March 4, 2019

Will My CHP Save Me Money?

In this blog, we’ll show you how to calculate the OpEx costs CHP installation and compare these against potential savings.

If you’ve got to the point where you think that putting in a CHP unit will match up with your overall energy strategy and the site demands match energy outputs of the CHP unit you now need to see if it really will give you important long term cost savings.

To do this you need to fully understand two factors a) how much generating you own electricity and heat will save you and b) how much a CHP unit costs to run.

How much does generating your own on-site energy save you?

The biggest saving comes from using both the heat and electricity that your CHP unit provides rather than getting these as separate commodities.

What is Combined Heat and Power (CHP)?

Having “Good Quality” CHP can also provide some additional benefits from being exempt from CCL levies on the energy you generate with your CHP and the gas it consumes.

Some other less quantifiable benefits form have a CHP unit are:

  • A CHP will mean you can be more in control of energy costs. It will allow some certainty of fuel cost, it can provide a degree of resilience against network problems and can allow you to sell power at certain times of day
  • A CHP’s better efficiency will bring reductions in the site’s production of carbon

 

There are some Government support measures in place too such a exemptions from the Climate Change Levy (CCL) as mentioned earlier, access to Enhanced Capital Allowances (ECA) for Good Quality CHP plant and machinery and Business Rates exemption for CHP power generation plant and machinery.

Full detail on the eligibility for these incentives will be found on the relevant page of the Department for Business, Energy and Industrial Strategy.

How much will it cost to run your CHP unit?

You need to think of 3 main areas:-

Gas costs

These will be the largest cost of owning a CHP unit. 

Now you can simply continue with your existing gas supply contract or you could look to forward buy as you will have a larger and predictable consumption. But be careful of how much gas price risk you are happy to take on for your CHP unit. 

 

O&M Contract

Often forgotten about this is essential to keep you CHP unit efficiently and reliably producing the cheaper energy that you bought it for.

CHP unit maintenance covers many disciplines and is not for everyone and even a very skilled ‘in-house’  team can struggle. In almost every instance it is best to consider a long-term O&M agreement with equipment manufacturers or a third party maintenance specialists.

O&M contracts can be priced in different ways and for different levels of service. They can be priced as p/kWh or aa an annual charge and can cover only routine maintenance or cover unexpected breakdowns as well

There is a helpful document on the Department for Business, Energy and Industrial Strategy

Other

Other costs are typically less significant than the cost of gas or O&M, but it is important to check things like the scope of the O&M contract i.e. do you need to buy the oil or is there a breakdown call out fee. Likewise don’t forget to still count the remaining electricity imports – your CHP is unlikely to cover all your electricity usage

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Will My CHP Save Me Money?

In this blog, we’ll show you how to calculate the OpEx costs CHP installation and compare these against potential savings. If you’ve got to the point where you think that putting in a CHP unit will match up with your overall energy strategy and the site demands match energy outputs of the CHP unit you […]

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