Combined Heat and Power: Opportunities through CHPQA and considerations for your net zero strategy
Is the perception of Combined Heat and Power (CHP) changing? Can CHP play a role as the UK transitions to net zero? How can operators maximise the benefits throughout the CHP's lifetime?
In this article, Maiti Hutchinson and Justin Okpe, consultants who support clients in identifying utility, carbon and cost reduction opportunities, aim to discuss and answer these questions.
CHP schemes in a shifting Carbon landscape
CHP engines are an efficient means of combusting gas into generating both electricity and heat. In the last 20 years, many businesses have invested in CHPs with them forming a key part of their decarbonisation strategy as well as providing operational savings and higher efficiency than stand-alone heat and power generation.
In recent years, the narrative has shifted significantly with CHPs being labelled as difficult to incorporate into future net zero strategies. This shift in perception has occurred at the same time as an increase in uptake of CHP schemes and businesses having already committed to CHP as a generation strategy and the associated long asset life of the plant. This shift in perception has been driven by change in generation sources that contribute to grid electricity.
Figure 1 illustrates how much the carbon intensity of the grid in the UK has been dropping over the last 20 years due to the uptake of renewable energy and lower carbon intensive fossil use for power generation. The carbon emission per kWh of grid electricity has fallen by 70% from 2010 to 2023.
Whilst considering their future decarbonisation strategy, corporate organisations in the UK can still optimise existing schemes to make the most of the assets available.
CHPQA rewards CHP schemes that use outputs efficiently
The UK government operate a scheme to reward companies who are using their CHPs efficiently. This is known as CHP Quality Assurance (CHPQA). The scheme incentivises good quality CHP performance with discounts on their gas bills’ Climate Change Levy (CCL) and Carbon Price Support rates (CPS). Good CHP performance is achieved through high electrical and thermal efficiency. We find that many of our clients with CHP schemes are not aware of this scheme, with CHP scheme suppliers prioritising implementation rather than the other benefits post implementation.
Many manufacturing clients also may already be in Climate Change Agreement (CCA) commitments where they already receive discounts on CCL rates; CHPQA provides levy reductions independent of the CCA. The government provides this discount on a sliding scale meaning that even if your CHP is not operating at the efficiency threshold set as ‘good performance’ there are still potential cost savings that can be achieved.
Requirements for a CHPQA application are:
Technical details of the CHP scheme
o Unit generation sizes
o Metering/monitoring arrangements
o Technical drawings of the scheme
A calendar year’s worth of energy data
o Fuel input to scheme
o Power output
o Heat output utilised by the site
The data is analysed and CHPQA bespoke efficiencies are calculated to submit to the government along with the data. The deadline for submission of 2024 data will be due by the end of Q1 2025.
The window for new applicants on the CHPQA scheme may be closing
The Department for Business, Energy & Industrial Strategy (BEIS) have in recent years been identifying ways to reform the CHPQA scheme and ensure the scheme aligns with wider net zero targets of the UK. A recent workshop session conducted by the CHPQA Administrator has released a presentation summary of key considerations involving the future of the scheme which includes:
- Raising the efficiency criteria and therefore maximising the schemes that utilise higher degrees of the energy outputs from the CHP scheme
- Utilising the CHPQA scheme to encourage a transition from fossil fuels to more low carbon fuels
- Closing the scheme to new applicants using unabated fossil fuels (3)
The future of CHP in the context of Net Zero
Eventually, with the current technological, commercial and GHG reporting landscape, those operating CHP schemes with ambitious decarbonisation targets will be left with a challenging decision – to accept an uplift in utility expenditure by switching to low carbon electricity or risk not achieving Scope 1 and 2 targets while keeping utility expenditure low.
Purchasing renewable gas is also currently facing uncertainty. At the point of writing this article, biomethane certificates or credits cannot be used to adjust scope 1 emissions resulting from the combustion of gas delivered via a common carrier pipeline under current GHG protocols.
So, how do you reduce the carbon intensity of energy generated by your CHP, at least in the short term, and prepare for the transition? It is crucial to maximise the use of generated heat on site to reduce the carbon emissions per kWh with a specific focus on utilising hot water produced at low temperatures, prioritising steam only for the processes that require higher temperatures. This increases the efficiency of your CHP due to less heat being wasted and reduces heat demand on the site’s ancillary heat-generating equipment. Satisfying heat demand with lower temperature media increases the attractiveness of incorporating alternative low carbon technologies such as heat pumps and heat recovery as more viable solutions.
Verco have expertise in not only preparing CHPQA applications and submissions but also supporting sites through audits of their submissions from CHPQA, whilst understanding the nuances of how the schemes may be utilised at sites.
Our heat mapping expertise can also help you with increasing your CHP efficiency score through improved heat use, further unlocking short-term cost savings. We have experience in developing feasibility studies and transition strategies away from CHP schemes to low carbon technologies, enabling greater decarbonisation.
Verco can support you with the CHPQA service and wider decarbonisation plans.