Combined heat and power generates electricity on site and captures the heat that would otherwise be wasted. It suits a narrow set of sites with a genuine, steady, year-round heat demand, and an oversized or poorly matched unit is an expensive mistake.
Verification
- Verified as at:
- Source:
- Omnium method; CHPQA scheme for quality assurance and associated reliefs
- Last reviewed by:
- Omnium
Figures in this sheet were current at the verification date above. Regulated charges reset each April. If you are relying on a figure, check the source or ask us.
Designed A4 fact sheet, ready to print or circulate.
How it works
A CHP unit burns gas to generate electricity on site. The heat produced as a by-product is captured and used, usually for space heating or hot water, instead of being rejected.
The efficiency gain comes from using both outputs. A unit whose heat is not being used is simply an expensive generator.
Heat demand decides it
The question is not how much electricity a site uses. It is whether the site has a steady, year-round heat demand large enough to absorb what the unit produces.
Hotels, leisure centres with pools, hospitals and some industrial processes can have that profile. An office usually does not. A site with a strong summer drop in heat demand will run the unit at part load or dump heat for months of the year, and the case collapses.
We size to the heat, not to the electrical load, and we would rather tell you the site does not suit CHP than size a unit that will not run.
The spark spread
Viability is indicated by the spark spread: the ratio between the electricity price and the gas price. The wider the gap, the more attractive it is to make your own power from gas.
A spread in the region of four to eight generally supports a project, but this moves with the market and must be checked against current prices at the point of the decision rather than assumed. A case built on last year’s spread is not a case.
Reliefs and compliance
A CHP scheme that meets the quality criteria under CHPQA can qualify for reliefs that a non-qualifying installation does not. Qualification has to be established and maintained rather than assumed at the point of purchase.
We will set out what a scheme would need to meet and flag where the reliefs materially change the case, but the tax treatment itself is a matter for your accountant.
On payback
We do not publish a payback range for CHP. It depends on the heat profile, the spark spread at the time, the installed cost and whether the scheme qualifies for relief.
Of all the technologies we look at, this is the one where we most often advise against proceeding.
Related sheets
- Heat pumps
Heat pumps move heat rather than generate it. Whether that cuts cost as well as emissions depends on the building and on gas prices against electricity.
- Solar PV
Why self-consumption decides solar economics, the three funding routes, and the sites where it does not stack up.
- The net zero roadmap
The order to decarbonise a building or portfolio in, and why measuring and reducing before generating and offsetting costs less.
Take this sheet into a meeting
Combined heat and power is available as a designed A4 fact sheet, dated and set for printing or circulation.
If this sheet raises a question about your own sites, speak to us.