Combined heat and power (CHP) can play a significant role in helping the UK move towards a low-carbon economy whilst ensuring that future energy demand can be met. But investment in this technology needs to be incentivised and encouraged at a government level.
I’d like to highlight the policies and frameworks which should be strengthened so that businesses can benefit from lower energy costs and help the UK meet its carbon reduction commitments.
According to the Government’s Industrial Strategy Green Paper, the UK has been facing a ‘trilemma’ in the development of its energy policy over the last decade: meeting climate change targets, guaranteeing security of energy supply and minimising energy costs. These challenges are even greater today, with the added difficulty of enabling businesses to stay competitive in the global market.
As a technology which is inherently more efficient compared to conventional methods, CHP can play an important role in addressing this trilemma. By generating heat and power simultaneously, CHP is approximately 30 per cent more efficient than relying on traditional heating plant and electricity supplied solely from the grid. For businesses concerned about the gap between electricity prices and gas prices – often referred to as the spark gap – implementing a CHP system could be the answer.
Remeha’s CHP technology burns natural gas to generate heat, while also providing electricity to supplement or replace the grid supply. By generating electricity on site, businesses can produce electricity at gas prices, which is approximately 8 pence cheaper per kW/h than buying it directly from the grid. Compared with purchased electricity, CHP electricity doesn’t suffer transmission losses caused by moving power over large distances, resulting in a more efficient process. At the same time, where the ‘waste’ heat from the generation process is lost at gas power stations, the heat generated by CHP can be re-used in the heating/hot water systems.
Despite the benefits offered by CHP, there are currently significant gaps at both policy and delivery levels in encouraging investment in the technology.
Many energy professionals have already identified the former as a significant barrier in UK businesses and residents being able to enjoy the economic advantages of moving to a low-carbon economy. In a recent EI survey, 64 per cent of energy professionals who took part said that energy efficiency should be prioritised. However, only around half of those surveyed felt that government policy had been effective in this area during 2016. Without better policy instruments, nearly eight out of ten respondents believe the UK will fall short of meeting the fifth carbon budget, which requires emissions to be 57 per cent lower than 1990 levels by 2030.
The EI has rightly stressed that policymakers should listen more to ‘those who understand how policies will be delivered on the ground.’ This would help to ensure that any legislation, guidelines and market mechanisms fully deliver on the promises made at policy level. Too often, opportunities are missed to incentivise the adoption of more energy efficient technologies due to loopholes and gaps in the system.
Take the capacity market reform for example. The Capacity Market scheme has been touted as one of the key pillars of the Electricity Market Reform programme. It is part of the Government’s long-term strategy to ensure that future energy demand can be met as older power stations are replaced and more renewable, but inflexible, forms of generating electricity connect to the grid.
The capacity market has been designed to provide electricity to the grid from October 2018 at times when there is a surge in demand, or when insufficient energy is generated. Demand-side responders can bid for contracts to supply energy to the network when it is under stress, four years ahead of delivery in auctions held every four years. Supplementary auctions also take place a year ahead of delivery.
However, according to the ADE’s ‘Lightening the Load’ report, the mechanism is not going to supply the low-carbon and low-cost energy that is promised. Due to the way the auction has been structured, the ADE has highlighted that CHP has been side-lined and cannot compete fairly in the market compared to traditional gas plants. As a result, it says, the scheme is “failing businesses” because organisations in the UK could be missing out on savings of £750m a year1. Whilst traditional gas plants definitely have a role to play in the capacity market, the scheme should give CHP equal support.
If CHP is given a level playing field in the capacity market auction, organisations that could gain a great deal from the technology would be encouraged to invest in the necessary plant and assets. At the same time, consumers would benefit from a better-balanced electricity network.
Incentivising investment in CHP not only promotes the technology for use in individual organisations, but could also stimulate the implementation of innovative strategies that can be replicated by others. A project at Notre Dame Primary School in Glasgow combined two sometimes incompatible technologies – CHP and ground source heat pumps – as part of renovation works to upgrade their heating system in 2014. Working in conjunction with Remeha to design the system, the engineering team at Glasgow City Council has helped the school to save over 600 tonnes of carbon emissions and at least £90,000 in running costs.
The successful scheme, which was nominated for an ADE Project of the Decade award and is eligible for the Renewable Heat Incentive (RHI) scheme, has encouraged the adoption of small scale CHP in six other primary schools and two care homes under the council’s control.
By increasing support for local CHP systems via more robust policy alongside better legislative and market frameworks, the Government can secure the country’s long-term supply of electricity, whilst delivering cleaner and affordable energy for all.
About Remeha CHP
Remeha has been reliably engineering high-performance and high efficiency heating solutions since 1935. It specialises in providing the most energy-efficient, sustainable and economical heating solution – for every commercial requirement. Its combined heat and power (CHP) range spans 5.5kWe to 100kWe and includes Europe’s biggest selling mini-CHP unit – the R-Gen SenerTec Dachs. Remeha’s dedicated CHP team consists of experienced specialists who provide unrivalled support to customers every step of the way. For more information visit remeha.co.uk.