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Energy Saving

CHP - Combined Heat and Power unit

Combined Heat and Power (CHP)

In short, Combined Heat and Power systems (CHP), or cogeneration, converts gas efficiently into power and heat on your own site. And with mini CHP and micro CHP systems now available, a CHP system is an option for many more businesses.

Cogeneration technology is reliable, reducing your grid energy need significantly.  Besides this, you’ll achieve better protection from power outages.

In reality, with grid electricity costs increasing, a 2-3 year payback on CHP plant is common. It does this chiefly by producing comparatively cheap electricity on-site. To put it another way, a CHP system therefore has a positive and lasting impact on your bottom line.

Additionally, a good quality CHP is exempt from paying Climate Change Levy on all gas, and electricity used on site (except for exported electricity).

Why doesn’t every business have CHP then?

It’s important to realise that not all businesses use enough electricity to get the payback benefits. Although this may be true, we have many clients who do meet the criteria, but who have yet to consider CHP. As previously mentioned, with mini CHP and micro CHP now available, it’s an option for smaller businesses.

In the first place, ask yourself a few qualifying questions.

  1. Do you need heating or hot water throughout most of the year? A 200-bedroom hotel with a swimming pool is great application. A 10-bedroom guest house isn’t. 
  2. Is your electricity use substantial? Savings come mostly from reductions in your grid electricity costs. Therefore, if your electricity spend is not significantly large, the potential savings from CHP will be smaller.

A viable CHP solution can save you many £1,000s in electricity every year. 

How much can it save?

For one thing, Combined Heat & Power is a highly intelligent and efficient process. To clarify, it utilises the heat created through electricity generation to generate hot water and space heating. 

Providing the cost of the fuel you use to run the system (i.e. gas) is cheaper than grid electricity, you will make savings.

The technology offers benefits to many types of business. To emphasise, it can cut as much as 40% off your energy bill, creating great savings.

Further information

You can download a Technology Information Sheet here.


A fuel such as gas is burned to release heat energy. The heat is used to drive a gas turbine-powered generator (steam-powered in larger plant), which makes electricity for your equipment and lighting, whilst simultaneously providing hot water and space heating.

There are numerous benefits –

  1. Reduced greenhouse gas emissions. The estimated average CO2 emissions for electricity generated from a mixture of gas, coal, oil and nuclear power stations is around 430g of CO2 per kWh delivered electricity produced at an overall efficiency of around 40% (i.e. 60% is lost during generation or transmission). By the same measure, if gas is used to generate electricity on site at an efficiency of 83% the CO2 emissions will be approximately 207g/kWh (i.e. 430g/kWh times 40% divided by 83%). This equates to a saving of 52%.
  2. Reduced energy costs. Because a significant proportion of a building’s electricity requirement is generated by mains fed gas, the overall cost of energy used by the building is reduced. The reason for this is that mains fed gas is cheaper than mains fed electricity. Typical prices are 7-12 p per kWh for mains electricity, but only 2-4p per kWh for mains gas. If you use biogas, the saving is greater again as you aren’t dependent on price volatile gas supplies and the cost of biomass and biogas is significantly cheaper, with a more reliable supply.
  3. CHP system integration. CHP units, heat pumps and boilers can be installed together as long as attention is paid to the operating temperatures of each appliance.
  4. Climate Change Levy exemption. Electricity generated by CHP and heat generated by heat pumps are exempt from this levy.
  5. Enhanced Capital Allowances. The scheme permits businesses to offset 100% of the capital cost of these technologies against tax in the first year, instead of having to spread the tax write-off over say 10 years. This can save around 7-8% of the capital cost over the plant lifetime.
  6. Renewable Heat Incentive (RHI). This can be claimed for twenty years for biogas/biomass versions – it is not available for grid gas versions.
  7. Improved SBEM results and energy ratings. The SBEM (Simplified Building Energy Model) result achievable by using CHP and heat pumps is significantly better than for any system incorporating oil or gas fired boilers for space heating. This means that the building is more likely to achieve a pass against Part L of the Building Regulations and will receive a better energy rating as recorded on the building’s Energy Performance Certificate.

Do you need heating or hot water throughout most of the year? A 200-bedroom hotel with a swimming pool would be a very successful application; whereas a 10-bedroom guest house would probably not be viable. CHP provides benefits when applied in a number of industries.  Please contact us for details.

Do you use a lot of electricity? Savings come mostly from reductions in your electricity costs. Therefore, if your electricity spend is not significant to start with, then the potential savings from CHP will be smaller. A viable CHP solution can save many £1,000s in energy every year, but for CHP to deliver optimum savings, existing electricity spend needs to be at least £150,000 – £200,000 p.a.

Is there a real difference between electricity and gas prices? CHP burns gas to produce cheap electricity, so the relationship between these two costs is important. This is known as your ‘Spark Ratio’. If you’re considering biomass/biogas, the price difference is always likely to be significant. Spark Ratio, sometimes known as the ‘Spark Gap’, is an industry-standard term for the difference between the prices per kWh of your gas and electricity supplies.

You’ll need to answer a few questions before we can assess this. It’s usually necessary to bring us in to assess some of these, but you can answer a few for yourself.

  1. Find out your annual heat and power requirement. CHP is ideal for buildings requiring heat and power together for more than 4,000 hours a year.
  2. Know your electrical load profile. It’s more important to understand the base load profile rather than the mean or peak. This will ensure that the system will run efficiently.
  3. Know your heat demand in kW and degrees C. CHP configures vary widely according to the amount of heat required and the temperature it is required at. Some engine manufacturers will offer engines with much higher jacket heat recovery temperatures than others.
  4. Know how much you currently pay for heat generation. By knowing your current billing figures, you can produce a precise costs comparison demonstrating the potential savings to be made from each CHP system.
  5. If in doubt, go small. A CHP which is too large for the application won’t save, whereas a CHP that is too small will, although slightly less than it otherwise would.
  6. Understand lifecycle cost. The cheapest CHP solution identified during the procurement process will not necessarily be the cheapest to run over a period of time.
  7. Track record of the system. There are many existing CHP systems that underperform – so look for a supplier with a demonstrable good track record.
  8. Purchase an operations and service contract. Buy an Operation and Maintenance contract at the same time as the installation; this will guarantee the system’s performance.
  9. Listen to the supplier. Understand where money needs to be spent – and where to economise – to procure a product which performs and is cost effective. 

Savings depend on your spark ratio and the amount of heating/electricity you are currently using and will potentially use in the future. Savings of circa £40,000 per annum are possible with a medium-sized CHP system and savings of £100,000 or more per-year are achievable on larger applications.  Savings all depend on individual circumstances and for larger industrial schemes, substantially more can be saved.

This is not normally needed, unless your CHP installation is in an area where the public view of your building may be affected. Often, the unit can be installed indoors if existing space permits. With any development planning you should always check with your local planning department. Compliance with building regulations and other standards, such as air quality requirements, will always be mandatory.

To have your own CHP system generating your own electricity on site normally requires it to be synchronised with the mains electricity grid. This is so it can run in conjunction with your incoming supply. We take care of this whole process for you, supplying the equipment to harmoniously link up to the grid. Your electricity network operator will require a mains protection relay to be installed. This protects your CHP system from trying to power the wider area in the event of a power cut. We provide this for you and take care of the application to the network operator, along with the subsequent installation and testing.

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