP value, studies on items
such as effective ways of returning the benefit accompanying BCP
value to the investors will presumably be important for the diffu-
sion of cogeneration systems. The Advanced Cogeneration and
Energy Utilization Center Japan intends to continue tackling such
tasks in order to spur the expanded diffusion of cogeneration sys-
tems over the years leading up to 2030.
Acknowledgement
The authors are deeply indebted to Chairman Kashiwagi and
other members of the AC research committee, concerned obser-
vers, and personnel on the market development subcommittee
for their precious advice concerning, and cooperation with, this
study.
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