Industry NewsKatherine Woodley, Carbon Management Analyst at EIC, the UK's leading energy consultancy, assesses the viability of Combined Heat and Power as a renewable energy source.
Combined Heat and Power (CHP) is a key element in the UK Climate Change Programme. The UK Government has announced that 10,000 MW of 'Good Quality' CHP capacity should be installed by 2010 and, as a consequence, strategies are in place to incentivise the wider use of these systems.
CHP is one of the most common forms of energy recycling and is the simultaneous generation of usable heat and power (usually electricity) in a single process. In its simplest form, an engine, gas or steam turbine is used to drive an alternator. The resulting electricity can be used either wholly or partially on-site. The heat created during power production is recovered, usually in a heat recovery boiler, and can be used to raise steam for a number of industrial processes, or to provide hot water for space heating.
Conventional forms of electricity generation in the UK are inefficient, with a large amount of low grade heat produced as a by-product. In most conventional power stations, a mere 30-50 per cent of the energy consumed is converted to electricity. CHP is recognised as a more efficient way to utilise fossil and renewable fuels and could make a significant contribution to the UK's sustainable energy goals. The efficiency of CHP leads to a reduction in the use of primary energy and a lowering of emissions, as less fuel is burnt. CHP systems are also typically installed on-site, supplying customers with heat and power directly at the point of use, therefore avoiding the significant losses which occur when transmitting electricity from a large centralised plant to the end user.
There is also the added incentive that Good Quality CHP is 100 per cent exempt from paying the Climate Change Levy (CCL), a tax imposed on UK business energy usage which was introduced in 2001. The government launched the Quality Assurance for CHP (CHPQA) scheme to determine how to appraise Good Quality CHP. Those with a CHP plant who wish to benefit from CCL exemption must register their plant with the CHPQA.
The type of fuel used in the CHP system will also have an impact on payback periods. Units using biomass or energy crops qualify for Renewable Obligation Certificates (ROCs). A ROC is a green certificate issued to an accredited generator for eligible renewable electricity produced within the UK. ROCs are released in relation to the megawatt hours of renewable output.
In the case of CHPs, the number of ROCs issued is dependent upon;
The average price of ROCs in January 2010 was ?46.25. Therefore if the facility is eligible for ROCs, the payback period on the investment would be significantly reduced.
Despite the benefits of CHP, two of the major factors affecting its economic feasibility are the cost of fuel and the potential value of the electricity produced. In recent years the viability of CHP has suffered as a consequence of the market conditions in the UK. Gas prices, which have risen faster than electricity prices, have reduced the competitiveness of CHP. However, with an increasing proportion of the UK's power being generated from natural gas, the spark spread is making it a more attractive option. Furthermore, an organisation needs to benefit economically from installing a CHP unit with achieved annual cost savings of a sufficient scale to yield a return on the capital invested.
Key factors to consider prior to installing CHP:
The EIC Carbon Management team can support your business in assessing the feasibility of installing CHP. For more information please contact EIC on 01527 511 757 or email theenergyexperts@eic.co.uk.