Generating cost and carbon savings with CHP

CHP Unit 130x130

In an article published in Tomorrow's Energy Management Magazine, Clare Burns, Head of Marketing for ENER-G explains why CHP is recognised as one of the most cost effective carbon reduction technologies.

In buildings with a consistent heating or cooling demand over extended periods, the energy saving potential of CHP, or cogeneration, can be unbeatable.

When CHP matches a building's heating/cooling and power needs and is well designed and operated, the return on investment is often very attractive. In such instances, payback on investment is typically three to five years, often equating to a reduction in energy bills of 20-30%. This will deliver energy cost stability and savings over an average asset lifespan of around 15 years. The CO2 savings potential - of up to 30% reduction in emissions - is also excellent.

By using cogeneration, businesses with large energy demands can take a positive step towards lower energy costs and improved operational and environmental performance. It can also help improve BREEAM ratings and provide a low NOx solution in emission controlled areas. There are also soft benefits, such as enhancing reputation by demonstrating corporate social responsibility (CSR) and environmental leadership. Further benefits include reduced dependence on imported electricity supplies and improved system resilience/reliability.

What is CHP?

CHP is the generation of electrical and thermal energy from a single thermodynamically efficient process. Instead of rejecting waste heat into the atmosphere, as is the case in power stations, the heat is harnessed and captured by connecting the CHP’s heat recovery system directly to the site hot water or steam system. The waste heat is used locally for water or space heating, or at another nearby location as part of a district heating system.

According to the International Energy Agency, the average global efficiency of fossil-fuelled power generation is 35-37 percent, representing an overall energy loss of around 65 percent. This is because around more than half of the energy used to generate electricity is lost as ‘waste’ heat. Further energy losses are incurred during electricity transmission and distribution, which doesn't affect CHP since the energy is generated and consumed on site.

Waste heat can also be used for cooling by connecting to an absorption chiller, where the heat can be used to produce chilled water for air conditioning and process cooling. The production of cooling, heating and electrical power is known as trigeneration or Combined Cooling Heat and Power (CCHP).

CHP systems are usually fuelled by natural gas, which is converted into electricity at around 33% efficiency and heat at approximately 52% efficiency. A high efficiency gas CHP system will deliver an efficiency increase of up to 25% on the separate energy systems it replaces. Renewable fuels such as biogases, bioliquids and biofuels can also be used.

Uses for CHP

CHP should be considered in the following circumstances

  • Designing a new building or considering energy efficiency in general
  • Installing or replacing a new boiler plant
  • Reviewing electricity supply or standby electricity generation or plant
  • Exploring options for building regulations compliance
  • Reducing CO2 emissions and environmental impact.

Cogeneration has many applications, but is particularly appropriate for hotels, hospitals, leisure centres, universities, military bases, prisons, manufacturing (particularly pharmaceuticals), commercial/municipal premises, horticulture, airports, data centres and district heating. Biogas CHP can be used for waste water treatment works and anaerobic digestion facilities, such as farms and dairies.

Finance and regulation

With intelligent design, CHP users can optimise their savings by achieving ‘Good Quality’ classification under the government’s CHP Quality Assurance Scheme (CHPQA). This accreditation is essential in order to benefit from Climate Change Levy exemption and Enhanced Capital Allowances that provide attractive financial incentives to use CHP.

Third party or supplier funding options, such as ENER-G's Discount Energy Purchase scheme, also provide the option of outsourcing the CHP system and gaining energy saving benefits on a 'pay-as-you-save' basis without any capital outlay.

CHP contributes significantly towards legislative compliance with part L2 of Building Regulations, while providing BREEAM assessment points. When configured in island mode, it can also reduce grid dependency to improve security of supply.

The 'spark spread' advantage

With a CHP system, the energy demand is shifted from electricity to gas by burning the gas to generate power. Gas supplies are currently relatively stable and low priced. The gap between gas and electricity costs in the UK is widening, partly due to infrastructure costs and other burdens on the electricity side. The wider that gap (or spark spread), the quicker the cost savings will apply.

By taking advantage of the differential between the price of gas and the price of electricity and generating energy efficiently, CHP can deliver an overall energy cost saving compared to the purchase of grid electricity and the use of boilers for heat generation.

Optimising CHP

A good awareness of the building’s current load profile is essential to ensure that a CHP system can be sized to deliver both a reduction in energy costs and an improvement in overall efficiency. Robust profiling is key to compiling an economic feasibility study

This would entail a good understanding of the existing or likely electricity and heat consumption profile, what is currently being paid for energy, and how that energy is used.

This data can then be used to calculate the potential savings resulting from the installation of a CHP system.

Sizing is critical to efficiency and to ensure the system is certified as 'good quality' by the CHPQA. If the selected CHP unit is too small then the maximum savings won't be delivered. If it's too large, it will be operating inefficiently at part-load, have fewer run hours and lower utilisation figures.

It is rare to achieve a continuous match in heat and power demands, so the planned operating strategy may require additional heat from conventional boilers, or a heat rejection facility, scope to import or export power and modulation of CHP output.  


For the right applications, CHP is an affordable route to energy cost and carbon reduction - helping organisations to cut overheads and meet environmental obligations.


For further information read the Essential Guide to CHP