The manufacturing sector is the UK’s largest consumer of energy, accounting for 16.5% of national demand, according to the Government Office for Science and Foresight. Combined with increased competition and the mounting costs of raw materials, rising energy bills are continuing to put pressure on many manufacturers. Combined Heat and Power (CHP) solutions can offer significant cost savings, with many UK industries examining the potential of these embedded generation systems.
However, it is important to note that these are no longer the low-carbon solution compared with separate grid supplies of electricity and heat. Despite delivering savings, implementing CHP should be carefully weighed against their emissions performance, at a time when manufacturers are facing increasingly stringent environmental targets and growing supply chain pressure.
On-site CHP, also known as cogeneration, offers intensive energy users’ sizeable reductions in total energy costs, potentially up to 20%, according to E. ON and 40%, based on Centrica data.
At the start of this decade, much of our grid electricity still came from coal-fired power stations where up to two-thirds of the energy consumed is wasted through the boiler stack and from the cooling towers. CHPs typically use generators with a slightly better electrical efficiency but importantly capture must of the waste heat generated and re-use it for heating, chilling or industrial processes.
As a result, a CHP can successfully convert around 80% of the energy it uses into useful energy outputs. As well as reducing net energy costs, this efficiency was until relatively recently claimed to reduce carbon emissions by around 25% compared with grid electricity and gas, used to meet the same electricity and heat demand.
As we move into the third decade of the new millennium, our grid electricity mix has completely changed. Around half of our electricity produced is from zero-carbon sources such as wind, solar and nuclear, whilst coal generators are on a steep trajectory to complete closure by 2025. The balancing is mainly done by combined cycle power stations, where conversion of gas to electricity is around 50% for new power stations. This means that grid electricity is around half the carbon intensity that it was just 10 years ago. By the end of the next decade it may well have a lower carbon intensity than natural gas, making CHP a higher carbon option.
Another recent consideration when setting out the business case for CHP is the recent announcement by Ofgem that Transmission Network Charging will be reformed in 2021. The new charges, which are based on voltage and agreed capacity with the DNOs, will replace the current ‘Triad’ methodology. This means that your CHP will no longer help you to avoid TNUoS charges.
Despite the reducing carbon and cost-benefit, CHP will still be an economic solution for manufacturers that have both electricity and all-year heat demands. However, CHP incurs expensive upfront costs, generally starting at several hundred thousand pounds for mid-sized manufacturers, even running into millions for larger users or more advanced technology.
This investment would need to be weighed carefully against future energy strategy and, in particular, the increasing pressure for manufacturers to transition towards low or net-zero carbon.
Further, CHP only delivers on its true potential when there is a simultaneous requirement for both electricity and heat. For example, during winter months CHP is likely to be used to its full capacity, but during the summer when there is not the same requirement for heating much of the potential for greater efficiency can be at risk of being squandered.
For some manufacturers that require consistent heating as part of their manufacturing processes, this may not be the case, demonstrating how well-suited CHP can vary by sector and organisation.
Before settling on a CHP solution, it is important to carry out an in-depth analysis of your energy demand profile to ensure that it is the most appropriate solution available and that the size of CHP installation provides the best ROI for your business.
Outputs from a large reciprocating CHP engine are typically around 37% electricity and 43% useable heat, so it is particularly important to consider how you could best put the heat to use to ensure maximum return. For the more electrically efficient reciprocating gas engines, more than half the heat that can be recovered is relatively low grade, at around 85°C, fine for radiator heating systems, but not always easy to integrate into industrial processes. Gas turbines offer lower electrical efficiencies but can recover heat at much higher temperatures. However, economies of scale mean that they mainly suited to sites with very high energy consumption.
To find out more about CHP and better understand how your business uses energy and the ways to act on that insight, contact our team on 01253 785 294