INFORMATION SHEET 11

COMBINED HEAT AND POWER (CHP)

Introduction to Combined Heat and Power (CHP)

A significant proportion of the energy used in industry is in the form of electricity. This electricity is generated in a variety of power stations that have typical efficiencies in the range 35 to 55%. The remainder of the heat input into these power stations is waste heat, which is usually rejected to the air. That is why large cooling towers are often seen at power stations. Power stations are designed to reject heat at a relatively low temperature so as to maximise the power station efficiency. Because of its low temperature, useful sinks for heat rejected by power stations cannot easily be found.

However in an industrial environment (and some others), it can be worthwhile to generate power on-site and use the heat rejected from the power generation system. Heat can be rejected at relatively high temperature. Although this reduces the efficiency of power generation the heat can be usefully used in the factory, so the overall system efficiency can be very high, up to 90% of the heat content of the input fuel. This simultaneous generation of heat and power is known as Combined Heat and Power often abbreviated to CHP. It is also sometimes referred to as cogeneration.

There are many different types of CHP scheme. Useful means to differentiate between them are the type of prime mover, the size and the usage of the heat and power generated.

• The key prime movers are reciprocating engines (either gas or oil fired, spark ignition or diesel engines), gas turbine-based systems (either simple or combined cycle turbines) and steam turbine systems.

• The power output of industrial CHP systems can vary from a few tens of kilowatts to ten of megawatts.

• CHP schemes can be designed so that all their heat and power output is used within the host site, with sites continuing to import electricity and heat, or the CHP scheme may sized to export power and/or heat some or all of the time.

In most CHP systems, the power output is in the form of electricity provided by a generator driven by the prime mover. However, the prime mover can be used to provide a direct mechanical drive to a power user.

CHP and the Climate Change Levy

Good CHP schemes offer considerable primary energy savings compared with conventional energy conversion systems, and hence the UK Government wishes to encourage the more widespread adoption of CHP through the following links with the Climate Change Levy:

• Firstly, all energy used in "good quality" CHP is 100% exempt from Climate Change Levy (see below for definition of good quality);

• Secondly, the Government will include CHP in the list of technologies eligible for Enhanced Capital Allowances, which were announced by the Chancellor as part of the Climate Change Levy package (See Information Sheet 13).

The Government has launched a scheme "CHPQA, Quality Assurance for CHP", to determine how to appraise good quality CHP. Those with a CHP plant who wish to benefit from CCL exemption must register their plant with CHPQA. Certain key aspects of CHPQA are described in this Information Sheet.

Immediate Actions

If you already have a CHP scheme and you wish its fuel use to be considered for exemption from CCL then you should obtain the CHP QA consultation from the contacts listed below. A form, F1, is included with the consultation papers; you should immediately complete and return this form to CHPQA to register interest in the scheme. CHPQA will send further details to you.

Good Quality CHP

The government’s CHP QA Scheme has been set up to define and certify good quality CHP. Recent important documents are available as shown in the box below.

This document gives full details of Good Quality CHP and its treatment. The most important outcomes of the CHP QA process are as follows:

1. For a CHP scheme to be certified as "Good Quality" it must achieve a "Quality Index" (QI) of 100 and must have an electrical efficiency of at least 20%. The calculation of QI is described in the consultation document.

2. If the electrical efficiency is less than 20%, then the proportion of system input that has "good quality" outputs is defined and is exempt from CCL.

3. If electrical efficiency is acceptable, but the QI < 100, because there is a low degree of heat recovery, then the electrical output consistent with the actual heat recovery is calculated. Electricity supply up to this level is exempt from CCL; additional electricity generation is subject to CCL.

4. Reduced QIs are acceptable for good quality CHP during commissioning.

5. A lower electrical efficiency of 15% is acceptable for steam turbine-based CHP for a transitional period.

6. Applicants can define scheme boundaries

7. Most schemes will require monitoring of fuel input, electrical output and heat supplied.

8. Simplified reporting requirements are in place for small schemes of less that 2MW_e capacity.