CHP – An Energy-Efficient Solution to Growing Cost Concerns

Combined Heat and Power (CHP) can be an ideal solution for site owners, operators and other building services’ professionals looking to make cost savings and improve energy efficiencies. Thanks to reduced whole-life costs and an array of financial incentives, businesses can realise significant benefits by adopting this pioneering technology, says Nigel Thompson, Sales Manager – Gas Power Solutions at Finning UK and Ireland.

CHP solutions generate electricity while capturing and using the wasted heat from conventional power plant process. By adopting this technology, which is sometimes known as cogeneration, CHP plants can achieve efficiencies up to 80 per cent. For point of comparison, coal and gas-fired plants rarely exceed efficiencies of 40 per cent[1].

This marked difference in efficiency translates into reduced energy costs for CHP plants over other fossil fuel-using options. Consequently, CHP plant owners and operators can experience marked reductions in energy costs, an area which usually constitutes a sizeable portion of overall spend.

These savings are felt most keenly at larger facilities with substantial energy demands, which will be able to recoup any investment in a shorter period of time. Indeed, even smaller sites can probably expect to be turning a profit on their system within three years of installation[2].

Government support

Aside from energy savings, a number of outside factors can make CHP systems an even more attractive investment. Chief among these is the growing concern and awareness surrounding enviromnmental issues such as carbon emissions, and the need to find ‘greener’ energy sources.

CHP fits this profile – although it still produces carbon dioxide,
the efficiencies created by CHP-using plants reduces the amount of fuel required to keep processes running. As a result, plant owners and operators using CHP will see their emissions cut by, on average, a minimum of 10 per cent and potentially by as much as 60 per cent[3]. With the benefit of a high-quality and secure energy source system on site, a plant’s dependence on the national grid for power is also dramatically reduced.

Taking this into account, various countries have set up CHP support schemes to reduce carbon use and pollution. In the UK, the government has “committed to increasing the UK’s CHP capacity because of the considerable environmental, economic and social benefits it can bring together with its contribution to security of supply.”

This has translated into a large array of new offers, initiatives and mechanisms being made available to CHP-using companies that significantly reduce their financial obligations to the government. These schemes include the Carbon Price Support Tax Exemption, the Climate Change Levy Exemption, and preferential business rates.  Furthermore, the Government’s Enhanced Capital Allowance scheme also allows businesses to write-off their investment in CHP systems against their taxable profits.

However, these incentives are only available to companies using CHP systems that have been ceritified ‘Good Quality’ by the CHP Quality Assurance program (CHPQA). To be applicable for the certification, a CHP system must be able to produce an electrical efficiency of 20 per cent. Only CHP systems that reach this criteria and demonstrate significant savings in comparison to conventional energy-generating systems are able to enjoy the reduced-cost benefits offered by the UK government.

This exclusivity makes it even more crucial to invest in a high-quality, reliable system that fulfills the CHPQA’s criteria (full guidance of which is available at https://www.gov.uk/guidance/chpqa-guidance-notes).

Taking full advantage of these can boost the cost effectiveness of investing in a system, enhancing savings generated and further reducing payback time. As such, it is clear that purchasing a high-quality CHP unit can have a fundamental impact on financial performance in the long-term, and owners and operators should prioritise total cost of ownership over the initial purchase price.

Whole-life savings

Even mid-sized CHP systems cost several hundred thousand pounds, with the price extending to seven figures for larger sites.  With this in mind it is vital that businesses identify solutions appropriate to their needs. Choosing cheaper and ill-suited systems may seem attractive due to their lower upfront cost, but they could prove a costly burden in the long-term. Assuming a standard 20-year lifespan, a system’s maintenance costs alone will likely be larger than the initial outlay, while fuel represents as much as 75 per cent of the overall spend.

So when investing in a CHP system, it is crucial that owners and operators look beyond short-term costs and look at the investment over the course of its lifetime. An appropriate CHP system will ultimately pay for itself, whereas a less-suited, lower-quality system may require further expensive maintenance and repair costs to compensate for reduced performance and reliability.

Furthermore, when taking account of fluctuating energy prices and the growing focus on ‘greener’ fuel sources and the environment, CHP is increasingly being identified as a reliable and sensible solution. Indeed, it is already being used at 383 industrial sites across the UK, generating a significant portion of the energy used in the sector[4].

Operations and maintenance

It is highly recommended to invest in an operations and maintenance (O&M) contract when purchasing a CHP system. When doing so, investors should priotise trusted partners who take a bespoke approach to each site, and have a strong, reliable track record.

For more information on Finning and CHP technology, please visit www.finning.com.

[1] Combined Heat and Power, Department for Business, Energy & Industrial Strategy. https://www.gov.uk/guidance/combined-heat-and-power

[2] CHP Finance, Department of Energy and Climate Change https://www.gov.uk/government/uploads/system/uploads/attachment_data/ le/345190/Part_5_CHP__Finance.pdf

[3] Digest of United Kingdom Energy Statistics (DUKES) 2016, Department for Business, Energy & Industrial Strategy https://www.gov.uk/government/statistics/digest-of-united-kingdom-energy-statistics-dukes-2016-main-chapters-and-annexes

[4]Digest of United Kingdom Energy Statistics (DUKES) 2016, Department for Business, Energy & Industrial Strategy https://www.gov.uk/government/statistics/digest-of-united-kingdom-energy-statistics-dukes-2016-main-chapters-and-annexes