Combined Heat and Power (CHP) enables on-site generation of electricity whilst also capturing the useful heat generated during the process. By using heat that would otherwise be wasted in conventional means of electricity generation, efficiencies in excess of 80% can be reached, in contrast to ~50% for conventional gas fired power stations.
Estimates for the costs and savings associated with this technology were derived from data given in the NHS Energy Efficiency Fund (Final Report February 2015) and also data from EEVS’ database of energy efficiency projects in the NHS.
The cost and carbon savings associated with expected reductions in kWh consumption were extrapolated over time using the cost and carbon intensity projections provided by the DECC/HM Treasury Green Book guidance on valuing energy use and greenhouse gas emissions.
The resulting figures were sense checked by stakeholders with experience of building energy efficiency interventions.
Case study sources
Energy savings were normalised using the energy spend of the NHS trust from which the various data sources were taken. This gave an average saving of £340,000 annually per trust based on the gas and electricity costs in 2015. Values were extrapolated over time using costs from the Treasury Green Book guidance.
Average capital costs per NHS trust normalised by energy spend were taken as £1,400,000.
Average carbon savings per trust were calculated using carbon intensity projections from the DECC/HM Treasury Green Book guidance. In 2015, the carbon savings derived from the expected kWh savings were 1,300 tCO2 per annum for NHS Trusts. However, it should be noted that the carbon intensities projected for gas and electricity have a significant impact on the carbon savings. Specifically that the projected decarbonisation of grid electricity means that the net effect is no longer a carbon saving from approximately 2021 onwards.
Combined Heat and Power (CHP) has been shown to be a good cost saving measure, however, projected grid decarbonisation (as per the Green Book guidance figures) means that as time goes on the, carbon savings are reduced, becoming negligible by 2025. These projections indicate that new installations of CHP after 2024/25 will not save carbon, albeit that cost projections suggest a good financial case can be made and that significant carbon savings may be made up to that point.
Organisations planning a CHP installation should use HM Treasury electricity emissions factors and consider emissions after 2024/25. Energy Performance Contracts (EPCs) may be able to mitigate this risk by considering both minimum price and carbon performance standards. For example, EPCs longer than 10 years may, by default, commit the trust to a gas CHP solution well after this solution has stopped saving carbon emissions. Whereas CHP contracts with minumum performance standards may drive innovation from EPC contractors, as the electicity grid decarbonises, which may include fuel source, energy storage and energy efficiency.