Are you really saving money?

You might know your CHP is aving you money. But how do you answer the question of how much? Sebastian Gray offers some answers

When you ask CHP owners why they’re operating a CHP unit, they most often answer “because it saves us money”. But how do you know your CHP is making you the savings you expect?

But let’s have a look at how to calculate the savings on a monthly basis. To calculate CHP savings there are two major requirements:

  • you will need to obtain your electricity day & night rate prices, gas price, maintenance cost (1) and the Climate Change Levy (CCL) gas and electricity rates; and
  • you will need the CHP hours run, the CHP gas used, the CHP electricity generated and CHP useful heat supplied for the period. You will also require details of the heat efficiency of the gas fired back-up boiler(s) to the CHP unit. Once you have the above data you can start to calculate your CHP savings.

For these calculations we are going to make some assumptions with regards to the CHP operation and the utility prices. Let’s say the CHP unit has the following specification:

  • electrical output: 100kW;
  • heat output: 150kW;
  • gas input: 300kW; and
  • daily run hours: 17 – the CHP unit does not run during the ‘night’ period.

Taking the month of January 2021 as an example, the CHP unit would have operated for 527 hours and generated/consumed the following:

  • electricity generated in period: 52,700kWh;
  • heat supplied in period: 79,050 kWh; and
  • gas consumed in period: 158,100 kWh.

Before we can start calculating the CHP savings, we must know if the CHP unit is registered under the CHPQA Programme. We will, for this example, assume that the CHP unit is registered and certified as good quality.

Also, for this example we will assume the following utility prices and apply the CCL rates as of January 2021:

  • electricity day rate price: £0.08000/kWh;
  • electricity night rate price: £0.04000/kWh;
  • gas price: £0.02000/kWh;
  • maintenance cost: £0.03000/kWh;
  • Climate Change Levy – gas: £0.00406/kWh; and
  • Climate Change Levy – electricity: £0.00811/kWh.

We will also assume that the gas fired back-up boiler heat efficiency is 85 per cent.

We now have all the data we need to calculate the CHP savings. The first step is to calculate the CHP costs. Effectively, the total cost to operate the CHP is the cost of the gas consumed and the cost of the maintenance to operate it. So we have:

Cost of CHP Gas: 158,100 kWh x £0.02/kWh = £3,162.00;

Cost of CHP Maintenance: 52,700 kWh x £0.03/kWh = £1,581.00

Total CHP Operational Cost:  = £4,743.00

If there was no CHP unit operating on site, then the electricity generated by the CHP unit would have to be imported from the grid and this would include the cost of CCL. So the cost of importing the equivalent electricity from the grid would be:

Electricity Day Rate Price: £0.08000/kWh

Climate Change Levy – Electricity: £0.00811/kWh

Total Electricity Price (Day): £0.08811/kWh

Therefore, the total cost to import the equivalent electricity from the grid would be:

Total Cost Equivalent Grid: 52,700 kWh x £0.08811/kWh = £4,643.40

We must also take into account the heat supplied by the CHP unit. If this were not available then the heat would have to be supplied by the site’s boiler(s), which would use gas to generate it. Assuming that the boiler has a heat efficiency of 85 per cent, then the quantity of gas used to generate the equivalent heat would be:

Equivalent Boiler Gas: 79,050 kWh/0.85 = 93,000kWh

As the gas used in the boiler is not subject to any CCL exemption, then the CCL rate for gas needs to be included in the price of the gas.

So the price of the boiler gas would be:

Gas price: £0.02000/kWh;

Climate Change Levy – Gas: £0.00406/kWh

Total gas price: £0.02406/kWh

Therefore the total cost of the boiler gas used to replace the equivalent heat from the CHP would be:

Total Boiler Gas Cost: 93,000kWh x £0.02406/kWh = £2,237.58

So this an effective saving, as this gas does not have to be purchased to generate the heat that is being supplied by the CHP unit. Therefore the total savings by operating the CHP unit are as follows:

Total Electricity Saving: £4,643.40;

Total Heat Saving: £2,237.58;

Total Energy Cost Saving: £6,880.98

From this we must deduct the total CHP operational cost.

Total CHP operational cost: £4,743.00

This gives us a total nett monthly saving of: £2,137.98

The above example is based on the optimum performance of the CHP. To calculate your actual CHP savings metered values for CHP electricity generated, heat supplied and gas consumed must be used.

Key takeaways when considering a CHP unit:

  1. Ensure that your CHP unit is correctly sized for the site on which it is to operate.
  2. For maximum efficiency, the CHP scheme should be heat led.
  3. Register you CHP unit with the CHPQA Programme.
  4. Complete HMRC forms PP10 and PP11 to obtain your CCL exemption.
  5. Carry out annual CCL reconciliation.

Reference

1) This is normally a rate charged by the CHP maintainer based on the electricity generated by the CHP unit. This is also known as the CHP electricity price and in most cases does not vary if the CHP operates during the day or the night.

 

Sebastian Gray is director of consultant 2EA