Whole life costing:
CHP (combined heat and power systems)

Peter Mayer

Peter Mayer of Building LifePlans
looks at the cost and environmental
dividends from combined heat
and power systems.

With Combined heat and power (CHP) or co-generation systems, heat that might be lost as a by-product of electricity generation is captured for space and water heating.

Locally supplied electricity incurs lower transmission losses than the national grid, which runs at losses of 40%. Payback periods of four to 10 years are possible.

CHP can also produce a 30-50% reduction in carbon dioxide emissions.


Specification options

A CHP system’s components are based around a prime mover or driver. These include a generator, heat recovery system, controls, electrical and thermal distribution, cooling, ventilation and flue systems. An enclosure protects the components and reduces noise and vibration. CHP can incorporate absorption chillers, which can convert excess heat into chilled water for cooling. This is called “tri-generation”.

There are a wide variety of CHP units for different fuels and drivers. Specifying for durability is difficult, as there are no specific CHP standards. Related standards such as BS EN 60034-1 for electrical machines focus on electrical properties. The government’s CHP Quality Assurance Standard focuses on energy efficiency and environmental performance.


Internal combustion engines

CHP systems based on reciprocating combustion engines use a modified lorry or marine motor, which runs slowly for a longer life. Maintenance costs and downtime should be factored in. Service lives are 10-20 years, and the engine may be rebuilt several times.

The most common fuel options are diesel or fuel oil to BS 2869. Other types run on gas. Electrical energy output is 50kW-5MW.


Gas turbines

Gas turbines are based on aero-engines. To maximise efficiency they need to run under full load conditions. Larger gas turbines are more efficient typically for industrial or large commercial use with electrical outputs of more than 1MW. Key maintenance items are the bearings and blades.

Gas turbines tend to be powered by natural gas or light oil. Use of waste gases from industrial processes or landfill offer enhanced environmental benefits.

However, there will be a trade-off resulting in engine downrating, as they have lower calorific values and detrimental constituents. Smaller CHP systems offer an alternative to reciprocating combustion engines.


Alternative types of CHP

Steam turbines burn a wide variety of fuels and are at the upper range of CHP systems. They can generate anything from a few MW of electricity to more than 100 MW.

Combined cycle systems incorporate more than one prime mover. These tend to be the larger scale CHP systems of 7MW or more.

Stirling engines are a type of external combustion reciprocating engine. The target market is domestic with outputs of more than 1kW for individual dwellings. They have an expected service life of 10-15 years.


Whole-life cost issues

CHP requires heat demand throughout the year. Up to twice the thermal energy is generated than electrical energy.

Buildings with high daily demand for hot water realise cost benefits with CHP. Micro CHP systems of around 1kW for individual homes are being developed, but field trials indicate that carbon savings are low.
It is important to size the CHP system correctly for the expected energy demands. Overrated engines do not achieve the anticipated savings and have to dump or transfer heat energy or run at lower capacity. Underrated engines miss out on potential savings. To be cost effective, CHP systems need to run for 4,000–5,000 hours a year.

CHP systems can sell excess electricity to the grid, although connection costs may be high and the income low. Alternative procurement arrangements may offer better value to organisations that wish to save energy without CHP’s high capital outlay.

Remote monitoring of CHP systems allows condition-based maintenance to be carried out before things go badly wrong. Specification of a CHPQA “good quality” CHP may attract the following financial benefits:
• Fuel could qualify for exemption from climate change levy
• Enhanced capital allowances may
• Business rates exemptions may apply.



Specification options


Combined Heat and Power systems Capital cost
Net present value for 60 years
Expected life
Micro-CHP reciprocating engine gas fuel, output (<15kW) 3,290 19,250 5 - 6
including cost savings 3,290 7,580  
CHP reciprocating engine gas fuel, output 110kWe 890 12,290 10 - 20
including cost savings 890 9,110  
CHP gas turbine output 100kWe 900 11,600 10 - 15
including cost savings 900 9,040  


Table notes

• All wattage is of electricity, exclusive of heat generation

• A discount rate of 3% is used to calculate net present values.

• Costs are averages and include: condition based maintenance by remote monitoring; secondary boiler with a nominal 20 year life; maintenance and servicing. Gas and electricity costs at current values (ie no allowance for fuel inflation). CHP system operating 5000 hours a year.

• Life cycle costs with cost savings are based on a comparison with a gas fired boiler system for thermal energy and all electricity bought in.

• This is a simplified analysis based on constant loads and outputs. A cost analysis based on project specific information is essential for a realistic best value appraisal.

First published in Building 2007



Further information

BLP provides latent defect warranties for buildings www.blpinsurance.com

Further information contact peter.mayer@blpinsurance.com or telephone: 020 7204 2450