Matt Caville, Senior Advisor for Decarbonisation of Complex Sites at Energy Systems Catapult, on the replacement decision facing hundreds of public sector sites
Gas-fired combined heat and power (CHP) is a mainstay of large public sector sites but the window on replacing it is closing. CHP reliably generates electricity more cheaply than the grid supplies it, delivering heat as a crucial by-product and providing a degree of resilience at sites that cannot afford to lose power. For a long time, it also reduced emissions, but the carbon case has fallen away.
Grid electricity has decarbonised faster than many expected and running a gas engine is now typically the more emissions-intensive way to meet a site’s demand. Because so much of this capacity was installed during public sector CHP investment in the 2010s, many energy managers are approaching a replacement decision at broadly the same time.
The scale of the problem
Our analysis of the Combined Heat and Power Quality Assurance (CHPQA) scheme dataset found 309 CHP installations across the public sector estate, representing around 414 MW of behind-the-meter generation. Roughly 70% sit in the health sector, with universities and further education accounting for much of the rest. These are not marginal or supplementary plant. They’re the primary source of heat and power for some of our most operationally critical buildings.
Three quarters of that fleet is approaching a replacement decision within the next decade. That’s more than 280 sites which need to decide, at some point before 2035, whether to replace like for like, refurbish, or switch.
A CHP unit typically runs for 15 to 20 years, so a decision taken in 2028 sets a site’s emissions profile well into the 2040s, beyond the public sector’s emission reduction targets of 50% by 2032 and 75% by 2037. These decisions are often handled as plant renewals within a maintenance budget, when in practice they determine whether a site can decarbonise at all.
The cost-carbon tension
For most energy managers, the barrier to acting is cost.
Non-domestic electricity currently costs around 25p/kWh against gas at roughly 5p/kWh. That price ratio makes on-site gas generation economic. It’s also why every low-carbon alternative we’ve modelled costs approximately two and a half times more to operate than the CHP it would replace. That tension sits at the centre of most replacement decisions.
Replacing on-site generation with electrified heat typically means importing significantly more power. Yet around 27% of CHP capacity sits in areas facing grid congestion.
With the Public Sector Decarbonisation Scheme now closed to new applications, the capital route that underwrote much of the last five years of progress has narrowed considerably.
These pressures make like-for-like replacement the path of least resistance. Repeated across 280 sites, that choice would extend fossil fuel dependency at some of the country’s most critical estates by 15 to 20 years, and risks adding stranded assets to public balance sheets.
The case for acting now
If a project takes three to five years to plan, and the grid connection takes longer still, sites with CHP reaching end of life in the early 2030s need to be in feasibility work now.
That doesn’t mean switching to a single low-carbon technology everywhere. For many sites, the practical route is phased: a primary low-carbon heat source with a smaller retained CHP in a transitional or resilience role. With a clear and funded exit plan, this approach delivers near-term carbon savings. From the conversations we’ve been having with NHS Trusts and energy managers across the public sector estate, the organisations making the most progress are those treating replacement as part of a site energy masterplan rather than as a line in the maintenance budget.
Where to start
If you have CHP on your site, three steps are worth taking this year: establish the age and remaining life of your units; check whether your site sits in a grid constrained area or a designated heat network zone; and get the replacement decision onto your capital planning agenda while it’s still a planned investment rather than an unplanned one.
Our full report sets out the analysis behind these figures, the technology options and potential for innovation to support the transition, and case studies from the University of Warwick and Kingston Hospital NHS Foundation Trust.
We’re also developing the model behind this analysis into a self-help tool for individual sites to test replacement options against their own data. More on this to follow in the coming months.
To read the full report and access our free Public Sector Decarbonisation Guidance, visit: https://trimrly.com/psdg
This article appeared in the September 2026 issue of Energy Manager magazine. Subscribe here.
