We ask ENER-G experts the questions you want answered. This month, we're talking feasibility and load profiling.
Why might a developer or landlord think about installing a CHP scheme?
There’s general acceptance that the gap between gas and electricity costs in the UK is widening, due to infrastructure costs and other burdens on the electricity side.
On the gas side, there are relatively stable supplies, with the addition of some potential fracking gas into the mix[GB1] . There’s a forward perspective on gas because it’s currently at a low price, whereas the cost of electricity just keeps going up. With a CHP system, you’re shifting your energy demand from electricity to gas and generating your own heat and electricity by burning that gas. The wider the gap between gas and electricity prices (or spark spread), the quicker your savings will be realised.
The second potential reason for the installation of a CHP unit is the increasing focus on sustainability. Gas-fired CHP schemes, despite burning a fossil fuel, remain one of the most effective means of carbon mitigation because the are more efficient at converting the primary fuel, gas, into heat and electricity than a centralised power station and a local boiler combined. As such, CHP assists organisations to reach emissions targets and reduce green taxes.
If you can burn gas twice as efficiently as the grid can, or the grid and conventional boilers, you’re not going to be emitting a lot of carbon and gas will last twice as long.
Furthermore, a CHP system has soft benefits as well, in respect of corporate social responsibility (CSR) and environmental leadership.
Why is economic feasibility so important?
An economic feasibility study is important as it gives investors the confidence to commit funding, providing an indication of whether or not the project can achieve a commercial return within a reasonable timeframe, which most normal measures cite as being around five years maximum.
Economic feasibility enables an investor to prioritise investment funds, providing a good indication of whether or not investment in a CHP scheme would be a good use of these funds or whether to put them to some other use in the business.
How do I model demand before the development?
The worst-case scenario when attempting to model the demand is where the building has not been constructed yet. In this situation, there isn’t any existing information. Fortunately, there are some industry standard models such as load diversification models. Building sector consultancies use technology to plot factors such as the likely construction material, location, and the likely energy profile. If that can be modelled going forward, along with CIBSE guidelines, you can acquire a good idea of the likely demand.
A useful thing to do with those models is to try and cross-reference with an existing site that is similar. A good example is if someone is building a new 250 bed hotel in London, and there already happens to be a 250 bed hotel in London with a CHP system installed.
Since the usage of the building is likely to be the same, the shape of the energy consumption will probably be very similar, given that they’re going to have customers using the facilities at the same time with a similar demand profile. Cross-referencing with actual historical data from similar facilities is a valuable step.
What happens if I have to install CHP systems before the development is occupied?
If it’s a new building, there may be constraints on that new building in order to accommodate the CHP system, but an even more pertinent question is when you should install the unit during the construction of the building.
For this reason, some form of aspect preservation may have to be considered if there’s any significant time between installation and start-up. There’s not a lot you can do to mitigate the timing; often units go in because it’s a planning condition, partly to meet green criteria and deliver a saving to the customer. That’s all fine, but the CHP unit needs to be under some kind of preservation contract or carefully preserved such that there aren’t any problems when it starts.
Are there any financial incentives that could help the scheme stack up?
Incentives or benefits could include a Climate Change Levy (CCL) reduction and Enhanced Capital Allowances. The CCL is a green tax designed to limit the use of fossil fuels. Given that CHP plants are extremely efficient as a means of greenhouse gas mitigation, a good CHP scheme that runs to a certain efficiency threshold can be exempt from some aspects of the CCL.
Enhanced Capital Allowances offer a further tax advantage. Together with the CCL reduction, or exemption, these incentives can improve project viability. This is especially important if the loads are less than ideal.
Read our technical manual and discover the ways to build an optimal economic feasibility study. Download The ENER-G Quality CHP Plan: How to calculate Combined Heat and Power (CHP) economic feasibility with load profiling.
Topics: CHP / Cogeneration