How to maximise financial incentives from CHP by achieving ‘Good Quality’ assurance

To maximise Combined Heat and Power (CHP) efficiency and gain access to attractive fiscal incentives, your cogeneration system must be certified as ‘Good Quality’ under the CHP Quality Assurance (CHPQA) programme. Luke Bannar-Martin of Centrica Business Solutions explains how to optimise operational efficiency to achieve certification.

Make energy efficiency savings with CHP

CHP is recognised for its exceptional efficiency and economic benefits. From one single on-site process, cogeneration can supply a building with electricity and thermal energy for hot water, and space heating and/or cooling. With a typical efficiency in excess of 80%, a CHP plant is much more energy-efficient than sourcing electricity from the grid and producing heat in gas boilers. As such, it can reduce energy bills by as much as 40%.

Enjoy the financial benefits of ‘Good Quality’ CHP

Achieving Good Quality CHP, certified under CHPQA, is financially rewarding as certification is linked to tax incentives and exemptions that reward efficient energy performance. These include:

  • Climate Change Levy (CCL) exemption
    CCL is an environmental tax on the electricity, gas and solid fuels used by most non-domestic customers.  ‘Good Quality’ CHP is exempt from paying CCL on gas used to generate electricity for on-site consumption. The financial benefits of exemption from the CCL tax can be considerable and have become even more attractive since increases in CCL tariffs on natural gas were introduced in 2019.
  • Annual Investment Allowance (AIA) eligibility
    Annual Investment Allowances replaced Enhanced Capital Allowances in 2020. This scheme encourages investment in energy saving equipment, such as CHP, by providing tax relief.
  • Preferential business rates
    Using ‘Good Quality’ CHP for on-site energy can deliver access to preferential business rates.

What is the CHPQA standard?

The CHPQA programme is the Government’s method for assessing the quality of CHP schemes according to energy efficiency and environmental performance. As such, CHP is assessed on its power efficiency and by a Quality Index (QI), which is a measure of the overall energy efficiency and delivery of primary energy saving. 

The aim is to monitor, assess and improve the quality of CHP, bringing important environmental, economic and social benefits for users. CHPQA is a voluntary scheme but its financial incentives benefit the user, the environment, and help the government to reach emissions reduction targets.

Note that CHPQA certification is not a one-off. Reassessment is required annually.

Succeed with Good Quality CHP

For a CHP system to qualify as ‘good quality’, evidence of energy efficiency must be provided. The project needs to be more efficient, in terms of heat and power, than alternative energy options.

The CHPQA Standard is used to calculate if the proposed CHP scheme exceeds the required threshold criteria by providing the CHP with Quality Index (QI) and power efficiency ratings. Such ratings are achieved by examining data for fuel used, power generated, heat supplied and hours run.

To be confirmed as Good Quality CHP:

  • Existing systems must achieve a QI of 100, and a power efficiency of 20%.
  • New systems must achieve a QI of 105.

The key steps to achieving ‘Good Quality CHP’ accreditation:

1. Accurate sizing of a CHP system in tandem with proposed demand reduction measures.

Gather accurate site energy data during the planning phase to size the CHP correctly. In most cases you should limit the maximum size of the CHP to the electrical base load, but you should also take into account your heat demand so that you utilise as much as possible and don’t reject useable heat. Accurate sizing will enable the CHP to operate at full load for the optimum number of hours annually.

The CHP system should be integrated into the site’s utility services so that it operates as the lead heat source at all times. It is essential to optimise the electricity and power generation to ensure the best financial/carbon savings. Boilers can always be used if there is an exceptional heat demand during peak periods.

2. Ensure CHP acts as the lead heat source at all times.

When integrating CHP into heating systems for new build schemes, select flow and return temperatures of heating circuits to optimise operation and prevent your CHP from ‘tripping’ due to high return temperatures.

3. Ensure your metering is calibrated and complies with CHPQA standards.

It should be capable of capturing fuel use, useful heat produced and electricity generated. We would always advise customers to monitor all energy outputs via quality metering or sensor technology to ensure that both their asset and their service provider are working to the best of their abilities.

4. Design and implement a control strategy that will yield the best performance. 

This should be connected to the wider building energy management system, or integrated into the controller – as is the case with Centrica Business Solutions’ PowerRadar system, which is a single-view energy management platform.

5. Implement a robust proactive maintenance and servicing strategy. 

Operate assets in line with the manufacturer’s guidelines, to keep your system operating at optimum performance. A CHP system is a business critical machine that requires daily observation to check for good operation. This can be performed via a remote control and diagnostic system, or by local monitoring.

This will also identify trends that could indicate problems further down the line. Condition based monitoring, including regularly reviewing oil samples, should also form part of your servicing and maintenance strategy to keep your cogeneration system in peak condition.

6. Record all available data

Use data collection and analysis technologies so you can provide evidence that the system is always operating at optimal performance. By doing so you will increase the system’s chances of achieving ‘good quality’ CHPQA certification, unlocking greater financial incentives along the way.

CHPQA: key points

Reduce emissions by using energy saving technologies including CHP to benefit from government incentives and tax exemptions.

  • Compliance with the CHPQA programme to ensure Good Quality CHP systems.
  • Evidence is required for CHP to be certified as ‘Good Quality’, so prioritise remote monitoring.
  • Good Quality CHP can take advantage of tax incentives, such as CCL exemption.
  • Create a good maintenance strategy to maximise energy efficiency and keep your CHP compliant.

Centrica Business Solutions is a market leader in CHP, with over 3,200 CHP built in the UK to date and deployed all over the global.

Download Centrica’s technical guide to CHP: https://www.centricabusinesssolutions.com/reducing-energy-costs-and-preparing-net-zero-transition

Further information: https://www.centricabusinesssolutions.com/

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