Energy inefficiency, grid instability and cost are just some of the issues which a business must contend with when considering their power supply. Combined heat and power systems could be the solution in alleviating these concerns, as Michael Nelson has been finding out.
As the energy sector rapidly changes to meet the demand for environmentally friendly energy production, combined heat and power (CHP) sources could become the standard for companies looking to future-proof their energy supply in a cost-effective way.
CHP is a decentralised, low-carbon system of generating heat and power in a single process. The heat produced by CHP plants is used as a secondary product, as opposed to traditional methods of electricity production which expels the heat as waste. Up to two thirds of the overall energy consumed is lost in this way.
Compared to centralised power generation and modern combine cycle gas turbine stations, which only achieve a delivered efficiency of 40 per cent and between 45-50 per cent respectively, a CHP plant provides both electricity and heat at an efficiency of up to 80 per cent.
As well as increased efficiency, there are several other key advantages to using a CHP system as opposed to traditional power sources. Tim Broadhurst, chief commercial officer at CooperOstlund, says that blended energy programmes such as CHP are becoming more commonplace for businesses due to the rise in commercial energy prices, and concern over grid security.
“The national grid is nearing capacity, yet electricity demand continues to increase,” he says.
“A lack of investment in upgrading the UK’s ageing infrastructure means that centralised supply is becoming ever-more unrealistic.”
The drive towards electrification is expected to further increase demand over the next decade, meaning significant infrastructure upgrades are needed alongside an increased emphasis on localised electricity generation.
According to Luke Worrall, business development manager at NerG, CHP systems increase a facility’s energy security by protecting it against problems associated with the national grid, producing electricity at the point of use. “Unplanned downtime negatively impacts productivity and consumer trust,” he says.
A survey of manufacturers found that when they experienced unplanned downtime, 37 per cent was lost production time on critical assets.
A CHP system bypasses such a critical system failure because it produces electricity independent of the national grid, enabling it to operate even in the event of an outage. Using automatic switching, the system can be set up to seamlessly switch to island mode so that, in the event of an outage, the system remains energised.
There are cost saving opportunities for businesses switching to CHP as well. Worrall notes that CHP systems help to protect businesses against price volatility while guaranteeing a secure energy supply. “Because electricity is more expensive than gas, and price rises tend to occur proportionally with one another, businesses generating their own electricity using the gas network can expect to pay less than simply purchasing electricity from the grid.”
Broadhurst agrees on the cost effectiveness of CHP and goes on to say that this cost saving can be paid back in a period of typically less than five years and help managers to meet Part L of the building regulations which concerns the conservation of fuel and power.
According to the Green Alliance (2020), UK businesses are paying an estimated £60 million in wasted energy costs. By producing heat and power from the same fuel, CHP can see managers save 20 per cent on their energy bills at the same time as reducing their carbon emissions by 30 per cent. A huge step towards 2050’s net-zero target.
Making the most of your CHP investment
Installing a correctly sized unit is essential to gaining the biggest financial benefit from its use. Worrall highlights the primary function of CHP as being the production of electricity, with heat a useful secondary by-product. However, often businesses specify their CHP systems to match the heat baseload of the building, meaning the full financial benefits are not realised.
“If the system is designed to meet the facility’s heat baseload, it cannot fulfil the facility’s electricity demands because it’s too small,” he explains. “This means it still needs to take significant levels of electricity from the grid to supplement that supplied by the CHP system. Only systems that are designed to offset as much grid electricity as possible reap the biggest financial rewards.”
Electricity usage can be calculated using half-hour meter data obtained from the electricity supplier. Using this data, it is a straightforward process to find out the electricity baseload for the building, which will help determine which CHP system is best suited to meet the building’s energy demands. This can result in an offset of up to 85 per cent of the site’s grid supplied electricity consumption and provide savings of between 30 and 40 per cent on its electricity bills.
Application of CHP across various industries
Another benefit of using CHP is in its versatility, meaning any type of business which has a consistent demand for heat stands to benefit the most. According to NetRegs, an environmental guidance website for companies based in Scotland and Northern Ireland, businesses could use heat to provide steam for industrial processes, hot water, and space heating or to supply cooling through absorption chillers. This could include food and pharmaceutical industries, hospitals, residential homes, office and tower blocks, leisure centres, universities, and commercial greenhouses among many different types of building.
Many of these building types have a simultaneous requirement for heat and power, meaning CHP is an excellent solution because of the advantage of supplying energy to them in a way which means the aggregate loads are met by a centralised point.
A case study by Belfast University, where a dairy production facility in Wales has switched to a CHP energy source, is a great example of its benefits. According to the study, Volac is an advanced dairy production facility which provides whey protein isolates for the sports and active nutrition markets, as well as lactose for use in food applications and base powders for young animal milk formulas. The aim of investing in a CHP system was to replace fossil fuels with renewable, sustainable energy for the factory processes, thereby reducing the carbon footprint of the site.
The on-site CHP plant now supplies 65 per cent of their energy demands, site carbon emissions were reduced by 60 per cent in two years and the payback period on the investment was no more than 10 years.
“Our major investment of £38 million in the plant enables Volac to generate sustainable energy to meet the growing needs of our business at Felinfach,” James Neville, CEO at Volac, says. “It has enabled us to reduce carbon emissions from our Felinfach operations and reduce the carbon footprint of our products. Through this investment we have been able to employ an additional five staff from the local community.”
Providing affordable energy to hospitals
Research from energy consultancy Energy Management suggests that NHS Trusts spend an average of half a billion pounds each year on gas and electricity. Much of this results from the need to keep medical equipment such as ventilators running, as well as providing light and heating for large facilities. This means that hospitals have very high baseloads, made higher by the outbreak of COVID-19 which has put added pressure on healthcare facilities due to larger numbers of patients in intensive care.
Heat is another essential energy needed to run a hospital, where it is used for sterilising tools, heating water, and keeping wards warm. Often this means that hospitals end up paying for energy twice – for electricity to power the hospital and for gas to heat it.
Jason Harryman, UK sales and business development manager at Finning UK & Ireland, explains that one way to reduce the energy costs in hospitals is with CHP. While conventional electricity generation is typically only around 40 per cent efficient, and the heat generated by the equipment is wasted, CHP could increase energy efficiency to over 75 per cent.
“Finning supplied Rotherham Hospital with a Cat G3516B gas generator that had an electrical output of 1.1MWe, alongside heat recovery modules and an external radiator cooling system,” Harryman says. “The CHP solution produced heat as a by-product and fed it back in to the hospital’s heating system. After only 30 days, the hospital achieved an efficiency rate of 90.2 per cent.”
With potential savings for the NHS of £26.4 million per year according to a report by NHS England and Public Health England, plus a reduction in emissions of at least 20 per cent, CHP provides a way for management teams to recover costs while achieving greener and more efficient energy.
Other financial gains from CHP
In cases where a CHP system has been in place for several years, there are more opportunities for financial and environmental benefit by making use of the spare energy capacity.
According to research commissioned by Enel X, four out of every five CHP assets in the UK were installed three or more years ago, and one in three were specified to meet the site’s past energy needs.
“Energy managers who optimised their CHP to meet the site’s past needs may now find themselves with power capacity to spare, especially where energy efficiency measures have reduced demand,” Wayne Davies, energy markets programme manager at Enel X, says. “This spare capacity has value,” he adds. “It can be traded in a number of ‘flexibility’ markets and become a source of revenue for the organisation.”
Non-optimised CHP units typically operate at a sub-optimal level, wasting energy by generating heat and electricity surplus to requirements, which reduces site efficiency and is bad for the environment.
The solution to this is according to Davies is to retrofit intelligent software controls to optimise management of the CHP plant. This minimises energy wastage and maximises the value of flexible capacity, compared with deploying a static operating schedule. This also allows managers to tap into the energy market, which offers multiple lucrative opportunities to trade flexible capacity.
Grid operators will need more flexible capacity to balance supply and demand as they continue to integrate more renewable energy. According to Aurora Energy Research, revenue for flexible technologies is forecast to grow by 13 per cent annually to create a £2.3 billion market by 2030.
Wholesale power prices peaked at over £500/MWh in early 2021 due to a combination of low temperatures, low wind generation and high demand. While these events are uncommon, it highlights the need for grid operators to maintain sufficient capacity to achieve a safe operating margin. It is this kind of price spike which allows the opportunity to monetise flexible capacity.
The benefits from using a CHP system for any given building are numerous. There is money to be saved and gained from using them, alongside the fact that carbon emissions are drastically reduced allowing businesses to make good on their environmental targets, CHP systems look set to become the new norm in localised energy supply.