PHOTO: Climate Energy

Basement installation: The Freewatt system, made by Honda,in a Boston-area house.

When you flip on a light switch in an average American home, the light bulb probably uses electricity generated in a far-away power plant. But that is not the most efficient way to use fuels—two‑thirds of their energy is lost as waste heat at the plant and while traveling over power lines.

What if the power plant were sitting in your home’s basement instead? Combined heat and power (CHP) systems can utilize up to 90 percent of a fossil fuel’s energy by simultaneously generating heat and electricity on-site, reducing energy consumption and slashing utility bills. Such systems already power hospitals, university campuses, and large petrochemical factories, and they are widely used for district heating in Denmark, the Netherlands, and other northern European countries. But only in the last few years has the technology evolved to the point that it can power and heat individual homes. Recently gaining popularity in Europe and Japan, micro-CHP, as it’s called, has now broken into the lucrative U.S. market.

Climate Energy, a company in Medfield, Mass., is testing a 1.2‑kilowatt system in 25 U.S. homes and hopes to sell several hundred units this year. The company, a joint venture of ECR International, in Utica, N.Y., and Yankee Scientific, also in Medfield, is marketing a system developed by Honda Motor, Tokyo [see photo, “Basement Installation”]. Honda has sold 50 000 1‑kW units for single-family homes in Japan. SenerTec, a firm in Schweinfurt, Germany, markets a 5-kW system for apartment buildings in Europe.

Micro-CHP systems typically consist of an internal combustion engine and a furnace. The engine drives a generator to produce electricity, and the heat created in the process goes to the furnace via a heat exchanger module. Micro-CHP equipment can run on a range of fuels, including coal and oil. The most popular systems, including Climate Energy’s, run on natural gas.

Unlike solar panels, wind turbines, and fuel cells, CHP is, as Climate Energy CEO Eric Guyer says, “an approach that’s much more like the hybrid gasoline-electric automobile than an exotic automobile such as one running on fuel cells. It’s a good application of available technology—nothing extraordinarily new, no new science, no new way of converting energy.”

The micro-CHP setup costs a few thousand dollars more than a traditional gas furnace. Whether it is worth the extra money depends on where you live. This is because it is driven by heat demand: in the winter the generator runs as much as possible without turning off, providing heat and about half of a typical home’s electricity. When you do not need heat, the power plant switches off and you buy all your electricity from the grid. And if you generate more electricity than you need—say, at night—you could sell it to the utility company.

The Climate Energy system makes the most sense if you live in one of those states where it gets very cold in the winter and you pay a lot for electricity. In that case, it can pay for itself in two years and save you US $500 a year thereafter. Otherwise, the payback period could be up to 10 years.