Thursday 14th of June 2018 | Posted In: Generate, Generating energy

Combined Heat and Power could reduce your electricity costs by half

Around 50% of your electricity bill pays for taxes, levies and getting the electricity to you. By generating your own electricity using Combined Heat and Power (CHP) you will import less electricity from the grid and therefore, avoid paying these.

What is CHP?

As the name suggests it is the simultaneous production of electricity (power) and heat. The most common technology used is a natural gas fuelled reciprocating engine. Rather than throw away the heat in the exhaust gases and from engine cooling, it is recovered as hot water (steam is possible) and put to good use. For every 1kWh of gas burnt, a modern CHP engine produces around:

  • 0.4kWh of electricity
  • 0.45kWh of hot water
  • So an overall efficiency of 85%.

Compare this with electricity from a traditional power station that might produce 0.4kWh of electricity for each 1kWh of fuel burnt and that’s all; the left over heat is typically thrown away.

But it is not just the higher overall efficiency of CHP that makes it financially interesting…

The cost of electricity

You may have noticed how the cost of grid electricity seems to keep going up no matter what is happening with the energy markets. Well, the energy suppliers are the easy target to blame, but it’s not all their fault!

The massive increase in renewable electricity in recent years is great news, but it has to be paid for and the subsidies are not covered by the Government (aka our taxes). In fact, they are paid for by adding extra charges to our import electricity bills, looking at a client’s electricity bill for April 2018 the ‘green payments’ totalled 3p/kWh. Then there are the network charges, Climate Change Levy and a collection of more obscure charges, combined we call these the non-commodity costs.

So how does this compare to CHP?

Basic CHP costing’s

Cost of gas:

  • To generate 1kWh of electricity with a modern CHP you will burn 2.5kWh of gas. At current prices (c. 2.2p/kWh delivered) that means burning 5.5p of gas.

Cost of maintenance:

  • This depends on the size of the CHP but 1p/kWh of electricity generated is a fair starting point.

Therefore, the total operating cost of the CHP (excluding finance) is 6.5p to generate 1kWh of electricity, compare this to what you are paying for import electricity at the moment.

Example: A simple (pessimistic) investment model

A site with electricity demand that is at least 100kW all year, but a negligible heat demands:

  • Cost of import electricity
    • Perhaps 9.0p/kWh (average day/night)
    • 100kW x 24 hours x 365 days = £78,840 p.a.
  • Cost of electricity from CHP
    • £56,940 p.a. (assumes no heat at all is used)
  • Saving
    • £21,900 p.a.

The capital installation cost of a 100kW CHP is around £100,000, so there is a simple return on investment within five years. Remember… this assumes that none of the heat produced is used, but if it were…

Value of heat:

  • For every 1kWh of electricity, we also get 1.1kWh of heat
  • If this would otherwise have come from a gas boiler, the gas burnt to produce it would have cost 2.4p.

So, net of the value of the heat, 1kWh of electricity actually cost 4.1p to generate.

Another scenario might be an electricity demand that is only 100kW during daytime hours, but has a significant heat demand.

  • Cost of import electricity
    • Perhaps 9.0p/kWh (average day/night)
    • 100kW x 12 hours x 365 days = £39,420 p.a.
  • Cost of electricity from CHP
    • £17,958 p.a. (assumes all heat produced is used)
  • Saving
    • £21,462 p.a.

A simple return on investment within six years and you can be sure that the non-commodity costs on your electricity will continue to increase.

What next?

Of course the figures aren’t quite as simple as those presented above and there are plenty of twists and turns:

  • The site specific energy match
  • The optimum size CHP for you
  • Connecting electricity generation to the grid (even if you use it all on site).

Never mind:

  • Selecting a CHP provider
  • On-going maintenance
  • Setting optimum run regimes
  • On-going compliance such as CHPQA.

This is where we come in, call us if you:

  • Think CHP might work for you and want to find out more
  • Already have CHP and want to make sure you are getting the best out of it.

Finally, if you have reached this point and decided that CHP isn’t for you, we can still negotiate a good deal on your import electricity contract for you!