Estimating the value of energy saving in industry by different cost allocation methods

In complicated systems, such as a highly integrated industrial plant with its own energy production, estimating the value of energy conservation is not so straightforward. Often, heat is priced using different kinds of methods for allocating the fuel cost to heat and electricity. However, there is no consistent way to valuate the process steam in industry, and not just one useful method for allocating costs to heat and power. In this paper, the energy method, exergy method, benefit distribution method and market‐based method are evaluated and compared from different decision‐making perspectives. The results of this study indicate that the allocation methods may overestimate by up to 200–300% the benefits from the mill perspective compared to the benefits from the mill site perspective. So, the most suitable method may vary, depending on the selected system boundary, i.e. the decision‐making perspective, the type of CHP plant and energy prices. Based on the results of this study, the exergy method fits well with the CCGT plant with a condensing unit and constant fuel input. On the other hand, the market‐based method is the most correct way to estimate the value of heat when heat conservation reduces the production of CHP electricity. Copyright © 2010 John Wiley & Sons, Ltd.