Excluding Combined Heat and Power from the Capacity Market Could Cost the UK £774 million

What is Combined Heat and Power (CHP)?

Combined heat and power (CHP) is an efficient electricity generation process that captures the heat which would otherwise escape into the atmosphere, so it can be transformed into useable thermal energy.

Recycling energy like this for your industrial processes, heating or cooling needs improves your energy efficiency and reduces your operating costs.

“Around 2,000 factories and businesses have so far adopted CHP to cut an estimated £375m from their total annual bills” according to The Telegraph newspaper.

With results like this, it is considered questionable that the government hasn’t included combined heat and power boilers in the Capacity Market. Especially after data from the Association for Decentralised Energy (ADE) revealed that, if CHP received the same support as traditional gas generation plants, we could double our capacity from 5.5GW to 13GW and, as a result, the UK would be more likely to secure future investments in low carbon energy.

What is the capacity market and why does it not include CHP?

The capacity market has been introduced to address issues surrounding differentiation in electricity supply and demand in the UK energy market. It will also provide incentives for investment in our overall level of reliable capacity and work to secure our electricity supply.

How will the capacity market work?

The government will estimate the total volume of capacity required on an annual basis. Energy system operators will then allow providers to bid for the required volume of capacity or investments through a central auction process.

There are restrictions on who can bid in the capacity market, as those bidding also have to be working towards carbon reduction targets. If the technology or energy generation technique isn’t classed as environmentally friendly enough, then it is not allowed to participate.

Why is Combined Heat and Power not included in the Capacity Market?

Unfortunately, combined heat and power have not been included in the businesses able to bid in the capacity market which has come as a surprise to many.

A recent report by the Association of Decentralised Energy has found that building combined heat and power (CHP) units instead of less efficient, power-only gas plants would help save between £656 million to £774 million on energy bills a year by 2030 while saving the equivalent carbon emissions of taking 1 in 14 cars off the road.

It has been said that restrictions on this are failing businesses in that it is now going to be more expensive to cut carbon emissions.

The government is now being pressured into rethinking its decision for this because, even though less efficient power plants can be initially cheaper, they have high fuel costs that increase energy bills so are not as effective in the long term.

How can I reduce my energy bills?

Installing a combined heat and power boiler is a great way to reduce your bills as you will:

• Use less fuel
• Reduce your carbon emissions
• Increase the reliability of your energy CHP is an on-site energy generation source that can be designed to also support your power requirements in the event of grid electricity disruption so if you have machines that can’t be turned off in your business, this is a great way to safeguard your operations.

How to reduce gas and electricity bills without CHP

Combined heat and power aren’t necessarily for everyone.

You may not be able to afford a new installation yet or have other issues preventing you from upgrading your boiler. That’s ok! There are still ways for you to save.

Comparing your business gas and electricity contracts alone could save your business a substantial amount of money, especially if you have been with the same supplier for several years.

Using a business energy comparison service, like Exchange Utility, can give you access to a variety of suppliers and energy tariff options that are better for your business.

At Exchange Utility, we provide FIVE STAR, honest and independent advice that’ll help you to make a money-saving decision on your next contract.

A few other ways that you could reduce the cost of your business energy overheads include implementing measures such as:

• Reviewing your gas, electricity and water contracts at the right time
• Installing a smart meter so you can monitor your business energy
• Reducing the cost of running your computers
• Reducing the cost of running your commercial kitchen
• Implementing energy-saving measures in the winter
• If you are a charity or non-profit organisation,  you should review how much VAT you pay on energy
• Adopting a cost-effective end-of-the-day routine

If you would like to discuss your business energy requirements, you can call our business energy experts on 0800 9777 000 or visit our business energy comparison page for more information.