Saturday, April 4, 2009



The attraction of combined heat and power (CHP) is its potential to reduce the apparent waste of energy involved in electricity production. It is almost invariably associated with fossil fuel generation but in principle applies to other forms of generation with a primary heat source, notably nuclear power. The difficulty with its widespread adoption has always been associated with the cost of getting the waste heat to places where it might be usefully employed, typically to provide household space and water heating in high density urban environments.

There are high capital costs, and also potential heat loss and pumping costs associated with the creation of large diameter pipe networks and the movement of hot water over significant distances. There are also high installation costs associated with retro-fitting into established urban environments The ideal heat load for CHP is a compact area, such as high density housing, although retro-fitting in individual buildings will still have significant extra costs, and the economics of potential schemes may depend on high rates of take-up among householders.

Most obviously, this is true of large power stations remote from centres of population. Isolation works against CHP because of the capital cost and heat loss involved in heat distribution over a rural or dispersed area. Proponents of CHP have therefore often tended to argue against large centralised power generation and in favour of smaller local or neighbourhood electricity generation. More recently there have been attempts to promote much smaller scale forms of CHP, even at the level of the individual household.

This note addresses some of the questions that need to be asked in order to determine whether or how big a role CHP might play in addressing the problems of getting to a low carbon future.

Measures of effectiveness

Examination of the contribution of CHP in the context of carbon emissions policy tends to use three measures – energy efficiency, carbon efficiency, and economic efficiency. They may sometimes point in the same direction, but they are in reality very different concepts.

Energy or thermal efficiency in this context is usually defined in technical terms – the percentage of the energy content of the primary energy source that is not “lost” when coal or heavy fuel oil is converted into a high value output, electricity, and a not very useful “wasted” output, large quantities of lukewarm water.

Carbon efficiency reflects the output of electricity for a given CO2 emission; it will differ from energy efficiency according to the type of fuel in use. For example heat input from a sustainable source, such as biomass, may be more carbon efficient than gas-fired generation, even if it is input to a process that is less energy efficient.

Economic efficiency should in principle trump and incorporate both these measures, provided energy costs and the full cost of CO2 emissions are correctly valued. It should in this context take into account both the value of the energy produced, with electricity production valued much more highly than hot water for example, and the social costs of CO2 together with the reality that we have to pursue policies that meet carbon targets.

The reality for CHP has indeed been that the economic measure predominates, albeit without an effective inclusion of any social or climate costs from carbon emissions. One incidental feature of CHP very relevant to its economics is that, in order to produce water at a sufficiently high temperature to be of any practical use, it may be necessary to scale down the more valuable electricity production from a CHP plant in order for the by-product of waste heat to have a potential market. The most efficient mode of operation for electricity production, taken by itself, leaves a residual waste heat that has very little potential economic value or practical use. The mode of operation is therefore itself an economic trade-off between high value electricity and lower value low grade heat.

The other big practical and economic issues for CHP are first the capital costs, particularly where retrofitting is involved, and second the balancing of power and heat loads within the relevant consumer base. Of course these problems can be overcome, for example by using national and local interconnection to spill power or receive back-up, but this is inevitably at some cost to economic viability.

Increasing efficiencies in power generation and domestic boilers

Since the 1970s two major developments have been the extensive introduction of combined cycle gas turbine plant which operates at much higher thermal/energy efficiencies than traditional thermal generation plant, and more recently the introduction of condensing gas boilers, with efficiencies of 80-90%. This clearly has the potential to reduce substantially, even if it does not entirely eliminate, the energy efficiency advantages of CHP.

Carbon Efficiency. Effectiveness of CHP in meeting CO2 targets.

CHP first came to major prominence in energy policy debates after the first oil crisis of the 1970s. Notwithstanding the fact that CHP has not achieved a substantial impact in the decades since then, we might expect that the importance attaching to CO2 emission reduction would now place a huge premium on energy efficiency, and open up new opportunities for CHP. In addition power generation technology has developed and arguments have been put forward for much smaller scale forms of CHP, operating at a highly localised or even household level, obviating some of the issues associated with large capital investment in CHP “hot water” distribution networks.

However other technologies have also moved on, and CHP is in competition, within the context of low carbon energy policies, with a number of alternatives. These include not only sources of power generation that do not lend themselves to CHP, such as scale large nuclear[1] or most forms of renewable energy (other than geothermal heat), but also with the various approaches to carbon capture and storage (CCS).

CCS is of particular importance to the future of CHP in relation to fossil plant. Since it is evident (one can cite the recent Committee on Climate Change report and other sources) that the power sector has to become virtually carbon free, it follows that CHP can only represent a major component of a realistic long term strategy if it is also associated with carbon capture. However a major issue for CCS is to establish a new infrastructure of pipe network to collect and transport the captured CO2 and deliver it to geologically suitable storage sites, including oilfields. This points initially at least to the concentration of CCS on major generation sites and militates against smaller CHP schemes simply on the grounds of excessive capital cost.

Decentralised small scale CHP runs into the problem of a big CO2 collection network, unless it is based on a renewable heat source[2], such as biomass or biofuel[3].  With the latter CCS could allow net carbon capture, or "negative carbon", again predisposing to location near a CO2 collection network.

Questions for CHP

It follows from the above that the most obvious questions to be addressed in determining the potential contribution of CHP to the future energy balance are therefore the following:

1. How significant are the energy efficiency savings associated with CHP considered to be, given the very large improvements that have occurred in recent decades both in power generation technology (CCGT) and in domestic boilers? This latter is obviously particularly important in considering the potential of smaller scale CHP designed to meet the power and heat requirements of domestic consumers.

2. In relation to building or retro-fitting CHP schemes around coal-fired plant, or other large thermal plant, has there been any change in assessment of the capital costs of the necessary networks for distribution of the waste heat? Hitherto retrofitting has rarely if ever been seen as economically or commercially viable, primarily because of capital costs, but much higher valuations attaching to CO2, particularly if these better reflect the real social cost of carbon rather than the inadequate numbers emerging from current carbon trading schemes, might alter the balance.

3. Any viable long term scheme for CHP associated with conventional fossil plant must require that it be associated with carbon capture. Given the cost and feasibility of building CO2 gathering networks, the emphasis may well be on fitting carbon capture to the largest point sources of power generation. To what extent will this limit the options, and hence the potential aggregate contribution, particularly for smaller scale CHP schemes?

4. Load balancing, between the electrical load and the demand for space and water heating that can be supplied through CHP, is likely to impact on the pattern of loads placed on local networks and the national grid. Given that some analysis already anticipates significant potential issues for the grid arising from the intermittency of some renewables, will CHP create any new problems for power networks?


1] It is conventional to assume that nuclear stations will be remote and that concerns over technical features of operation will also work against nuclear CHP. This conventional assumption now deserves to be re-examined.[2] In fact the carbon efficiency for biomass is also substantially increased if the CO2 generated can be separated and “”fixed”. Purely in relation to carbon efficiency an electricity only generating plant based on a renewable heat source, located close to a CO2 gathering network, and with the potential for carbon capture, will be superior to a CHP scheme without carbon capture.[3] One interesting development is the possibility of new "biofuel" crops suitable for marginal, ie non-agricultural, land.

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