Climate Change Levy: How to Be Exempt with CHP

Posted by Heather Foster on 13-May-2014 10:00:00

Running Combined Heat and Power can mean relief from the Climate Change Levy for your business. Find out more.

Climate Change Levy how to be exempt with CHP

Many small-scale CHP systems under 2MWe are eligible for CCL relief, yet data shows that one in six CHP schemes in the UK that could qualify as ‘good quality’ CHP failed to register and enjoy the benefits of the scheme. So what is the Climate Change Levy, and how can your business enjoy relief from CCL on the energy associated with your CHP?

What is the Climate Change Levy?

The Climate Change Levy (CCL) is a tax on UK business energy use, charged at the time of supply. The tax applies to use of electricity, gas, liquid petroleum gas and solid fuel. Exemptions are available to the final recipient of supplies of electricity generated from certain renewable sources and combined heat and power (CHP).

The Climate Change Levy was introduced in 2001 to encourage energy efficiency and reduce carbon emissions, and from its beginning, CHP- generated electricity supplied directly to an end user was exempt provided the CHP scheme met a certain efficiency threshold, allowing it to qualify as Good Quality CHP.

What will it do for my business?

By registering as Good Quality CHP under the CHPQA initiative, your business could qualify for relief from the CCL on the proportion of gas burnt in the CHP, saving a great deal of money. For example, a CHP system under 2MWe could qualify for CCL relief of approximately £100,000 per year.

The CHP Quality Assurance Programme (CHPQA) audits CHP schemes for quality on behalf of the Department for Energy and Climate Change (DECC). By qualifying as Good Quality CHP, you can obtain a CHPQA Certificate and claim CCL exemptions.

CHPQA certification can also give your business access to other incentives, including:

  • Qualification for Enhanced Capital Allowances.
  • Preferential treatment in the EU Emissions Trading Scheme.
  • Exemption from business rates.
  • Exemption from the Carbon Price Support Levy.

How to obtain CHPQA certification

To claim CCL relief on fuel inputs to and power outputs from your CHP, you will need:

  • To register for CHPQA and apply for the necessary CHPQA Certificate.
  • A Secretary of State (combined heat and power) exemption Certificate.
  • To complete and submit Supplier Certificates (PP11).
  • To send the Supporting Analysis form (PP10) along with a copy of PP11 to HM Revenue and Customs.

The CHPQA programme is set up in such a way as to ensure it only benefits schemes making significant environmental savings, and as a result your business’ savings from CCL will depend on unit size, fuel inputs and electricity and heat outputs.

Some CHP providers will offer a CHPQA service in which they manage the CHPQA certification process and the completion and submission of the HMRC forms for CCL relief.

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Topics: Policy & Legislation

Heather Foster

Heather Foster is a Corporate Account Manager at ENER-G Combined Power, a UK manufacturer of carbon reducing, energy efficient products exporting its cogeneration technology across the globe. Heather is a highly accomplished engineering professional, combining detailed technical knowledge with a wealth of service, operations and account management experience.