The CHP Paradox - Why Combined Heat and Power Is Losing Its Economic Edge

How CHP Systems Work - For decades, Combined Heat and Power (CHP) systems have been the standard solution for greenhouse CO₂ supply. By burning natural gas to generate electricity and heat—with CO₂-rich flue gases as a useful byproduct—CHP systems appeared to elegantly solve multiple problems simultaneously. However, fundamental changes in energy economics, carbon pricing, and grid infrastructure are undermining the CHP value proposition, particularly for greenhouse operators who originally installed these systems primarily for CO₂ supply rather than power generation. A typical greenhouse CHP system burns natural gas in an engine or turbine to generate electricity. The waste heat from combustion is captured and used to heat the greenhouse, while the flue gases are cleaned and injected into the greenhouse to enrich CO₂ levels for plant growth. This tri-generation approach (electricity, heat, and CO₂) appeared economically compelling when natural gas was cheap, electricity prices were high, and carbon was unpriced.

The Changing Economics of Natural Gas - European natural gas prices have experienced extreme volatility over the past five years, fundamentally altering CHP economics. In 2020, Dutch TTF natural gas traded at €10-15 per MWh. By August 2022, prices spiked above €300 per MWh during the energy crisis following Russia's invasion of Ukraine. While prices have since retreated to €30-40per MWh as of early 2026, the structural factors supporting higher gas prices—reduced Russian pipeline flows, increased LNG import dependence, and competition from Asian markets—suggest that the era of persistently cheap natural gas is over. For greenhouse CHP operators, gas price volatility creates planning uncertainty. A CHP system that appears economical at €25/MWh gas becomes a significant liability at €100/MWh. During the 2022 price spike, many Dutch greenhouse operators shut down CHP systems entirely and purchased CO₂ from alternative sources, accepting higher CO₂ costs to avoid catastrophic gas expenses. This experience revealed that CHP systems optimized for cheap gas become economic anchors when fuel prices rise.

Rising Carbon Costs - The EU Emissions Trading System (ETS) has transformed from a symbolic policy gesture into a material cost driver. EU carbon allowances (EUAs) currently trade above €80 per ton, with forward curves suggesting prices will reach €100-126 per ton by 2030 as the Linear Reduction Factor accelerates. This carbon price applies directly to CHP emissions—every ton of CO₂ produced from natural gas combustion creates a compliance obligation. The carbon math is straightforward but brutal for CHP economics. Burning natural gas produces approximately 0.2 tons of CO₂per MWh of gas consumed (using typical emission factors of 56.1 kg CO₂/GJ).[7]At €80 per ton CO₂, this adds €16 per MWh to the cost of gas. A greenhouse consuming 10 million MWh of gas annually for CHP operation now faces €160million in carbon costs—a figure that dwarfs many other operational expenses.By 2030, with carbon at €126 per ton, that same operation would face €252 million in annual carbon costs. Critically, these carbon costs apply to ALL CO₂ emitted—not just the portion captured and used in the greenhouse. If a CHP system captures 30% of its CO₂ for plant enrichment while the remaining 70% exits the stack, the operator still pays carbon costs on 100% of emissions. This fundamentally changes the economic calculation compared to purchasing delivered CO₂ (which carries embedded carbon costs) or generating CO₂ via Direct Air Capture (which produces no fossil emissions and thus no carbon tax liability).

The Grid Electricity Paradox - When CHP systems were first deployed in greenhouses, grid electricity was expensive and base load power from coal and gas dominated. Generating electricity on-site via CHP made economic sense —operators avoided high retail electricity prices while producing useful heat and CO₂. However, the electricity market has transformed dramatically with renewable energy deployment. Many European electricity markets now experience periods of negative or near-zero wholesale electricity prices during high solar and wind production. Germany saw electricity prices below €20/MWh for extended periods in 2025, occasionally even negative when solar output peaked during low-demand hours. For greenhouse operators with CHP systems, this creates a perverse situation: their expensive on-site generation competes with essentially free grid electricity during sunny midday hours—precisely when greenhouses need maximum CO₂ for photosynthesis. The capital cost of maintaining CHP capacity that sits idle during low-price periods represents a stranded asset. Operators face a choice: run the CHP when economics don't justify it (wasting money on expensive self-generated power), or leave it idle and purchase electricity from the grid (making the capital investment in CHP unproductive). Neither option is attractive.

The CO₂ Quality Question - The CO₂ produced by CHP arrives as a dilute stream mixed with nitrogen, water vapor, and trace combustion byproducts. Touse this flue gas for CO₂ enrichment, operators must ensure it doesn't contain harmful contaminants. The combustion of natural gas inherently produces nitrogen oxides (NOx), carbon monoxide (CO), and potentially sulfur compounds if the gas contains impurities. While catalytic converters and scrubbers can reduce these contaminants, they cannot eliminate them entirely, raising questions about long-term crop exposure. Ethylene, even at concentrations as low as 0.01 ppm (10 ppb), can cause visible damage to sensitive crops like petunias, reducing flower size and causing abnormal growth. Nitrogen dioxide (NO₂) at 40 ppb can damage crops over 24-hour exposures, while ammonia (NH₃) causes harm at 144 ppb per year. Sulfur dioxide, benzene, and aromatic hydrocarbons also pose risks depending on concentration and exposure duration. The question for greenhouse operators becomes:what level of chronic low-dose exposure to combustion byproducts is acceptable for high-value crops? For organic certification or premium markets, even trace contaminants may pose reputation risks.

Timing Mismatch: Heat vs.CO₂ Demand - CHP systems produce heat, electricity, and CO₂in fixed ratios determined by thermodynamics. A typical system might produce40% electricity, 45% useful heat, and flue gas containing the remaining energy(with CO₂ as a byproduct). However, greenhouse demand for these outputs varies independently. CO₂ demand peaks during bright daylight hours when photosynthesis is maximum—often during summer when heating demand is minimal.Heat demand peaks during winter nights, when CO₂ enrichment provides no benefit because photosynthesis has stopped. This temporal mismatch forces operators to run CHP systems at suboptimal times. Running the system in summer to meet CO₂demand produces unwanted heat that must be vented, wasting energy. Running it in winter for heat produces CO₂ when plants can't use it effectively due to lowlight levels. There is no operational mode that simultaneously optimizes for both heat and CO₂ delivery throughout the year.

The Alternative: Decoupling CO₂ from Combustion - The emerging alternative is to decouple CO₂supply from fossil fuel combustion entirely. Direct Air Capture systems produce CO₂ without burning natural gas, eliminating carbon tax liability on CO₂generation. Heat can be supplied by electric heat pumps (increasingly economical with low electricity prices) or other electrified systems. Electricity comes from own PV installations or alternatively the grid, allowing operators to benefit from low-cost renewable power during high-production periods. This decoupled approach provides operational flexibility that CHP cannot match. CO₂ production can ramp up and down to match real-time plant demand, independent of heat or electricity needs. No combustion byproducts means no crop contamination risk. Capital can be allocated to simpler, more reliable systems rather than complex cogeneration equipment.

Conclusion - Combined Heat and Power systems made sense in an era of cheap natural gas, expensive electricity, and unpriced carbon. That era is ending. Rising gas prices, carbon costs approaching €100+ per ton, abundant low-cost renewable electricity, CO₂ quality concerns, and unfavorable regulatory trends are systematically undermining the CHP business case. For greenhouse operators with existing CHP systems, the question is not if but when to transition to alternative CO₂ supply. For those planning new facilities, investing in CHP infrastructure may commit them to an obsolete technology for decades.The paradox is that systems originally installed to improve economics may now represent the primary obstacle to achieving cost-competitive, sustainable greenhouse operations