Consider a 60-kW cogeneration system that produces electricity and hot water with the following efficiencies:

(a) 26 percent for the electricity generation, and

(b) 83 percent for the combined heat and electricity generation. Determine the annual savings of operating the cogeneration system compared to a conventional system that consists of purchasing electricity at a rate of $0.08/kWh and producing heat from a boiler with 70 percent efficiency. The cost of fuel is $5/MMBtu. The maintenance cost of the cogeneration system is estimated at $1.00 per hour of operation. Assume that all the generated thermal energy and electricity are utilized at 6,500 hr/year.

Determine the payback period of the cogeneration system if the installation cost is $2,500/kW.