The Combined Heat and Power Plant Cost Allocation Methods: An Overview and a New Method Based on the Linear Steam Turbine Characteristic Curve

This paper provides a comprehensive review of cost allocation methods for combined heat and power plants, examining both thermodynamic approaches commonly used in Russia and economic methods applied in developed electricity markets. The author develops a novel thermodynamic method based on a linear steam turbine characteristic curve, which offers the advantage of considering energy quality differences between electricity, industrial steam, and heat while requiring fewer input data than existing effective methods. The study compares all methods using both qualitative criteria and numerical results, revealing that the officially adopted "physical" method in Russia is the least effective thermodynamic approach and actively hinders market development. The paper concludes with practical recommendations, including the use of thermodynamic methods for internal efficiency assessment and economic methods for tariff setting and wholesale market bidding.