Climate change & energy

Action in the UK - Combined heat and power

CHP LogoCombined Heat and Power (CHP) is a fuel-efficient energy technology that, unlike conventional forms of power generation, puts to use the by-product heat that is normally wasted to the environment. CHP can increase the overall efficiency of fuel use to more than 75%, compared with around 50% from conventional electricity generation. Furthermore, because it often supplies electricity locally, CHP can also avoid transmission and distribution losses.

CHP is an important element in the Government's new energy policy, as set down in the Energy White Paper. The bold ambition is to set the UK on the path to achieving a 60% reduction in carbon dioxide emissions by 2050. The Strategy confirms the Government's belief that CHP has an important role to play in meeting the White Paper aims.

Latest

19 October 2007 - Analysis of the national potential for high-efficiency cogeneration and an Evaluation of progress towards increasing share of high-efficiency cogeneration

The following information is available on this page:

CHP targets

In 2000 the Government set a new target to achieve at least 10,000 MWe of installed Good Quality CHP capacity by 2010. In support of this target, the Government has set a target to source at least 15% of electricity for use on the Government Estate from Good Quality CHP by 2010.

What is Good Quality CHP?

Good Quality CHP refers to CHP generation that is energy efficient in operation. The CHP Quality Assurance programme (CHPQA) launched in May 2000 determines that quality by providing a practical method for assessing all types and sizes of CHP scheme. The methodology and criteria are contained within the CHPQA Standard (PDF). Progress towards the 2010 target is monitored continually under CHPQA, which provides annual statistics on both planned and installed CHP. Certification under CHPQA is being used to determine the eligibility of schemes for a range of benefits. More information is available at www.chpqa.com.

CHP Strategy

Defra published the Government's Strategy for Combined Heat and Power to 2010 (PDF 250 KB) in April 2004. The Strategy incorporates the full range of support measures to support the growth of CHP capacity needed to meet our CHP target, and lay the foundation for long-term growth in CHP.

As part of the development process, the Government commissioned work from Cambridge Econometrics in 2001 to provide key statistical input to an evaluation of CHP capacity to 2010, which underpinned the conclusions and measures in the draft CHP Strategy. However, with the need to produce a final version of the CHP Strategy it was necessary to revisit the analysis, and the results from this second analysis PDF were published in November 2003 on the DTI website.

Measures to encourage CHP

Since 2000, the Government introduced a package of measures to support CHP. These measures, as reported on in the CHP Strategy, are categorised below:

Fiscal Incentives
  • exemption from the Climate Change Levy for all Good Quality CHP fuel inputs and electricity outputs;
  • eligibility for Enhanced Capital Allowances (ECAs) to stimulate investment;
  • Business Rates exception for CHP power generation plant and machinery;
  • a reduction in VAT on certain domestic micro-CHP installations;
  • eligibility to ROCs for the biomass element of fuel utilised in Energy from Waste CHP plants
Grant Support
  • the Community Energy programme to encourage CHP in community heating schemes (now closed);
  • Bio-energy Capital Grants scheme
Regulatory Framework
  •  favourable treatment under phase II and future phases of the EU Emissions Trading Schemes;
  • introduction of the EU Cogeneration Directive;
  • changes to the licensing regime, benefiting smaller generators;
  • working with Ofgem, to ensure level playing field under NETA for smaller generators, including CHP;
  • emphasising CHP benefits when planning or sustainable development guidance is reviewed or introduced;
  • revised guidance on power station consents applications to ensure full consideration of CHP;
  • exploring opportunities to incentivise CHP under the forthcoming Carbon Emissions Reduction Target (CERT);
  • encourage the take up of CHP through the Building Regulations; and
  • addressing the administrative burdens placed on smaller generators and incentivising the utilisation of distributed generation.
Promotion of Innovation
  • promotion and support by the Carbon Trust and Energy Savings Trust for the development of energy efficiency and low-carbon technologies, and ensure their programmes reinforce delivery of the 10,000MWe target;
  • instigation of field trials to evaluate the benefits of micro-CHP; and
Government Leadership and Partnership
  • adoption of a 15% target for Government Departments to use CHP generated electricity; and
  • encouragement of other parts of the public sector to consider setting similar targets.

The Climate Change Programme Review additionally include a commitment for the Government to shortly undertake a study into the licensing and exemption arrangements governing small-scale CHP and renewables operations and the cost and benefits of these operations.

Recent reports and consultations

As a complementary study to the Cambridge Econometrics work (see above), Defra commissioned Future Energy Solutions to carry out a bottom-up analysis of the economic potential for CHP, using economic and performance data from actual CHP schemes.

** A public consultation on the guidance for power station developers was launched by DTI on 25 August 2004 and closed on 24 November 2004. Revised guidance was published in December 2006.

A commissioned report from ILEX Consulting was published in December 2003:

Additionally, Defra asked ILEX in the summer of 2003 to undertake some high level analysis on the impact of the EU Emissions Trading Scheme on CHP, the results of which were taken account of in developing the UK's National Allocation Plan, and their final report:

EC Directive on Promotion of Cogeneration (Combined Heat and Power) in the Internal Energy Market

Cogeneration (Called Combined Heat and Power, or CHP, in the UK) is the simultaneous generation of heat and power, usually electricity, in a single process. It is a highly fuel-efficient technology that uses the heat - produced as a by-product of energy generation - that would normally be wasted to the environment. Cogeneration is a key energy efficiency technology that can produce up to 30 per cent fewer emissions than conventional generation. The Directive aims to reduce energy demand as a means to achieve security of energy supply, and to contribute towards the EU's carbon-saving targets.

The overall objective of the Directive is to create a framework to facilitate and support the installation and proper functioning of cogeneration where a useful heat demand exists or is foreseen.

The main measures contained within the Directive are:

  • A "guarantee of origin" to be readily available for electricity produced from cogeneration
  • Obligations on Member States to analyse national potentials for high-efficiency cogeneration and barriers to their realisation
  • Provisions for evaluating different support mechanisms for cogeneration used by Member States
  • Provisions laying down the principles for the interaction between cogeneration producers and the electricity grid
  • Provisions requiring Member States to evaluate current administrative procedures with a view to reducing the administrative barriers to the development of cogeneration

Further information

UK involvement in the Directive

The Government broadly supports the aim of the Directive, and was actively involved in negotiations on its development. The Government's priority was to ensure that the proposed Directive will benefit, rather than harm, the prospects for CHP in the UK.

Progress of the Directive

The Directive entered into force on 21 February 2004.

European Commission websites

Further information

If you want further information that is not covered by these pages, you can contact us by e-mail at chp@defra.gsi.gov.uk.

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Page last modified: 13 February 2008
Page published: 9 May 2002

Department for Environment, Food and Rural Affairs