Once available only to large commercial sites, Combined Heat and Power generation (CHP) systems are now available on a scale that is safe, practical, and affordable to homeowners. CHP technologies, sometimes referred to as a power plant, have provided heat and electrical energy efficiently at commercial and industrial sites for many years. However, with over 100,000 successful residential installations in Japan and Europe, as of December 2014,  several manufacturers are now offering residential CHP products in the U.S.

A CHP system uses fuel such as natural gas to produce simultaneous heat and electricity. The electricity can be used for any household device such as lights and appliances. At the same time, the heat produced can be used for water heating and/or space heating. About 10% of the fuel used is lost as exhaust, much like a high efficiency furnace.

Micro-CHP, as residential-sized CHP systems are usually called, run on propane or natural gas. The byproduct of electricity generation is waste heat—and plenty of it. One 6-kW unit provides 10 gpm of hot water at 140 to 150°F. This waste heat can be used to heat an entire home, water for domestic use, for swimming pools and spas, or even as an energy source for heat-driven (absorption) cooling systems.

CHP systems are extremely efficient, offering combined heat and power generating efficiency of about 90%, compared to about 30 to 40% for electricity from a central power station.

Micro-CHP units range in capacity from about 1 kW to 6 kW and are about the size of a major appliance. Units come as grid-tied systems which connect to utility power as backup or as stand-alone systems providing primary power for a residences.

A typical unit produces 1.2 kilowatts of electric power and 11,000 Btus of heat in the form of hot water. The system is combined with a high efficiency, natural gas-fueled warm air furnace or boiler for supplemental space heating.

Operating cost and energy savings will vary by type and cost of fuel, efficiency of the system, amount of electricity produced, and whether net metering is available at the site. For the average homeowner in the Northeast, a 1.2 kW system will provide approximately half of the annual household electricity needs. The cost of operating the CHP unit to its full capacity (fully using the thermal output of the CHP) will be less than buying an equivalent amount of fuel gas and electricity as long as electricity costs remain above 8.5 cents per kWh, which is the case in most of the country. Annual maintenance costs are on the order of a few hundred dollars.