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UK CHP Capacity growing government energy mix

The latest UK government statistics show that Combined Heat and Power (CHP) is making a valuable and growing contribution to the UK energy mix.

Combined Heat and Power (CHP), also known as cogeneration, creates electricity and useful heat together in a single process, allowing organisations to reduce energy costs, while also supporting energy resilience and sustainability.

For the right sites, high efficiency CHP provides typical energy cost savings of 30-40% compared to grid supplied power and heat from boilers. This can often deliver a return on investment within 2 to 3 years.

Cogeneration provides sustainability benefits and can also boost energy resilience by providing an off-grid power supply. This guards against the growing risk of electricity supply disruption.

The Digest of UK Energy Statistics (DUKES) provides a comprehensive picture of energy production, with specific chapters addressing an element of the contribution to the UK’s energy requirement. The statistics used in this article are all drawn from the Combined Heat and Power chapter of DUKES 2019.

Key findings:

  1. UK CHP capacity increased 66MWe to 5,985MWe last year
  2. The amount of electricity generated by CHP increased by 5% in 2018
  3. Percentage of renewable fuels used in CHP increased to 17.4%
  4. Spark spread remains positive

The figures show that the number of CHP schemes in the UK increased by 64 to 2,473 between 2017 and 2018 as more industrial sites, businesses, public sector organisations, district heating schemes and others invested in cogeneration.

Overall, the UK’s CHP capacity increased by 66MWe, while the amount of ‘good quality’ electricity produced increased by 5% in 2018. CHP accounted for 6.9% of all electricity supplied in the UK.

UK CHP Electrical Capacity

UK CHP Capacity by industry sector

CHP remains a popular cost and carbon saving technology for heavy-industrial energy users. The oil and gas sector was the largest CHP contributor by capacity in 2018 and saw a 10% increase in CHP electricity output. The chemicals, food and drink, and paper and publishing sectors also accounted for significant amounts of CHP capacity.

16% of UK CHP capacity is accounted for by ‘other’ sectors, including agriculture, community heating, leisure, transport and commerce.

CHP is ideally suited to the industrial sector with consistent energy intensive operations.  In addition, healthcare, Universities, leisure and hospitality sectors, where there is often extended 24/7 demand for hot water, heating and power.  In 2018, the statistics reveal that 240 schemes in the health sector had a combined electrical capacity of 212MWe.

UK CHP Capacity by Industry

Impressive cost savings

Cost saving is the fundamental driver of CHP uptake, with businesses of all types and sizes investing in cogeneration to reduce heat and electricity bills.

Edina’s MWM CHP engines achieve extremely high efficiencies of 85% – 90%, almost twice as efficient as taking electrical energy from the grid and thermal energy from on-site boilers. This results in substantial savings on utilities costs.

The economic success of CHP is also determined by the positive ‘spark spread’. This is a simple calculation that compares the price of energy with the cost of fuel used to generate that energy.

Given that most CHP units are fuelled by natural gas, which over recent years has been significantly cheaper than grid electricity, there is a spark spread price advantage, which is illustrated by the latest UK energy statistics.

In the last decade, the spark spread value for natural gas has been consistently positive. It reached a peak of 5.2 in the third quarter of 2016 and has since fluctuated just below this mark. In the final quarter of 2018, the spark spread stood at 4.5.

As gas prices have continued to fall in 2019, cogeneration has become a more attractive proposition. According to month-by-month data from Ofgem the spark spread peaked in January at 8.75 and registered a monthly low of 4.54 in March. In June, the last month for which data is currently available, the spark spread was 5.41.

For organisations investing in CHP, this healthy spark spread leads to energy cost savings and rapid financial returns. In many cases, CHP generators have provided payback times as quickly as two or three years, which can prove to be a smart investment when you consider that a typical CHP system has a lifespan of 10 to 15 years.

The cost returns of CHP are further enhanced by a range of government initiatives and policies designed to incentivise the uptake of Good Quality CHP in the UK.

These include:

  • Exemption from the Climate Change Levy (CCL) of all fuel inputs to, and electricity outputs from, Good Quality CHP
  • Eligibility for Enhanced Capital Allowances for Good Quality CHP plant and machinery
  • Business Rates exemption for CHP power generation plant and machinery
  • Reduction of VAT (from 20% to 5%) on domestic micro-CHP installations

Read: How Queen’s University Belfast is saving £948,000 per year with CHP technology.

Improving energy resilience

Increasing demand for CHP is also being driven by the critical need for increased energy resilience. CHP can be configured to operate off-grid in ‘island mode’ to provide power security in the event of grid disruption. In August, a major power outage that affected businesses across England and Wales heightened concerns about the security of supply in the UK.

Power reliability is particularly important for manufacturers, who face heavy production losses, and data centres that can lose critical infrastructure in the event of a power cut. For these businesses and many others, energy resilience underpins the business case for CHP and onsite generation.

Read: How Queen Elizabeth University Hospital achieved security of power with CHP.

Fuelling the rise of CHP

Natural gas remains the fuel of choice for most CHP generators, driving 69% of the total CHP production in 2018 and accounting for 7.3% of the UK’s total gas demand. The proportion of electricity and heat generated through CHP using renewable fuels did increase slightly between 2017 and 2018 to 17.4%.

Of these renewable fuels, gaseous renewables accounted for 42%, closely followed by biomass at 36% and waste fuels at 20%.

UK CHP Capacity by Fuel Share

Sustainability benefits of CHP

Calculating carbon emissions savings from CHP is complicated, because CHP plants can displace a wide variety of generators using different fuels and technologies, but the economics of the wholesale power market means that CHP is far more likely to displace higher carbon centralised gas or coal power plants, compared to energy generated by lower cost renewable sources.

Cogeneration provides a more efficient and cleaner solution to unabated gas power stations, which continue to make an important contribution to the UK power mix. ‘Good quality’ CHP schemes make at least a 10% primary energy saving compared to the separate production of heat and electricity. By generating heat and power onsite, organisations prevent the substantial transmission losses that occur from transporting electricity from remote power stations.

Government figures on the absolute carbon savings of installed CHP relative to fossil-fuel power stations in the UK show that there was a slight increase in the carbon savings, from 10.28 million tonnes of carbon dioxide (MtCO2) in 2017 to 10.33 MtCO2 in 2018.

Read: How Arla Foods is using CHP to achieve its zero carbon vision of the future.

Market leading CHP expertise

Edina is market-leader in the provision of CHP and is the exclusive UK and Ireland distributor for high efficiency MWM gas engines.  From its sites across the UK and Ireland, Edina supplies full service and maintenance coverage supported by 24 hours a day, 7 days a week, 365 days a year field service engineering support and remote monitoring, control systems monitoring and remote support from our UK Head Office.  This ensures exceptionally high levels of CHP efficiency and availability to promote operational resilience.  Our full turnkey/EPC power solution is creating competitive advantage and sustainability savings for organisations across all sectors.

Discover more about Edina’s CHP expertise

To discuss CHP feasibility for your organisation, speak to a member of the Edina team today and call: +44 (0)161 432 8833 or email us.