Six reasons why CHP is good for business

As organisations coordinate their

economic recovery from the global pandemic, Combined Heat and

Power (CHP) can deliver impressive energy and

operational cost savings, while also supporting

business resilience and sustainability. Hugh Richmond, CEO of distributed

energy company Edina, explains

A number of tax and financial incentives increase the economic case for cogeneration. The most significant is exemption from Climate Change Levy (CCL) on natural gas input fuel and self-generated electricity used on site. This can provide thousands of pounds worth of energy cost savings


HP/cogeneration is frequently the most effective energy cost reduction

technology, particularly for sites with a high heating or cooling demand, where CHP can yield savings of around 30% and rapid payback of two to three years. So here are six benefits of CHP:

1. HIGH EFFICIENCY CHP is almost twice as efficient as using separate grid power and individual boilers. If correctly sized, cogeneration can achieve efficiencies of up to 90%. Since energy is generated and

consumed on-site, there are none of the transmission and distribution losses of transporting electricity from remote power plants. In addition, these traditional, unabated power stations, generate a significant amount of waste heat. By contrast, CHP systems recover much of the heat ‘lost’ during generation and use it to heat spaces, water, or in process heating. By connecting an absorption chiller to a

CHP system it can be used in trigeneration mode to produce chilled water for use in processes like refrigeration and process cooling, or for air conditioning.

2. ULTRA-LOW FUEL PRICES Gas-fuelled CHP systems can generate power much more cheaply than purchasing network electricity because wholesale gas prices are so much lower than power prices and this long-term trend looks set to continue. The latest UK government energy

statistics reveal that the gas Spark Spread (the difference between the retail price of energy and the cost of fuel used to generate that energy) is currently at its highest in nearly 20 years – reaching a peak of 5.6 in the last quarter of 2019.

3. TAX INCENTIVES A number of tax and financial incentives increase the economic case for cogeneration. The most significant is exemption from Climate Change Levy (CCL) on natural gas input fuel and self-generated electricity used on site. This can provide thousands of pounds worth of energy cost savings as CCL is one of the biggest green taxes. Huge increases in CCL rates were

introduced in 2019 to replace lost tax revenues when the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme was phased out. CCL on natural gas increased by a further 19.7% on 1 April 2020 and will continue to increase sharply through to 2023, making the CHP exemption on gas even more beneficial. To qualify for CCL exemption,

cogeneration projects must qualify as ‘good quality’ CHP under the Combined Heat and Power Quality Assurance (CHPQA) scheme. CHPQA assured schemes may also be eligible for preferential business rates and taxation benefits under the Annual Investment Allowance.

4. FLEXING POWER FOR PROFIT CHP systems are usually connected to the network electricity supply to maximise system efficiency and ensure availability of power at all times. This provides an opportunity to use power flexibly so that grid electricity is only used when wholesale prices are cheapest. Self-generated power can be used at expensive peak times. There’s also scope to generate

revenue from flexible power capacity via grid-balancing Demand Side Response schemes, such as the Capacity Market. CHP systems can also be used in combination with battery


storage to access the most lucrative, fast response markets.

5. BOLSTERING ENERGY RESILIENCE CHP systems have a very high uptime – typically operating at 97% availability. Sites with a reliable gas supply can benefit from a stable supply of power, heat and, if necessary, steam to keep operations running smoothly. Although most CHP units are set up

to use a small percentage of grid power, they can be run independently from the electricity network in island mode. This ensures business continuity in the event of power supply disruption. Alternatively, standby emergency generators, or battery storage can be used in tandem with CHP systems to ensure back-up power.

6. ENVIRONMENTAL BENEFITS Due to its high efficiency and utilisation of waste heat, natural gas cogeneration can reduce emissions, with renewable CHP delivering much greater carbon savings. Government figures on the total carbon savings of the UK’s installed CHP, relative to fossil-fuel power stations, were 10.47 MtCO2

in 2019. CHP systems can play a complementary

role alongside other low and zero carbon measures as organisations work towards net-zero goals. Some companies reinvest the substantial cash savings from CHP in renewable projects that may have a longer payback time. As a market-leader in the supply,

installation and after-care support of CHP systems, Edina can provide flexible finance to support project delivery and help power your future.



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