1.1 History

Dating back to the 1880s, when steam was still the primary source of motive power in industry and electricity was just emerging as a product for both power and lighting, industrial plants led in the application of cogeneration concepts. The use of such technology became commonplace as engineers replaced steam-driven belt-and-pulley systems with electric power and motors, moving from mechanically powered systems to electrically powered systems. In the 1890s, prior to the development of the electric grid and almost of necessity, industrial applications cogenerated. Power was used in motors and steam for thermal purposes. There were no regulated utilities, and cogeneration was simply a power technology. In the 1900s, most of the power used by industry was cogenerated.

With the evolution of the electric utility industry, purchased power costs dropped while power reliability and quality increased. As technology developed, leading to larger central plants and their resulting economies of scale, utilities were able to deliver more capacity for each dollar invested. Moreover, the higher efficiencies achieved at these plants resulted in lower fuel costs.

The development of the integrated power grid provided several additional benefits to end-users. First, the grid resulted in increased reliability, as power was made available from a number of sources and not just a single generating plant. Second, the average cost of power dropped as the available capacity was operated on an economic dispatch basis. That is, the lowest-cost plant available to satisfy a requirement was loaded first, thus lowering the average cost of...