Sustainable Energy: Combined Heat and Power

Combined Heat and Power (CHP) is an important element in the Government's strategy for reducing greenhouse gas emissions. Prudent use of resources, including energy, is a key part of the UK Climate Change Programme. The Government recognises the positive contribution CHP can make to a range of sustainability objectives, including its significant environmental, economic and social benefits. CHP can play a large part in achieving the UK's Kyoto targets as well as the domestic target of reducing carbon dioxide emissions by 20 per cent on 1990 levels by 2010.

CHP is a crosscutting technology that is non fuel-specific. It puts to use the heat produced as a by-product of the electricity generation process that would normally be wasted to the environment. CHP can increase the overall efficiency of fuel use to as much as 70-90%, compared with 35-52% from conventional electricity generation. Furthermore, because it often supplies electricity locally, CHP can also avoid transmission and distribution losses.

CHP Target

In recognition of the important role that CHP can play in the achievement of an environmentally sustainable energy system, the Government set a target in 2000 of achieving at least 10,000 MWe of installed Good Quality CHP capacity by 2010.

What is Good Quality CHP?

What is Good Quality CHP?Good Quality CHP refers to CHP generation that is energy efficient in operation. The CHP Quality Assurance programme (CHPQA) launched in May 2000 determines that quality by providing a practical determinate method for assessing all types and sizes of CHP scheme. Progress towards the 2010 target is monitored continually under CHPQA, which provides robust annual statistics on both planned and installed CHP. Certification under CHPQA is being used to determine the eligibility of schemes for a range of benefits. More information is available at www.chpqa.com.

CHP Strategy

Defra intends to publish the Government's CHP Strategy by the end of this financial year (March 2004). The Strategy will incorporate a full range of measures including market incentives, guidance and information, financial assistance and legislative action to support the growth of CHP capacity needed to meet our CHP target, and to lay the foundation for further long-term growth in CHP. These include the recent measures outlined in section 4.18 of the Energy White Paper.

As part of the development process, in 2001 the Government commissioned work from Cambridge Econometrics to provide key statistical input to an evaluation of CHP capacity to 2010, which underpinned the conclusions and measures in the draft CHP Strategy. However, with the need to produce a final version of the CHP Strategy and the requirement for a National Allocation Plan (NAP) for carbon emissions, it was necessary to revisit the analysis. The results from this second analysis have now been published, and can be accessed here.

A consultation document was published in May 2002 to invite comments on the draft CHP strategy. The consultation period ended in August 2002 and a summary of responses (Adobe Acrobat format, 100 KB) was published in November 2002. These responses fed into the consideration of the Energy White Paper.

Measures to encourage CHP

Since 2000, the Government has introduced many measures in order to support CHP. These have included:

• exemption from the Climate Change Levy for all Good Quality CHP electricity outputs
• Climate Change Agreements to provide an incentive for emissions reductions
• the Emissions Trading Scheme
• eligibility for Enhanced Capital Allowances (ECAs) to stimulate investment
• business rates exception for CHP power generation plant and machinery
• changes to the licensing regime, benefiting smaller generators
• a reduction in VAT on domestic micro-CHP
• the launch of the £50m Community Energy programme to encourage CHP in community heating schemes (More information is available at http://www.defra.gov.uk/environment/energy/communen.htm and www.est.co.uk/communityenergy
• research and development into CHP by the Carbon Trust (http://www.thecarbontrust.co.uk/)
• Development of energy efficiency and low carbon technologies, including CHP, by the Energy Savings Trust (www.est.co.uk).
• the CHP Club, which is the main promotional route for CHP (www.chpclub.com).

The measures outlined in the Energy White Paper that are to be incorporated into the CHP Strategy will;

• require significant evidence that power station consent applicants have considered all economically viable options for CHP and community heating
• emphasise the benefits of CHP and community heating whenever planning or sustainable development guidance is introduced or reviewed
• work with Ofgem to ensure a level playing field under NETA for smaller generators, including CHP
• set targets for use of CHP in the Government estate
• explore incentivising CHP within any expansion of the domestic Energy Efficiency Commitment from 2005
• support field trials designed to evaluate the benefits of micro-CHP
• invite the Energy Savings Trust and the Carbon Trust to review their current and future programmes to ensure they reinforce the delivery of our CHP target
• work on a framework for pilot projects under the UK Emissions Trading Scheme for which CHP projects may be eligible

Further Information

The Energy Efficiency Best Practice Helpline, funded by Defra, is our main information point for general advice. Call them on Tel: 0800 585 794, or visit: www.actionenergy.org.uk

If you want further information that is not covered by these pages, you can contact us by e-mail at chp@defra.gsi.gov.uk.

Earlier material

In 2000 the then DETR held a public consultation on A Quality Assurance Programme for Combined Heat and Power. From the responses the Government published several decisions, leading to the development of the current CHPQA standard.