CHP: Making it work

Nick Lewis Head Shot-1

Combined heat and power, CHP for short, is neither a complex or new concept. It usually involves the operation of a gas fired engine-generator package and heat recovery system in a facility, providing electricity and heat to the building, offsetting both imported power and gas used in heating boilers. This exploits the inefficiency of UK electricity generation, where heat is rejected in cooling towers and avoids transmission losses. CHP is commonplace across Europe and is generally very successful.

In the UK, the situation is somewhat different, and CHP often has a poor reputation, for a variety of reasons. Systems can be badly designed with inadequate attention to heat integration, which must respect the operating temperature limits of the engine cooling systems. CHP is often inappropriately sized and applied to buildings unsuited for CHP as a ‘tick box’ exercise to achieve planning consent. In addition, many CHP packages are not maintained properly (for reasons explained later) and all the above factors lead to the basic reality that a significant proportion of UK CHP does not operate for long after its initial commissioning. In plant rooms all over the country, you will find CHP units rusting away having completed only a few thousand operating hours. In 2015 only two thirds of the installed CHP capacity met the ‘Good Quality’ test.

Figure 1. Installed CHP capacity by year. From DBEIS Digest of United Kingdom Energy Statistics (DUKES) 2016

Many UK energy managers have been involved in unsuccessful CHP projects in the past and hence, understandably, tend to resist the installation of new CHP systems. However, recent trends in energy prices mean that the time has never been better to look at CHP in the UK. If you have a facility where CHP will work, and you get it right, three-year paybacks are a realistic proposition. The economics of CHP can be far better than for renewable energy technologies, and CHP doesn’t benefit from any significant subsidies or incentive schemes, other than exemption from Climate Change Levy for ‘Good Quality’ CHP systems. CHP can also have 100% Enhanced Capital Allowances, which can benefit private sector organisations, with profit to offset by this tax allowance.

So, the simple question is, ‘How can CHP be made to work?’. In the paragraphs below, I explain the basic rules to follow to ensure a successful CHP project. Let’s be honest, none of the points I am making are ‘rocket science’ and I am sure that many readers will think, ‘Isn’t that obvious?’ All I can say is that, based upon the history of CHP in the UK, the fundamental rules are often ignored. The reasons for this are difficult to explain, but I believe that much of the problem stems from lack of basic knowledge of the parties involved in the development of these projects.

System sizing

First and foremost is sizing of the CHP system and this is where it frequently goes wrong. This must be based upon the most economic size after considering alternative operating scenarios and may involve partial heat rejection, reduced summer operation and modulation. A detailed assessment of energy demand profiles from bill and half hour data is essential for the feasibility study. The cost per kW for both equipment and maintenance reduces with increasing capacity. To be economically viable, CHP must be able to run at full output for the vast majority of the year, with all of the power and most of the heat usefully deployed. To achieve this, you must look at the typical lowest electrical and thermal loads of a facility (usually in the summer months) and base the CHP size on these figures.

Most CHP suppliers will be more than happy to analyse your energy data and provide a recommendation for the size of CHP unit you require. However, many will produce complex and misleading reports, using a wide range of graphs and other presentational tools, which are often baffling to the customer. It is also common for the analysis to exaggerate the attractiveness of the investment, for example, by excluding the costs of maintenance or overstating run hours per annum, or even using the wrong fuel input based upon the lower net calorific value of gas. What you want is something simple and transparent, including full life cycle maintenance costs.

System and installation design

Once the optimum size for the CHP system has been established, you then must consider the practical considerations of where and how it will be installed.

Whilst usually compact, CHP packages can take up a reasonably large footprint once service access is taken into consideration. It is very important that the simple questions of where

the CHP will fit, noise level control, how it will get there and how it will be maintained are carefully considered.

The CHP needs to be connected to the gas supply, electrical network and hot water system. They also need a fresh air supply/extract and an exhaust. Although this is generally not complex from a design perspective, many CHP systems do not work, particularly because they are not integrated correctly with the hot water heating system. Attention must be paid to harmonising the return water temperature with the maximum value to achieve engine cooling and hence the essential heat recovery element.

The costs of installing a CHP vary significantly depending upon specific site installation factors. There is no such thing as a ‘typical’ installation cost. It is vital that a basic installation budget is established at an early stage in the project development, to ensure that expectations of overall project costs and economic viability are established.

Equipment procurement

Procuring the CHP plant must be approached in a structured manner to ensure CHP savings are achieved throughout the project life cycle. The main considerations are:

  • Conduct a comprehensive feasibility study to establish the optimum CHP capacity;
  • Shop around, get a few quotes for both equipment and maintenance;
  • When assessing quotations, make sure that you are comparing like with like; many suppliers will leave items off the ‘standard’ quote to make it appear more attractive. Look for additional cost ‘options’!
  • Compare the claimed electrical, thermal and total efficiencies;
  • Determine savings over the entire life cycle, considering carbon taxes risks, CHPQA performance for optimum CCL relief, which can include boiler gas and Discounted Energy Purchase option (see below), where appropriate;
  • Ask to visit similar installations completed by your favoured supplier; there’s no substitute for speaking to other customers;
  • Insist that any equipment supply proposal includes a draft maintenance contract (see below) and make sure that this contract is in place at the same time as the system is ordered.

CHP system maintenance

Any CHP system is only as good as the maintenance provisions it is comes with. If you don’t tie these up at the time of ordering the equipment, you have severely compromised your position. Problems with maintenance contracts and customers not being prepared to be ripped off when they come to negotiate them retrospectively are the reason that many UK CHP units are not operational.

Whilst highlighting that some CHP suppliers will take the opportunity to exploit customers, on the flip side it should also be noted that maintenance contracts need to be fair to both parties. Where customers try to impose unreasonable terms upon suppliers, making the

supplier take on all the project risk, this will not form the basis of a good long term working relationship which is essential if a CHP project is to prove successful.

Supplier financed schemes

Finally, a brief note concerning supplier financed CHP installations. These are often referred to as Energy Supply (ESCO) Contract or Discounted Energy Purchase (DEP) contracts. Under these contracts, the supplier pays for the equipment and installation and then charges for the generated electricity at a rate that covers the capital and maintenance costs. The Client generally pays for gas fuel and receives the heat free of charge. The success of the scheme will be dependent upon utilising this heat, though the supplier may be less interested in this factor, as it does not affect their financial position. Appropriate metering, temperature monitoring and contract wording are essential to police this element.

Customers are often attracted to this solution because it does not involve them taking any risk, though load provision and any minimum take clauses must be considered. However, if CHP is procured properly, based the guidelines listed above, customer investment in a good CHP system is an educated managed risk.

In conclusion, I would emphasize the importance of an accurate feasibility study, based upon bill and half hour data energy demand profiles and thorough installation design, considering operating temperatures and their control. If you establish a good relationship with a supplier who you find honest, trustworthy and transparent you will be on the right track to a successful CHP project.

Nick Lewis is Managing Director of NewEnCo

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