The use of Combined Heat and Power (CHP) to provide heating, cooling and electricity to buildings, whether directly or as part of district power scheme, is set to grow throughout 2017, with businesses especially taking advantage of on-site generation. The increasing specification of CHP is a response to a range of pressures on building operators and developers.
Tighter carbon regulation
With the Climate Change Act, the UK has adopted a legally binding target to reduce carbon dioxide emissions to 80% below 1990 levels by 2050. To ensure that target is reached, the government is implementing stepped reductions through carbon budgets recommended by the Committee on Climate Change (CCC). This reduction will be across power, transport, and particularly buildings. Businesses have an active role to play in helping to achieve this wider goal.
In 2016 the government accepted the recommendations of the fifth carbon budget, with a target of emissions 57% below 1990 levels by 2028-32. As the operation of buildings accounts for 33% of UK carbon dioxide emissions, achieving that target will require measures to decarbonise heat generation - causing an upward trend within businesses to adopt CHP.
CHP captures exhaust heat from the process of generating electricity and uses it for space heating and water heating, thus reducing the overall carbon dioxide emissions associated with operating buildings. Businesses can also play a fundamental role in meeting local emissions policies, such as the stringent emissions policy adopted in the London Plan, which requires dwellings on large developments to be zero carbon and all other dwellings to have emission rates 35% below those set by current Building Regulations.
Rising energy costs, particularly of electricity, have a detrimental effect on profitability. The cost of both electricity and gas is expected to rise further throughout 2017, with some experts suggesting Brexit has already had an impact on prices.
This increase in energy and fuel prices is particularly evident within the construction industry.
“Rising costs of imported raw materials continue to be a primary driver of cost inflation, but there is now an indication that currency weakness is filtering through to higher energy and fuel costs too.” - Rebecca Larkin, a CPA senior economist.
Adopting on-site generation using CHP allows businesses to reduce the amount of grid electricity purchased, while increasing the amount of gas used. The price differential between electricity and gas, known as the ‘spark spread’, produces ongoing financial savings for businesses. A CHP unit can give a return equal to many times its capital cost. Large businesses and organisations, including universities and hospitals, have already benefited from reduced costs as a result of using CHP. UEA, for example, saves around £1 million per year through CHP.
There is a growing emphasis on sustainability in business, with many organisations seeking to minimise the local and global environmental impact of their operations. For many businesses, particularly those with energy intensive manufacturing processes, such as chemical, pharmaceutical and food or drink processing, the high consumption of heat and electricity can have a significant environmental impact.
This can be avoided with CHP as it captures exhaust heat from electricity generation that would otherwise be wasted, thus achieving high efficiency in the production of energy. This leads to a reduction in costs and lowers the building’s carbon footprint.
It’s not just large businesses such as hospitals and universities that stand to benefit from CHP. A recent report by global financial solutions firm DLL, highlights that sustainability - achieved through CHP - has a vital role to play for medium sized businesses. “The future success of UK SMEs lies in the adoption of energy efficiency, on-site generation and energy storage”, the report states.
Availability of technology
Today’s ongoing development of CHP, in particular the introduction of packaged systems, has made the specification and installation of CHP remarkably straightforward.
Packaged CHPs are designed and supplied as complete units that are connected to a building's electrical and heating system. The benefits this provides for business are numerous, including simple integration to existing utilities and reduced maintenance requirements placed on internal staff.
This development in technology has encouraged more businesses to adopt CHP, resulting in far more guidance becoming available from government and industry bodies, such as CIBSE and the ADE. Businesses now have better access to support, guidance, and CHP technology than ever before.
Changes in taxation
There is a strong financial case for CHP, with systems having a typical payback time of three to five years. In addition, an installation that meets the government’s CHP quality assurance standard (CHPQA) is eligible for enhanced capital allowances and is currently exempt from the Climate Change Levy.
Throughout 2017, businesses are more likely to sway towards CHP as a method of generating heat and electricity, as other methods of on-site electricity generation are facing significant increases in taxation. The rateable value of solar panels generating electricity for use within a building is set to increase seven-fold, significantly reducing the return on the panels and, in some cases, negating it entirely.
CHP offers multiple benefits for businesses, including reduced taxes and increased financial savings.
The operation of buildings accounts for 33% of UK carbon dioxide emissions, so businesses need to find cost effective ways of meeting government emissions targets.
- CHP technology, advice, and support is more accessible to businesses than ever before, and with Brexit looming and uncertainty defining every industry, businesses will be looking to reduce costs and achieve sustainability wherever they can.
Start calculating the feasibility of your projects. Find out how by downloading: The ENER-G Quality CHP Plan: How to calculate Combined Heat and Power (CHP) economic feasibility with load profiling
Topics: CHP / Cogeneration