Report: Combined Heat and Power Systems Could Save Hospitals $700k Per Year

If an average-sized hospital adopted a combined heat and power generation system, it could post at least $700,000 in annual cash flow savings, according to a report from Health Care Without Harm and the Boston Green Ribbon Commission.

CHP, also known as cogeneration, is the process of producing electricity and heat from a single fuel source. The Environmental Protection Agency and many healthcare sustainability organizations have touted CHP as an "efficient and clean approach to generating power and thermal energy" compared with power plants, which are more expensive and have higher carbon emissions.

For the report, researchers looked at CHP systems at Massachusetts-based hospitals, such as South Shore Hospital in Weymouth. They said CHP systems can "help hospitals manage operational budgets to address growing utility costs, reduce greenhouse gas emissions, access reliable and redundant power and address air quality concerns."

Accounting for capital costs, construction financing costs, long-term financing costs, maintenance charges and other financial elements, researchers said CHP has a net positive cash flow of more than $700,000 per year. Hospitals that invest in CHP could also see full payback within four years or less, while fuel consumption could fall by up to 24 percent.

Researchers interviewed several hospital executives and facility managers to identify lessons from CHP systems. For example: "Interviewees noted that the environmental and reliability benefits of CHP systems can be a useful argument to hospital CFOs in order to relax return on investments standards," the report read.

However, the report's authors said CHP may not be suitable for every hospital, and executives must weigh several factors, such as energy demands, the cost of grid-based electricity and other planned building renovations.

More Articles on Hospitals and Sustainability Finance Strategies:
Because it Makes "Economic Sense": How Methodist Le Bonheur Healthcare Changed Its Operations
How Hospitals Can Improve Margins 33% Through Energy Savings
4 Reasons Why Sustainability Investments Are Vital to Hospital Finance Strategies

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