Allocation of fuel costs and CO2-emissions to heat and power in an industrial CHP plant: Case integrated pulp and paper mill

This paper studies allocation of fuel costs and CO2-emissions to heat and power in a CHP plant producing heat to an integrated pulp and paper mill and electricity to the liberalized electricity markets (or to the mill by the market price). The CHP plant and the mill are considered to be two separate economical units and both the mill and the CHP plant perspectives are discussed. Fuel costs and CO2-emissions are allocated using the energy, exergy and market based methods. The CHP plant purchases black liquor and bark from the mill. It also purchases oil from the markets to cover the whole fuel demand of the plant. The results indicate that the marked based method can be recommended as a “neutral” cost allocation method, because with that, the energy producer is not collecting extra margins from selling steam. This means that heat pricing is cost based. The results also indicate that depending on the emission factor and efficiency of alternative energy production form, the marked based method or the exergy method allocate the lowest CO2-emissions to heat. Therefore, the use of market based method for allocating costs and CO2 emissions can be recommended in order to use one single approach in both.