Co-generation is defined as the co-production of power and useful heat when fuel is burned in a power generation cycle. Using the excess or waste heat to provide some economic benefit such as process heat or water heating can make compelling economic sense. It has been used for decades in large pulp and paper, chemical, petroleum, and other heat-intensive processing industries.
Cogeneration lends itself to a natural partnership between utilities and large industrial customers, particularly when the utility is installing new generating plants anyway. Large industrial customers can often use the waste heat from the utility's power generating cycles for industrial processes. Likewise, when a large industrial customer becomes a cogenerator, the customer may agree to sell its excess power generation -- if there is any -- to the utility.
There are three basic cogeneration designs in common use: steam turbines, internal combustion engines, and gas turbines. In each case, the engine is used to produce power and the waste heat is captured to provide process heating.