Combined Heat and Power

Combined heat and power (CHP) is the simultaneous generation of heat and power in a cost-effective and environmentally friendly way. Centralised power generation in the UK has an average delivered efficiency of only around 30%; only a third is supplied as electricity to the point of use. The remainder of the energy in the fuel is dissipated as heat via power station cooling towers and from the electricity transmission and distribution systems. Even modern combined cycle gas turbine stations only achieve a delivered efficiency of about 45%.

By contrast, CHP plant generates useful energy, at the point of use, in the form of both electricity and heat, with an overall efficiency of typically 80%.

The installation of a CHP system can lead to substantial savings in total energy costs. An additional benefit is the reduced emission of carbon dioxide to the atmosphere, an important consideration for organisations conscious of their environmental impact. CHP can also improve a user's security of energy supply.

CHP plant can be designed to run on any fuel, from gas and oil to domestic refuse, though natural gas is the most common. Plant also comes in a wide range of sizes, from below 50 kW to many MW's of electrical output. In recovering excess heat from the combustion process, a CHP system is able to yield efficiency gains. This, combined with the differential in fuel price between raw gas and processed electricity, make a CHP scheme an attractive proposition.

CHP provides the following benefits

• energy cost savings
• reduced dependency on electricity supplier
• environmental performance improvements
• an alternative to purchasing new or additional boilers.

CHP is one of the top priorities for the government in their drive to cut UK CO2 emissions by 20% by the year 2010. Although much of this will come from CHP in large industrial applications, the development of CHP in buildings will also play a key role.

CHP in Community Heating

In addition to the individual sectors, there is considerable advantage in energy linking buildings so that aggregate loads are met by centralised plant. This can be built up into community (or district) heating (CH) networks, with significant extra CHP potential. CH is where a group of buildings, whether domestic, non-domestic or a combination, are supplied with heat from a single source.

CHP provides an excellent heat source for CH schemes. There are a number of CH schemes with CHP in the UK, representing an installed capacity of 214 MWe. The vast majority of this CHP, around 200 MWe, is installed in large scale multi-use CH schemes such as those in:

Slough, London (Citigen), Southampton, Nottingham, Sheffield.

Despite there being significant potential (250,000 homes are connected to CH schemes), a relatively small amount of CHP, 14 MWe, is installed in small scale domestic, or residential, CH schemes. Most of these schemes export the generated electricity to the grid. The relatively low export prices paid for the comparatively small amounts of electricity generated from this CHP has significantly restricted the number of installations. A few schemes, such as the St. Pancras Housing schemes, have pioneered the direct sale of electricity to tenants, but this is comparatively new practice. However, progress is being made with the aid of the Residential CHP Programme.

Financing CHP

With installed costs between £600 and £1,200 per kWe (depending on the unit size), CHP can represent a sizeable investment, although the savings produced typically give a simple payback of around 3 to 5 years. There are three main alternatives for funding:

Capital Purchase - With this option the CHP unit is purchased outright by the host site.

Equipment Supplier Finance (ESF) - Most CHP suppliers provide ESF under their own brand names. Under such schemes the site benefits from reduced costs for no capital outlay and very little risk.

Contract Energy Management (CEM) - Under this arrangement the CEM company owns the CHP unit and sells heat and power to the host site at a reduced rate.

Grants for small-scale CHP - The Energy Saving Trust's (EST) small scale CHP programme provides development and capital grants for qualifying small scale residential CHP schemes.