Energy xxx (2014) 1e10

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Energy
journal homepage: www.elsevier.com/locate/energy

Comparative economic analysis of gas turbine-based power

generation and combined heat and power systems using biogas fuel
Jun Young Kang a, Do Won Kang a, Tong Seop Kim b, *, Kwang Beom Hur c
a
Graduate School, Inha University, Incheon 402-751, Republic of Korea
b
Dept. of Mechanical Engineering, Inha University, Incheon 402-751, Republic of Korea
c
Korea Electric Power Research Institute, Daejeon 305-760, Republic of Korea

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

Article history: We evaluated the economic feasibility of small CHP (combined heat and power) and CC (combined cycle)
Received 17 August 2013 systems using a 5 MW-class gas turbine fueled with biogas. The significance of this study is that we used
Received in revised form practical hourly and seasonal variations of the CHP and CC performance based on detailed performance
13 December 2013
analysis. Using the investment and running costs of the entire facilities and the prices of electricity and
Accepted 3 January 2014
Available online xxx
heat, economic indices such as the annual gross margin, the net present value of the cash flow and the
payback period were estimated. Two kinds of heat demand patterns were compared in the CHP system.
Major findings are as follows. A strong dependence of the project economics on heat sales was observed.
Keywords:
Biogas
Both of the CHP cases showed an economic benefit over both the CC system and the gas turbine-only
Gas turbine system. Another important finding is that the CHP system would be more beneficial than the CC sys-
Combined heat and power tem in terms of the total net present value after twenty years as long as the annual heat demand is over
Combined cycle thirty percent of the annual electricity supply. The effect of increasing prices and costs was also simu-
Economic analysis lated, and improvements in project economics were estimated.
Performance Ó 2014 Elsevier Ltd. All rights reserved.

1. Introduction example, studies on firing biomass in normal combined cycle [2]

There is a growing need to use alternative energy sources to
cope with the depletion of fossil fuel resources and the escalation of
environmental concerns. Another important issue is the need to
reduce greenhouse gases. In this respect, attention on the use of
various kinds of biofuels in the power generation industries has
grown rapidly. There are two types of gaseous biofuels. The first
type of fuel is syngas, which occurs due to pyrolysis and gasification
of solid wastes such as wood chips. The other fuel is biogas, which is
generated from anaerobic digestion of wastes such as food wastes
and animal excreta. Thus, biogas is also called digester gas. Landfill
gas is a kind of biogas because its production process and compo-
sition are similar.
The use of biofuel-fired CHP (combined heat and power) sys-
tems using various kinds of prime movers is steadily increasing. GTs
(gas turbines) are quite suitable for use with biofuels because of
their high fuel flexibility [1]. Gas turbine CHP systems and gas/
steam turbine CC (combined cycle) power plants using bio-syngas
and digester/landfill gas have received considerable attention
from power generation and energy industries recently. For
* Corresponding author. Tel.: þ82 32 860 7307; fax: þ82 32 868 1716.
E-mail address: kts@inha.ac.kr (T.S. Kim).
and integrated gasification combined cycle [3] have been pub-
lished. Several cases studies on the use of biogas produced from
various sites such as animal farm [4] and sewage treatment plant
[5] have also been published. In addition, a possibility of con-
structing a trigeneration systems using biogas fired micro gas tur-
bine [6] was researched. In particular, digester gas is suitable for
small gas turbines raging from tens of kilowatts to several mega-
watts because the amount of digester gas produced at a single
source is usually limited [6,7]. Biogas is mainly composed of CH4
and CO2. Since biogas contains quite a large amount of CO2 (20e50%
by volume), its heating value is quite small compared to natural gas
[7]. As a result, a considerably greater quantity of biogas should be
supplied to the combustor compared to the case of firing natural
gas. Therefore, if the fuel is changed from natural gas to biogas, a
gas turbine might produce a larger power output compared to the
original natural gas fuel due to the increased turbine gas flow [7].
The evaluation of economic feasibility is quite important when
considering CHP systems. Several economic analyses of CHP sys-
tems fired with natural gas, especially using gas turbines, have been
published. These studies include an economic analysis that con-
siders varying electric and thermal loads [8], an economic study
that accounts for system capacity, types of prime mover, and
operating scenarios [9], and an economic study that considers

0360-5442/$ e see front matter Ó 2014 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.energy.2014.01.009

Please cite this article in press as: Kang JY, et al., Comparative economic analysis of gas turbine-based power generation and combined heat and
power systems using biogas fuel, Energy (2014), http://dx.doi.org/10.1016/j.energy.2014.01.009
2 J.Y. Kang et al. / Energy xxx (2014) 1e10

Nomenclature NPV net present value ($)

O&M operation and maintenance
C instant cost ($) P pressure (kPa)
CC combined cycle PB payback period (year)
CF cash flow ($) R gas constant (kJ/kgK)
CF0 initial investment ($) Rel electricity sales revenue ($)
CHP combined heat and power Rh heat sales revenue ($)
COMB combustor SMP system marginal price ($)
COMP compressor ST steam turbine
EPC engineering, procurement and construction T temperature (K)
EVAP evaporator TURB turbine
ECON economizer W_ power (MW)
G generator g specific heat ratio
GM gross margin ($) h efficiency
GT gas turbine k constant
HRSG heat recovery steam generator
HX heat exchanger Subscripts
I discount rate DG digestion system
IRR internal rate of return (year) fs feedstock
LHV lower heating value (kJ/kg) i year index
m _ mass flow rate (kg/s) in inlet
N shaft speed (rpm) pt pretreatment
n total project period (year) t arbitrary year

different climate zones [10]. Biogas has received industrial atten-
tion as one of the important new energy sources. Thus, techno-
economic analyses of biogas-fired CHP systems have been per-
formed recently. Examples include a comparative economic anal-
ysis of different CHP systems [11], an evaluation of the economics
and environmental benefits of firing biogas [12], and an application
of biogas to trigeneration systems [6].
We evaluated the economic feasibility of using biogas in a small
gas turbine CHP plant. The main features of this study are an eco-
nomic evaluation using a detailed ambient temperature-dependent
thermodynamic performance analysis; comparison of the eco-
nomics of CHP and pure electricity generation systems; and an
examination of the effects of varying costs and prices (which have
not been simultaneously considered in previous works). A 5 MW-
class gas turbine under commercial development was chosen. In
order to obtain realistic economic analysis results, we performed a
detailed gas turbine analysis that considered performance variation
according to ambient conditions. Monthly and hourly variations in
electric power generation, heat supply capacity, and fuel con-
sumption were predicted and used for the economic analysis. We
performed an economic analysis from the viewpoint of an inde-
pendent power producer that sells all of the generated power to the
grid, but sells heat within the limit of the demands of the consumer.
For this purpose, two types of heat demand patterns were used.
Using the electric power and heat production of the gas turbine, the
heat demand and economic data such as plant investment costs,
feedstock cost, electric and heat prices, and key economic factors
such as gross margin, payback period, and net present value, were
assessed. Pure electricity generation systems (the gas turbine-only
and gas/steam turbine combined cycle) were also analyzed, and
their economic data were compared with those of the CHP systems.
The effect of varying electricity and heat prices on the system
economics was also investigated.
which is supplied to a heat demand site. The other system is a pure
electricity generation system, as shown in Fig. 2. The steam from a
HRSG (heat recovery steam generator) drives a steam turbine and
recirculates in the bottoming cycle. This system is a small-scale gas/
steam turbine combined cycle, and produces electricity only. The
gas turbine adopted in this study is a 5 MW-class engine under
development [13]. The anaerobic digestion plant converts feed-
stocks into raw biogas, and a fuel pretreatment system eliminates
undesirable gas components in the raw biogas (such as hydrogen
sulfides and siloxane), which can damage the gas turbine engine.
Then, the resulting biogas is fed to a gas turbine combustor. The
purpose of the separate HX (heat exchanger) is to supply heat in the
form of hot water to the anaerobic digestion process. Of course, the
original gas turbine was designed to burn natural gas. In this study,
the fuel was switched to biogas, which we assumed to consist of
65% CH4 and 35% CO2 by volume. The digestion plant was not
analyzed in detail, but the cost factors (equipment costs, and
operation and maintenance costs) were considered. The cost and
energy consumption of the pretreatment system were included.
The gas turbine performance (electric power output, heat supply

2. System

Two types of systems were examined in this study. The first is a

CHP system, as shown in Fig. 1. The GT exhaust gas generates steam, Fig. 1. Combined heat and power system configuration.

Please cite this article in press as: Kang JY, et al., Comparative economic analysis of gas turbine-based power generation and combined heat and
power systems using biogas fuel, Energy (2014), http://dx.doi.org/10.1016/j.energy.2014.01.009
 J.Y. Kang et al. / Energy xxx (2014) 1e10 3

such as the pressure ratio, turbine inlet temperature, turbine

Fig. 2. Combined cycle configuration.
exhaust pressure, and air flow rate, unknown parameters such as
the compressor and turbine efficiencies, and turbine coolant flow
rate, were tuned to make the engine power output, efficiency, and
turbine exhaust temperature as close as possible to known values.
Based on the design point calculation, and the off-design
modeling and simulation were performed. A full off-design anal-
ysis of the gas turbine using a compressor map was conducted to
account for the effect of variation in the ambient temperature. Only
the full load (fully fired) operation at each ambient condition,
which maintains the design turbine inlet temperature, was simu-
lated. Fig. 3 shows the compressor map used in this study. The use
of the following two dimensionless parameters [15] enabled the
simulation of off-design operation caused by an ambient temper-
ature change:
pffiffiffiffiffiffiffiffiffi
_ RTin
m
Dimensionless mass flow ;
Pin

capacity, and fuel consumption) at full load in various ambient

N
temperature conditions was simulated in detail, as described in Dimensionless shaft speed pffiffiffiffiffiffiffiffiffi (1)
Section 3. RTin
The off-design operation of the turbine was modeled using the
3. Performance following constant swallowing capacity (choking condition) [14]:

3.1. Modeling
GateCycle [14] was used to simulate performance of the entire
system. A full off-design simulation is required because firing
biogas instead of natural gas, and operating the engine in a wide
ambient temperature range, alters the operating conditions of the
gas turbine with respect to the design conditions. The methodology
for the modeling and analysis of the gas turbine and heat recovery
system was adopted from our previous work, wherein we simu-
lated gas turbine CHP systems of a similar size using the same
software [7]. Only a brief overview of the thermodynamic perfor-
mance modeling will be given here because the focus of this paper
is on economic analysis. Details of the performance modeling can
be found in Ref. [7]. The design specifications of the gas turbine are
listed in Table 1. It is a 5 MW-class engine under development that
has a moderate firing temperature (1104  C) and is suitable for CHP
applications. A stage-by-stage turbine calculation, including a
detailed turbine coolant model, was used. A short description of the
design point simulation is as follows. Given basic design parameters
pffiffiffiffiffiffi sffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
 gþ1
_ in Tin
m g 2 g1
¼ constant; where k ¼ (2)
kAin Pin R gþ1
Matching the characteristics of the compressor and the turbine
resulted in the determination of an off-design operating point. A
brief description on the matching procedure can be referred to a
literature [15]. In this study, all of the calculations including the
component matching were performed by GateCycle [14].
The design data of the HRSG and steam cycle are listed in
Table 2. The HRSG was designed to produce saturated steam (about
180  C) at a pressure slightly lower than 10 bar. In the CHP system,
the temperature of the water returned from demand side (i.e., the
water inlet temperature at the HRSG) is 90  C. In the combined
cycle system, the steam condition was the same as in the CHP
system. The steam condition is similar to conditions used in a
commercially available gas turbine CHP and combined cycle pack-
age [16]. The steam turbine efficiency is considerably lower than
that of larger steam turbines, but is quite reasonable for a small
steam turbine. The efficiency was obtained using a steam turbine

Table 1
Design specifications of the gas turbine.

Inlet Air temperature (K) 288.2

Air pressure (kPa) 101.3
Pressure loss (%) 0.5
Air flow (kg/s) 21.19
Compressor Pressure ratio 14
Number of stages 11
Polytropic efficiency (%) 88
Combustor Fuel flow (kg/s) 0.3308
Lower heating value (kJ/kg) of natural gas 49,303
Pressure loss (%) 6.0
Turbine Turbine inlet temperature (K) 1104
Turbine exhaust temperature (K) 753.5
Turbine exhaust pressure (kPa) 104
Number of stages 3
Stage efficiency (%) 87.8
Total coolant relative to compressor 14.3
inlet air flow (%)
Performance Gearbox efficiency (%) 98
Power output (MW)a 5.25
Thermal efficiency (%)a 32.2
a
Gear box end. Fig. 3. Compressor performance map.

Please cite this article in press as: Kang JY, et al., Comparative economic analysis of gas turbine-based power generation and combined heat and
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4 J.Y. Kang et al. / Energy xxx (2014) 1e10

Table 2 the manufacturer did not release the off-design performance data.
Design parameters of the bottoming cycle. Thus, we compared the results of our simulation with the perfor-
Combined heat power Combined cycle mance data of two other commercial engines of similar size [19,20].
Inlet water temperature (K) 363.2 e
The data were taken from official technical brochures available at
Inlet water pressure (kPa) 1032 e the manufacturer’s website. Fig. 5 shows the relative variations of
Steam temperature (K) 452.2 452.2 power and efficiency with ambient temperature. The fuel is natural
Steam pressure (kPa) 980.7 980.7 gas in this reference calculation. The trends and magnitudes of the
Pinch temperature difference (K) 10 10
variations are quite similar in the three engines: the average de-
Condenser pressure (kPa) e 12.75
Steam turbine efficiency (%) e 63.6 viations of power and efficiency of our simulation from the mean
Steam flow (kg/s) 3.08 2.85 values of the other two engines are 0.99% and 0.59%. This result
HX inlet water temperature (K) 343.2 343.2 demonstrates the validity of the proposed off-design analysis.
HX outlet water temperature (K) 363.2 363.2
After validating the off-design analysis tool, we simulated the
Heat demand of HX 2092 2092
performance of the biogas-fired CHP and CC systems. Table 3 shows
performance summaries of CHP and CC systems fired with natural
gas and biogas at a 15  C ambient condition. We first examined the
design database [17] by taking into account the size and operating natural gas-fired CHP and CC systems. The gas turbine power
conditions of the steam turbine. We also confirmed a similar effi- output in Table 3 is the power at the generator end. We considered
ciency value from a calculation using another correlation [18]. The a generator efficiency of 97%. Because of the inclusion of generator
power output and efficiency of the CHP and CC systems are defined efficiency and the additional HRSG pressure drop, the gas turbine
as follows: power output and efficiency shown in Table 3 are lower than the
_ _ _ _ _ values shown in Table 1. As a result, the GT electric power output is
W CHP ¼ W GT ; W CC ¼ W GT þ W ST (3) slightly less than 5000 kW. The recovered heat at the HRSG for the
heat supply of the CHP system is 7152 kW. Together with the heat
_
W recovery for the digester heat supply, the total heat recovery is
hel ¼ (4)
_
ðm$LHVÞfuel more than 9200 kW. The CC system generated 1133 kW from the
steam turbine (22% of the gas turbine power) and increased the
The operating condition of the separate heat exchanger for the power generation efficiency by 7% compared to the CHP system. In
digester heat supply is shown in Table 2. Fig. 4 shows a schematic the biogas-fired cases, more fuel should be supplied to maintain the
layout of the biogas pretreatment system. We did not simulate the same turbine inlet temperature as in the natural gas-fired cases.
removal processes that eliminate a very small amount of harmful The increased gas flow in the turbine slightly increases the oper-
compositions. We calculated the electricity consumption in two ating pressure of the turbine inlet as a result of the compressor and
compressors and a chiller, which result in a non-negligible oper- turbine matching [7], thereby increasing the operating pressure
ating cost. The raw gas is supplied at 40  C and 1.05 bar, and is ratio. The increased turbine gas flow increases the engine power
pressurized to 5 bar by the first compressor and cooled to 30  C by output and efficiency. This phenomenon is fully described in Ref.
the chiller. Then, the gas is further pressurized to 27 bar by the [7], and the current analysis also presents the same trend, as shown
second compressor, and fed to the combustor. The compressor ef- in Table 3. The increased turbine gas flow enhances the HRSG heat
ficiency and the coefficient of performance of the chiller were recovery rate, with 3.3% more heat recovery in the CHP system and
assumed to be 85% and 3. 2.8% more steam turbine power in the CC system. The biogas pre-
treatment power consumption amounts to 9.1% of the gas turbine
3.2. Simulation validation and performance data power output. Fig. 6 shows variations in the electric power output,
heat supply capacity, and fuel supply with ambient temperature in
The simulated power output and thermal efficiency values at the the biogas-fired CHP and CC systems. These ambient temperature-
gear box end (5.25 MW and 32.2%, see Table 1) are quite close to dependent performance data represent outputs of the performance
those reported by the manufacturer. The power output is exactly simulation, and are inputs to the economic analysis described in the
matched, and the efficiency is only 0.3% points higher than the next section.
reference values (5.25 MW and 32.5%) [13]. Before we simulated the
biogas-fired systems, we checked the validity of the off-design
simulation model. Since this engine is still under development,

Fig. 4. Pretreatment system layout. Fig. 5. Comparison of power and efficiency variations with commercial engines.

Please cite this article in press as: Kang JY, et al., Comparative economic analysis of gas turbine-based power generation and combined heat and
power systems using biogas fuel, Energy (2014), http://dx.doi.org/10.1016/j.energy.2014.01.009
 J.Y. Kang et al. / Energy xxx (2014) 1e10 5

Table 3
Performance of CHP and CC systems at 15  C ambient temperature.

Type of fuel Combined heat power Combined cycle

Biogas Natural gas Biogas Natural gas

a
Net electric power output (kW) Gas turbine 5240 4995 5240 4995
Steam turbine 0 0 1165 1133
Total 5240 4995 6405 6128
Fuel LHV (KJ/kg)b 20,199 49,303 20,199 49,303
Fuel flow rate (kg/s) 0.8346 0.3308 0.8346 0.3308
Fuel energy consumption (kW) 16,857 16,308 16,857 16,308
Net electric efficiency (%) 31.1 30.6 38.0 37.6
Turbine inlet temperature (K) 1104 1104 1104 1104
Compressor pressure ratio 14.3 14.0 14.3 14.0
Exhaust gas flow (kg/s) 21.98 21.52 21.98 21.52
Turbine exhaust temperature (K) 759 758 759 758
Turbine exhaust pressure (kPa) 107 107 107 107
HRSG heat recovery (kW) 7387 7152 0 0
Heat supply for digester (kW) 2092 2092 2092 2092
Fuel pretreatment power consumption (kW) 479 479

Biogas compositions: CH4 65%, CO2 35% by volume.

a
Generator end.
b
Natural gas compositions : CH4 91.33%, C2H6 5.36%, C3H8 2.14%, n-C4H10 0.48%, iso-C4H10 0.46%, N2 0.22% by volume.

4. Economic analysis
4.1. Site condition and demands
To evaluate the annual economics of the system, we needed to
know both the daily and yearly variations of the system perfor-
mance because the system performance changes as the ambient
temperature changes. We modeled a power plant under develop-
ment in Incheon, Korea, and adopted average ambient temperatures
in the same area for each month. The temperature data are illus-
trated in Fig. 7. Each line represents the hourly ambient temperature
variation averaged over one month. Thus, we could apply the same
pattern for a whole month. Using ambient temperature patterns, we
calculated the hourly variation in system performance (electricity
output, heat supply capacity, and fuel consumption) for each month.
The results are shown in Fig. 8. Fuel consumption is the same for
both the CHP and CC systems but the electricity output is larger in
the CC system. The heat supply capacity applies only to the CHP
system. The results of all twelve months were obtained, but only the
results from three months are shown in the figures for better clarity.
We assumed that the power plant is owned by an independent
power producer; the gas turbine (and the steam turbine in the CC
system) produces full power during its operating time; and the
produced electric power is supplied to the electric grid at a regular
selling price. We further assumed that the heat produced at the
HRSG would be sold to a consumer nearby in the CHP systems. Two
types of thermal loads were adopted as case studies in the CHP
system. The first is the load of a mechanical factory (case A), and the
other is that of a paper factory (case B). Figs. 9 and 10 show the heat
demands of the two cases. The load patterns were generated by
scaling published data [8]. Since detailed monthly data were not
available, we used the average data for three seasons (hot, cold, and
mid-season). The hot season corresponds to June, July, and August,
and the cold season to December, January, and February. The mid-
season includes the remaining months. The yearly variation of
thermal demand is more moderate in the paper factory (case B). In
the mechanical factory (case A), the heat demand is very low in the
summer season.
If the heat demand is larger than the generation capacity of the
plant, all of the produced heat could be supplied to the consumer.
On the other hand, for the period in which the demand is less than
the generation capacity, we assumed that the plant produces the
exact amount of heat needed to satisfy the demand.
4.2. Analysis method
The gross margin and NPV (net present value) method was
adopted in this study [21]. The method is the most general scheme,
30

20
Ambient Temperature( C)
o

10

-10 Jan Apr Jul Oct

Feb May Aug Nov
Mar Jun Sep Dec
-20
0 4 8 12 16 20 24
Time(hour)

Fig. 6. Performance variation of biogas fired systems with ambient temperature. Fig. 7. Ambient temperature variation.

Please cite this article in press as: Kang JY, et al., Comparative economic analysis of gas turbine-based power generation and combined heat and
power systems using biogas fuel, Energy (2014), http://dx.doi.org/10.1016/j.energy.2014.01.009
6 J.Y. Kang et al. / Energy xxx (2014) 1e10

8.00

7.00

6.00

Heat Demand(MW)
5.00

4.00

3.00

2.00
winter
1.00 summer
midseason
0.00
0 4 8 12 16 20 24
Time(hour)

Fig. 9. Heat demand pattern of case A.

facility costs (CDG,O&M), and the electricity cost to run the biogas
pretreatment process (Cpt). The cost and price data are described in
Section 4.3.
The economics of a long-term project such as power plant
operation is usually evaluated using the NPV (net present value)
method. The NPV of a time series is a sum of the present values of
the individual (yearly) cash flows. A project can be economically
feasible when the NPV is positive. Considering the discount rate,
the NPV is expressed as follows:

X
n
CFt
NPV ¼ (6)
t¼0
ð1 þ IÞn

where n is the total period project, I is the discount rate, and CFt is
the net cash flow in the t-th year, which can be calculated as
follows:

X
t
CFt ¼ CF0 þ GMi (7)
i¼1

where CF0 is the initial investment. The actual economics of a fa-

cility is usually expressed as a payback period. The payback period
is defined as the time at which the NPV becomes zero. In the case of

12.00
Fig. 8. Seasonal and hourly variation in system performance: (a) electricity output, (b)
heat supply capacity, and (c) fuel consumption.
10.00
Heat Demand (MW)

and has been frequently used in many technical-economic analyses 8.00

cited in Section 1. The following equation expresses the gross
margin benefit from plant operation for a year, which represents
6.00
how much of the sales revenue is profit. In our system, we have two
kinds of sales revenue (electricity and heat) and several different
costs. The gross margin per year is the difference between the total 4.00
sales revenue and the sum of various costs.
  2.00 winter
GMt ¼ Rel þ Rh  Cfs þ CCHP=CC;O&M þ CDG;O&M þ Cpt (5) summer
midseason
0.00
where Rel and Rh denote the yearly sales (revenues) of electricity 0 4 8 12 16 20 24
and heat. The four terms in the parentheses represent costs: the Time(hour)
feedstock cost (Cfs), the O&M (operation and maintenance) costs of
the CHP or CC plant (CCHP/CC,O&M), the biogas production (digestion) Fig. 10. Heat demand pattern of case B.

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 J.Y. Kang et al. / Energy xxx (2014) 1e10 7

a constant gross margin, the PB (payback period) can be calculated 0.20

from the following equation, which is derived from Eq. (6):
" # 0.18
Ið1 þ IÞPB
GM ¼ CF0 (8)
ð1 þ IÞPB  1
0.16

SMP ($/kWh)
The shorter the payback period is, the more economical the
investment becomes. Another economic parameter is the IRR (in- 0.14
ternal rate of return). The IRR is the discount rate at which the NPV
becomes zero at the end of the project (i.e., the lifetime of the
0.12
plant). The following equation is used to predict the IRR:
Jan May Sep
X
n
CFt 0.10 Feb Jun Oct
0 ¼ (9) Mar Jul Nov
t ¼ 0 ð1 þ IRRÞt Apr Aug Dec
0.08
In general, a project is worth performing when the IRR is higher 5 10 15 20
than the cost of capital. The higher a project’s IRR, the more Time(hour)
desirable it is to undertake the project.
The economic calculation begins with the determination of the Fig. 11. Electricity price (SMP) of Korea in 2012.
gross margin using Eq. (5). Then, the net cash flow is calculated
using Eq. (7). Eq. (8) gives the payback period when the gross
margin is assumed to be constant, while Eq. (6) is used to obtain the Korean won to US dollars using the average exchange rate in 2012
payback period which makes the NPV zero when a variable gross (1120 won/$). The electricity sales revenue during an hour was
margin is assumed due to changes in both the cost and the sales calculated by multiplying the SMP shown in Fig. 11 by the electricity
price in Eq. (5). Finally, Eq. (6) gives the total NPV after the total generation (kWh) per hour, which was obtained from the data
project period. shown in Fig. 8. Integration (summation) over a whole year pro-
duced the yearly revenue (Rel) in Eq. (5). The price of heat was
4.3. Cost and price data adopted from the data of the Korea District Heating Corporation
[27]. Its annual variation was not sensible, and we used a constant
Table 4 lists initial investment cost data. All of the costs and average value in 2012, which was $0.0854/Mcal ($0.07345/kWh).
prices used in this study are in US dollars. The price of the gas The total heat supply over a whole year was obtained by summing
turbine generator set was obtained by multiplying the average unit the hourly supply calculated using the data shown in Fig. 8. The
price ($/kW) of small gas turbines in a handbook [22] by the design yearly heat sales revenue (Rh) in Eq. (5) was calculated by multi-
power output of the gas turbine. The price of the digestion system plying the price by the total heat supply.
was scaled from Ref. [23] using the required biogas supply rate. The Table 5 shows the O&M cost, feedstock cost, and other assumed
prices of plant equipment such as the fuel pretreatment system, the economic factors. The O&M costs of the power plant (CCHP/CC,O&M)
heat recovery steam generator, and the plant control system were and digestion system (CDG,O&M) were taken from Refs. [28,29]. We
scaled from those of a biogas power generation project of a similar assumed that the feedstock is food waste, and included only the
size [24]. The EPC (engineering, procurement, and construction) transport cost in the feedstock cost, neglecting other minor costs
costs were also taken from Ref. [24]. The price of the steam bot- such as acquisition and processing costs. The feedstock transport
toming cycle of the CC system was obtained by referring to both the cost is proportional to the annual consumption of the food waste
gas turbine and combined cycle system prices [22,25]. The total and the transportation distance. We used a method described in the
project cost is $18.7 million and $20.2 million for CHP and CC literature [30]. The annual amount of feedstock was calculated
plants. using the required annual biogas consumption of the gas turbine.
The hourly varying electricity price in Korea [26] was used to The average transport distance from the waste storage to the power
calculate the electricity sales revenue. Fig. 11 shows the SMP (sys- plant was assumed to be 2.8 km. The annual biogas pretreatment
tem marginal price) in 2012. The data are the actual market prices. cost was calculated using the required electricity consumption and
The electricity and heat prices in this paper were converted from the electricity price in Fig. 11.
The availability of the plant was assumed to be 0.9 (i.e., the plant
operates for 90% of the year). The total project period (plant life-
Table 4
time) and the discount rate (I) were assumed to be 20 years and 8%.
Initial investment cost.
The reference year of our economic analysis is 2012. Therefore, all of
Type Item Cost ($) the investment and running cost that were adopted from various
Equipment a Gas turbine genset 2,882,000 references were converted to those in 2012 by applying a 2.5%
b HRSG & CHP control system 1,229,200 yearly inflation rate.
c Bottoming steam cycle 3,267,000
d Fuel treatment & compression 2,018,000
e Digester 7,804,800
CHP system (a þ b þ d þ e) (A) 13,934,000 Table 5
CC system (a þ c þ d þ e) (B) 15,971,800 Operation and maintenance cost, feedstock cost, and economic factors.
EPC Consulting and design 823,300
Installation 3,305,000 CHP/CC plant O&M cost ($/kWh) 0.006
Permits & inspection 139,100 Digestion plant O&M cost ($/kWh) 0.006
Contingency 562,400 Feedstock transport cost ($/ton) 0.2788
Total EPC cost (C) 4,829,800 Plant availability 0.9
Total Cost CHP system total project cost (A þ C) 18,763,800 Total project period (years) 20
CC system total project cost (B þ C) 20,801,600 Discount rate (%) 8

Please cite this article in press as: Kang JY, et al., Comparative economic analysis of gas turbine-based power generation and combined heat and
power systems using biogas fuel, Energy (2014), http://dx.doi.org/10.1016/j.energy.2014.01.009
8 J.Y. Kang et al. / Energy xxx (2014) 1e10

Table 6
Results of the economic analysis with fixed costs and prices.

System CHP system Combined cycle system

Heat demand pattern Case A Case B No heat demand e

Electricity supply (MWh) 41,809 41,809 41,809 50,910

Heat supply (MWh) 22,466 55,044 e e
Electricity sales revenue (A) ($) 5,818,724 5,818,724 5,818,724 7,087,831
Heat sales revenue (B) ($) 1,647,977 4,037,706 e e
Feedstock cost (C) ($) 99,023 99,023, 99,023 99,023
O&M cost (D) ($) 501,714 501,714 501,714 650,833
Pretreatment cost (E) ($) 611,524 611,524 611,524 611,524
Annual income (A þ B) ($) 7,466,701 9,856,430 5,818,724 7,087,831
Annual expense (C þ D þ E) ($) 1,212,261 1,212,261 1,212,261 1,361,380
Annual gross margin ($) 6,254,440 8,644,169 4,606,463 5,726,451
Pay-back period (years) 3.57 2.48 5.12 4.46
NPV (million $) 42.64 66.11 26.46 35.42
IRR (%) 33 46 24 27

5. Economic analysis results and discussion
Our economic analysis was performed in two ways. First, we
used the fixed price and cost data presented in Section 4.3. Second,
we reflected the rises in prices and costs with time. As a result, the
gross margin is constant in the first case but varies in the second
case. In addition to the two CHP cases, a third case was simulated
wherein no heat is generated from the HRSG, and thus only elec-
tricity from the gas turbine is exported to the grid. By comparing
this case with the other CHP cases and the CC case, the effect of heat
sales and additional electricity sales from the steam turbine on the
project economics can be clearly evaluated.
Table 6 summarizes the economic analysis results with fixed
prices and costs. Fig. 12 shows NPV curves. Consider the two CHP
cases first. Remember that case B has a relatively larger heat de-
mand compared to case A (see Figs. 9 and 10). In the CHP systems,
the annual electricity sales revenue is $5.82 million In case A, the
annual heat sales revenue is much lower than the electricity sales
revenue because of the relatively low heat demand. In case B,
where the heat demand is relatively larger, the revenue from the
heat sales is larger in comparison to case A (the ratio of Rh to Rel is as
high as 0.69 in case B, while it is 0.28 in case A). The O&M (power
plant plus digester) and biogas pretreatment costs (electricity
consumption) are similar, and their sum is about 19% of the elec-
tricity sales revenue. The feedstock cost is much smaller than other
120
CHP case A
100 CHP case B
CC
80 GT only (CHP w/o heat demand)
NPV (million $)
costs. The annual total revenue turned out to be much larger than
the annual total expense, resulting in a net positive gross margin.
The estimated payback period is 3.57 and 2.48 years in cases A and
B. The total NPV after 20 years is $42.64 million and $66.11 million.
The IRR is 33% and 46% in cases A and B. These results show that the
project is quite feasible and the profitability strongly depends on
the heat demand. The heat sales in case B is 2.45 times larger in
comparison to case A, which results in a 55% higher total NPV and a
31% shorter payback period. Overall, the biogas-fired CHP plants
would be quite feasible given a reasonable level of heat demand. In
the extreme case of generating electricity only (this is still consid-
ered to be a CHP system because some heat should be generated in
the HX and supplied to the digester), the economics worsens
considerably. The payback period becomes much longer (5.1 years),
and the total NPV after 20 years is 62% that of case A, and 40% that of
case B. Comparison between the two CHP cases and the gas
turbine-only system shows the important role of heat sales on the
project economics.
In the combined cycle case, the electricity sales revenue is 22%
higher than the CHP cases. The CC system shows a 13% shorter
payback period and a 34% larger total NPV than the GT-only case,
but its economics is poorer than the other two CHP cases. The CC
system’s annual total sales (income) are larger than those of the GT-
only system by the percentage of the increase in electric power
output, but are lower than those of the two CHP cases. An addi-
tional calculation shows that if the annual total heat demand is over
12,439 MWh, the total NPV of the CHP system would be higher than
that of the CC system. The minimum amount of heat demand of the
CHP system that would lead to the same payback period as the CC
system is 7638 MWh. These two minimum heat demands are only
55% and 34% of the current heat demand of the CHP case A, and 30%
and 18% of the gas turbine electricity supply (41,809 MWh). This
result again shows the importance of heat sales. A 4.5 year payback

60 period and 27% IRR mean that the CC system is also a feasible
project, but the CHP system would possibly be a better option for
40 the case of moderate heat demand. The main reason for this
conclusion is that the addition of the steam turbine to the gas
20 turbine does not provide a dramatic power increase, as in the case
of large central CC plants using high performance gas turbines. The
0 power addition (i.e., efficiency upgrade) by having a CC system is
only 22% in our study, whereas it is about 50% in central CC plants.
-20
The aforementioned results are based on a constant gross
-40 margin. However, in reality, the gross margin varies over time
0 5 10 15 20 because all of the sales prices and costs change (they naturally in-
Time(year) crease over time). Fig. 13 illustrates the recent increase of the
annually averaged electricity SMP and district heat price in Korea
Fig. 12. NPV estimation for the case with fixed costs and prices. [26,27]. Also, all of the costs must rise due to the effect of some

Please cite this article in press as: Kang JY, et al., Comparative economic analysis of gas turbine-based power generation and combined heat and
power systems using biogas fuel, Energy (2014), http://dx.doi.org/10.1016/j.energy.2014.01.009
 J.Y. Kang et al. / Energy xxx (2014) 1e10 9

0.16 Table 7
Major results of the economic analysis with varying costs and prices.
electricity
Electricity and heat prices ($/kWh)

0.14 heat System CHP system Combined cycle

system
0.12 Heat demand pattern Case A Case B No heat e
demand
0.10 Pay-back period (years) 3.30 2.38 4.52 3.96
NPV (million $) 69.34 100.14 47.75 63.38
0.08 IRR (%) 38 51 30 33

0.06
0.04
0.02
2002 2004 2006 2008
Year
Fig. 13. Trends of electricity and heat prices.
inflation. An exact prediction of the increases in prices and costs
during a long time (for example, as long as 20 years) is almost
impossible. However, the price increase trends in Fig. 13 suggest
that assuming nearly linear increases in electricity and heat prices
would be reasonable (see the two lines which represent linear
fitting of the raw data). Hence, we assumed $0.00882/kWh per year
and $0.00336/kWh per year increases in electricity and heat prices
(the slopes of the two lines in the figure). A 2.5% yearly increase in
each cost was assumed, representing moderate inflation. In sum-
mary, in Eq. (5), the electricity sales revenue (Rel), heat sales reve-
nue (Rh), and pretreatment system operation (electricity) cost Cpt
increases according to the linear relation shown in Fig. 13. Other
costs increase by the inflation rate every year. Fig. 14 shows NPV
curves, and Table 7 summarizes major economic data. The as-
sumptions of varying prices and costs resulted in considerable
benefits in both the NPV and payback period. The improvements in
the total NPV ranges from $21.3 million (GT-only system) to $34.0
million (CHP case B). The total NPVs of electricity-only systems (GT
and CC) were enhanced by about 80% (compare Tables 6 and 7), and
their payback periods improved by about half a year, whereas the
relative increases in the same economic factors of the two CHP
systems are lower. This is due to the fact that the assumed yearly
increase in the electricity price was greater than the increase in the
heat price. However, the total NPVs of the CHP cases were still
larger than that of the CC system.
120
CHP case A
100 CHP case B
CC
80 GT only (CHP w/o heat demand)
NPV (million $)
6. Conclusion
An economic assessment of a 5 MW class gas turbine-based CHP
and CC systems using biogas as fuel was performed based on a
2010 2012 detailed performance simulation. The results are summarized as
follows.
The design point of the gas turbine was simulated precisely, and
off-design analysis provided a reliable ambient temperature de-
pendency of the gas turbine’s performance. The average deviation
of the predicted off-design power and efficiency from those of other
engines is less than 1%. The off-design performance data was
coupled with specific ambient temperature data, resulting in a
detailed database of hourly and seasonal variations in system po-
wer output, heat supply capacity, and fuel consumption.
In comparison to the gas turbine-only system, the CHP system
turned out to enhance project economics considerably. The eco-
nomic analysis result showed a strong dependence of project eco-
nomics on heat sales. By assuming fixed prices and costs, even the
lower heat demand CHP case (case A) with an annual heat supply
that is 54% of the electricity supply showed a 30% reduction in the
payback period, and a 61% increase in the total NPV after 20 years
compared to the case with gas turbine electricity sales only. The
CHP case with 2.5 times more heat supply (case B) than case A
showed a 31% shorter payback period and 55% higher total NPV
compared to case A.
The CC system can supply 22% more electricity than the gas
turbine, and is predicted to have a 13% shorter payback period and
34% larger total NPV than the gas turbine-only case, but its eco-
nomics is poorer than the other two CHP cases adopted in this
study. With an annual heat demand over 30% of the annual elec-
tricity supply, the CHP system would be more economical than the
combined cycle system in terms of the total NPV.
Assuming increasing electricity and heat prices, improved eco-
nomics in all systems was observed. The percentage improvements
in payback period and NPV are relatively larger in electricity-only
systems (GT and CC) than in CHP systems. However, the total
NPVs of the CHP cases were still larger than that of the CC system.
Acknowledgment

60 This work was supported by the Power Generation & Electricity

Delivery of the Korea Institute of Energy Technology Evaluation and
40 Planning (KETEP) grant funded by the Korea government Ministry
of Trade, Industry and Energy (Development of Biogas Pretreat-
20 ment Fuel System for 5 MW-GT).

0
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