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Tax exemption on CHP products welcome

The government’s announcement that combined heat and power (CHP) systems would be exempt from carbon tax from April of this year means that it has never been more relevant for industrial users to take a look at how CHP could help to reduce their carbon emissions.

This, combined with a growing list of other financial incentives, has positioned CHP as one of the most cost-effective solutions available to reduce the UK’s carbon use.

The fact that CHP allows stakeholders to use heat created as a by-product of electricity generation means less gas is required than a comparable utility and boiler solution. This is viewed favourably by the government’s low carbon initiatives.

In addition to this “carbon floor price” exemption, there are also a host of financial incentives that can be gained from investment in CHP technology. Not only is good-quality CHP exempt from the Climate Change Levy, but it is also covered by the Enhanced Capital Allowance scheme, helping to significantly reduce payback periods.

While the legislative incentives help reduce payback, it is important to consider the true cost of ownership and maintenance contracts. Many CHP modules have closed protocol controls, which essentially tie a client to a particular manufacturer for the system’s entire lifecycle regardless of cost and quality of service. Using a system that has open protocol controls provides the opportunity to tender service contracts and change supplier.

As with many aspects of system design, the work put in at the early stages of a project is vital to its success.

Correct sizing of a CHP system is essential to ensure the right balance between providing useful heat and electricity is maintained, and this leads to the maximum amount of savings. Although the Combined Heat & Power Quality Assurance Programme allows a proportion of the heat to be rejected throughout the year, ideally all heat should be used to maximise efficiency.

As well as sizing CHP for now, it is also important to consider potential future usage levels and how any energy-saving technologies due to be installed will affect its performance. For example, as the second phase of the Ecodesign of Energy-related Products Directive rolls out later this year, any application using fans or motors will have to meet improved minimum efficiency standards – which can have a significant impact on the sizing of CHP modules. By the same token, the opposite can be true if future expansion grows energy demand, meaning a larger CHP module could provide increased efficiencies.

CHP now offers the most cost-effective way to reduce CO2 as well as other financial benefits. But as with all renewable and low-carbon technologies, well designed, installed and operated systems are the key to realising these savings.

Alex Parkinson is commercial sales manager at Bosch Commercial and Industrial Heating

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