Co-generation is a systems approach for producing poth power and heat. Combined heat-and-power (CHP) plants produce electrical power, and use the heat from that production to also provide heat to local buildings (often through underground steam or hot-water piping systems). These systems have been most often found at hospitals and universities, where a large number of buildings can be efficiently served by a combined facility such as this. But new systems are bringing this same technology into the home.
Micro-CHP units are new to the US, with the first installations just beginning in the northeast. The technology for these units is not brand new, however. There are more than 30,000 homes with these units installed in Japan, where the gas utilities have been promoting them. In Britain, 80,000 under-counter micro-CHP systems are on their way and will be installed in the coming years.
Household micro-CHP systems use a natural gas powered electrical generator to produce electricity. The heat produced from that part of the system is used either to create hot air (as with a traditional forced-air furnace system) or to create hot water (for radiator or radiant floor heated homes). Because the heat is being productively used, rather than going up the chimney of a distant power plant, and because the electricity is being locally produced, rather than being subjected to the losses inherent in power transmission, the micro-CHP is "triple the efficiency of power delivered over the grid."
Micro-CHP systems are most likely to be used in states that offer net metering to their customers, since they will likely produce more electricity than the household needs while they are cycled on.
Having your own power plant in your basement also means that, with the right connections to properly operate the system, blackouts are no longer a concern. Micro-CHP systems are not inexpensive, however. They can be as much as double the cost of a comparable high-end furnace. But, with the electrical savings, they can pay for themselves within a few years at present rates.