The introduction of Feed-in-Tariffs (April 2010) will lead to a surge in demand for microgeneration technologies, in general, and combined heat and power (CHP) in particular, says David Shaw*.
Many end users are counting the days until Feed-in-tariffs (FiTs) are introduced. There is now a significant amount of on-site microgeneration of electricity going on in this country but much of it is wasted. Next April, that should change.

There is still some confusion about the detail, but it appears British FiTs will consist of two elements: an amount users receive for the electricity they generate and use on site and an export tariff for any surplus that they sell back to the grid. The export tariff is likely to be set at 5p/kWh; the generation tariff will depend on the technology used.

Suddenly this makes the financial argument for CHP and other microgeneration technologies look far more enticing. The small scale CHP market is already moving ahead well but there is so much more potential in this business, but end users are looking for more financial incentives. Hopefully, FiTs will provide this.

'Everything changes in April,' says Ian Shaw, energy manager for the London Fire Brigade. 'All of our meters are capable of exporting to the grid but you can't turn them on until someone agrees to buy the power from you. FiTs will, therefore, be a huge step forward.'

Payback

The London Fire Brigade, the third largest fire service in the world, is in the middle of a massive programme to reduce the carbon footprint of its 112 stations. It has already installed Dachs mini-CHP systems from Baxi -SenerTec in 18 stations and is planning several more. The service also makes extensive use of photo-voltaics and solar thermal systems across the service's large elderly property portfolio which includes several buildings built in the Victorian era.

'We are future-proofing ourselves,' says Ian Shaw. 'If the price of electricity doubles then our payback looks even better.'

Currently, exporting to the grid makes little economic sense as most utilities will pay only around 3p per kW/hr for microgenerated electricity and will charge you a monthly administration fee of around £50 for the privilege. With the introduction of FiTs, payment will have to be fair and the prices will be guaranteed for a number of years.

This is the kind of incentive we need to kick-start a major programme to ramp up the amount of electricity produced by decentralised generators. Power stations waste huge amounts by throwing all the heat generated by the process away and then make it even worse by adding transmission losses on top.

The grid is in deep trouble and we face major blackouts in the near future. Even the major energy firm E.ON has predicted the lights will start to go out in 2016 and many experts anticipate problems well before then. We must quickly find alternative sources of electricity that offer security of supply using tried and tested technology. The fact that CHP also provides heating puts it in a very strong position and we expect to see a lot of market activity in the coming year.

The challenge will be to ensure end users are properly educated about how to get the best from their CHP plant. Also, new installations must be correctly sized and integrated with the rest of the services to ensure they deliver the best possible return. More end users, like the London Fire Brigade, are looking to future proof themselves by having their own sources of power and protecting themselves from energy costs that will soar by as much as 60% during the next decade, according to the regulator Ofgem.

The energy generation industry expects to spend £235bn during the next decade on modernising our energy infrastructure and energy minister Lord Hunt has announced proposals to build 7,000 new wind turbines around the coast at a cost to the taxpayer of £15bn. His aim is to create an extra 25GW of capacity from wind but it is end users who will end up paying for it.

For every five megawatts of conventional power you are trying to replace, you need 25MW of wind power because the wind does not blow all the time. The National Grid estimates total wind capacity will grow to 16GW by 2015/16, all of which will have to be backed by some form of conventional power generation to match consumer demand peaks.

Subsidies

So, any electricity produced by wind turbines will be far more expensive than the electricity we consume today and even the companies which will provide the energy admit renewables will need generous public subsidies for at least 25 years to be economically viable.

Rather than leaning entirely on these costly and intermittent sources, we must give ourselves some options. Local and district combined heat and power (CHP) systems create power close to where it is to be used while also simultaneously capturing the heat for use in water and space heating in buildings. CHP can produce an overall saving of close to 30% compared with receiving electricity from the grid and generating heat separately.

CHP is designed to run continuously so that it generates electricity at maximum efficiency. Ideally, all that electricity will be consumed on site, which is why applications linked to a 'private wire' system are perfect for CHP. A good example is the MoD's Aspire project for multiple army accommodation units, which currently includes 60 Dachs CHP units from Baxi-SenerTec - ultimately it is intended for the project to have more than 100 units by 2012.

CHP currently provides about 7% of the UK's electricity capacity and about 80% of that is based on manufacturing sites. There is enormous potential to increase its contribution from smaller sites like sheltered housing, fire stations, leisure centres, hotels etc. Greenpeace believes the output of electricity from CHP could quadruple to meet about a quarter of Britain's demand for power.

CHP systems typically cost about 20% more than equivalent conventional plants but cut greenhouse gas emissions by up to 20%. CHP is exempt from the Climate Change Levy, or energy tax, which is charged at a rate of around 0.46p per kilowatt hour of electricity or roughly 10% of today's price. It also qualifies for Enhanced Capital Allowances and is subject to the 5% reduced rate of VAT.

However, it looks like FiTs will be the key economic driver during the next few years that could deliver a national network of microgenerators protected from the soaring cost of green power and immune from the threat of blackouts.

*David Shaw is business manager of CHP provider Baxi-SenerTec UK.

www.baxi-senertec.co.uk