Money for nothing

Would you turn your back a free payout with no strings attached? Judging by the prevailing attitude towards combined heat and power (CHP) systems, the answer is a resounding 'yes'. CHP produces electricity and useful heat in a single process, reducing the waste heat produced in the generation of electricity. As a result, a facility using a CHP system will use considerably less primary fuel than one that buys power from the grid and uses on-site boilers for heating. As Ian Hopkins, sales and marketing director for ENER-G Combined Power (www.energ.co.uk/chp), points out: "CHP plants typically have an overall efficiency of 80% or more, meaning that only 20% of the energy produced is wasted. By comparison, centralised power generation in the UK wastes 60% on average, while modern combined cycle gas turbine stations waste roughly half." The Combined Heat and Power Association (CHPA) estimates that organisations using CHP units can save between 10 and 30% of their electricity costs over power sourced from the grid and heat generated by on-site boilers. Indeed, in applications where there is a large heating/cooling demand, especially where it is for extended periods, the cost and carbon saving benefits of CHP are difficult to match. Added to this, attractive financial incentives on CHP systems can include a reduction or exemption from the climate change levy (CCL); qualification for enhanced capital allowances; preferential treatment in the EU emissions trading scheme; tax savings under carbon reduction commitment energy efficiency scheme and exemption from business rates (http://bit.ly/1qj1Xlc). Yet too many manufacturers are missing out on these benefits. ENER.G's Hopkins reckons that almost one in six UK CHP customers is losing money because of a failure to register for the CHP Quality Assurance programme (CHPQA). This defines, assesses and monitors CHP schemes on the basis of energy efficiency and environmental performance. In order to get lucrative tax incentives, your CHP system must be considered what CHPQA defines as 'good quality' (http://bit.ly/1v7mm0P). Hopkins says: "On a small 200kW CHP system, failure to gain CHPQA certification would mean missing out on more than £10,000 per year in CCL relief, while a 2MW system would qualify for payments of approximately £100,000 per annum." This is effectively money for nothing. So why are so many firms failing to claim it? Hopkins says: "A lack of knowledge about the savings and a belief that CHPQA compliance process may be onerous could be responsible." Jonathan Graham, policy manager at the CHPA (www.chpa.co.uk), agrees: "It is possible that some manufacturers are unaware of the benefits that they can receive by registering their CHP with CHPQA. That is unfortunate because it is certainly worth their time to do so." A perception that the process is complex could also put off potential beneficiaries, particularly smaller firms. Graham again: "The smaller the energy user, the more difficult the application process might appear, especially if the company doesn't employ a full-time energy manager. "Also, some of the incentives disappear as the company gets smaller so, for example, perhaps you don't pay CCL. That means the financial driver might be less powerful." However, he says, the CHPQA programme has a new, simplified form which is significantly easier to complete. Nigel Thompson, sales manager, gas power solutions at Finning Power Systems (www.finning.co.uk/powersystems), adds: "Some companies will not consider an investment unless 18-24 month payback is achieved – despite a CHP of 15-year life expectancy providing huge savings over its life. "Some organisations don't want to consider the engineering and some (erroneously) have the impression that CHP is not a sound investment." Having said that, CHP won't deliver for every building; detailed analysis and modeling are required to assess feasibility and then to ensure that it is sized and specified accurately to provide maximum efficiency, both in the short and long term, where energy demand patterns might change. It is, says ENER.G's Hopkins, essential to understand energy consumption in detail before specifying or implementing CHP: "In conventional power and heating applications, plant capacity is usually dictated by maximum demand, resulting in the system operating predominantly at part load. "To gain the efficiency and economic viability of CHP plants, high utilisation is required, so it is essential to understand the minimum energy demands during the running period, as well as the maximum demands. The large differences between winter and summer demands must also be understood and considered." The CHPA's Graham says that three years is a common payback period for CHP. However, he warns: "The shortest payback period is not always the best value. There may be much better long-term value with a longer payback period." Besides, he adds: "If you can't afford the initial capital cost, remember that a number of companies in the market offer energy services contracts as a way to help address this. These are contracts where the CHP company owns and operates the generator and sells you heat and power at a discount your current prices. That allows you to reduce the need for capital upfront while still retaining a proportion of the efficiency benefits." CHP – the installation process explained If you are interested in implementing a CHP scheme, the first step is go to a trusted supplier. The CHPA's Jonathan Graham explains: "I would define that as someone with a good track record who provides good long-term operation and maintenance contracts." However, he warns: "Beware specifications prepared by anyone who does not own, operate or maintain the CHP. And remember, CHPs only provide efficiency benefits if they are operated and maintained well; if you don't employ a trusted supplier, you are at risk of not obtaining the benefits you're expecting." The supplier will conduct an energy audit to gain an accurate picture of the base load. Finning's Nigel Thompson says: "We will generally ask for specific information on the utility pricing of the gas and power. That is probably the largest factor that will determine whether or not a CHP is suitable." This will give your supplier an indication of the profile for the CHP in order to size it. Thompson again: "If you under size CHP, it will still produce savings, but not as quickly as it might. If you oversize it, you will pay more for the installation and it ends up not running some of the year [and the more the system runs, the greater the efficiency gains]." Typically, the supplier will also visit the site at this point to work out whether the system should go indoors or outdoors and, if it is a gas system, whether sufficient gas volume is available. Thompson explains: "The CHP will inevitably end up using more gas than the site currently does. That is usually overlooked... We would also look at electrical connections and at that point would calculate the ideal sizing (in most cases, based on the heat requirement)." ENER.G's Ian Hopkins adds: "It might be beneficial to install temporary metering or monitoring equipment to establish heat and power demands in as much detail as possible. "In new buildings, heat and power demand profiles can be estimated using a combination of building design data; simulation modeling of building; benchmark profiles from comparable buildings; occupancy patterns, and data from energy models." As well as mapping and calculating existing energy consumption, future changes in consumption patterns must also be considered in the planning phase. These might include the implementation of energy efficiency measures, expansion or contraction of facilities, changes in processes, operation or occupancy. The impact of such changes must be factored in to test CHP viability. Hopkins says: "Integration with other low carbon technologies may be a further consideration, particularly in new buildings, where it is necessary to factor in competing supplies and the total impact on demand." He says an operating model is also required to evaluate potential costs and savings. "This should factor in variations in site energy demands. It is rare to achieve a continuous match in heat and power demands, so the planned operating strategy may require additional heat from conventional boilers, or a heat rejection facility, scope to import or export power and modulation of CHP output. "Various operating strategies should be considered to achieve perfect optimisation, for example, is part-load operation or heat rejection preferable to exporting power? Is night time operation worthwhile? Is thermal storage beneficial?" But a CHP set up does not end with putting the system in place. Finning's Thompson has this final thought: "A CHP system should not be installed and forgotten about and left to run. Most manufacturers support their equipment over the period of the contract whether five, 10, or 15 years with a comprehensive operations and maintenance (O and M) agreement. "This will guarantee the end user against breakdown of the plant. There will be no hidden costs. The O and M provider takes the risk of not just the routine maintenance, but any breakdowns and fixes those of their own cost."