DECENTRALISED POWER GENERATION. DOES IT INCLUDE A FUTURE FOR COMBINED HEAT POWER? AND WHERE DOES THE BALANCE LIE?

 

Decentralisation is one of the three D’s for the future of low carbon energy sectors. It sits with decarbonisation as another factor driving smaller scale renewables generation, and digitisation, potentially enabling more localised control. But how much does the future lie with smaller local systems? Will a centralised National Grid remain at the core of the power sector? And will there be a resurrection of the prospects for localised combined heat and power schemes?

One organisation pushing a decentralisation agenda is the Association for Decentralised Energy (ADE). However their recent report makes some extravagant and misleading claims about the waste of energy in the “centralised” and “legacy” power systems that the UK currently enjoys. The report implies easy routes to eliminating waste, implicitly through combined heat power (CHP) schemes.

“Inherited from the public system of the 1960s and 70s, less than 10% of UK power stations currently recover waste heat, and this represents a missed opportunity to save £2 billion annually.”

The apparently obligatory deference to supposed virtues of the UK privatised power model, and the assumed culpability of a distant public sector past, are contradicted by historical fact. Almost all current power generation, both in renewables and combined cycle gas turbines (CCGT), is from plant built after 1990, within a supposedly “market driven” privatised power sector. About 2.1 % of November 2021 generation was from the nationalised industry “legacy” of coal, and none is baseload.

Wastage and CHP

ADE adopt the rather tired and misleading argument that electricity generation from fossil fuel “wastes” heat energy, and that combined heat power, essentially a decentralised operation, could therefore provide a substantial contribution to a low carbon economy, with considerable cost saving and efficiency gain.

This subject requires some understanding of the thermodynamic principles of energy and entropy. Not all energy is "useful" in the thermodynamic sense of its availability to perform real work (or even to heat homes effectively). “Waste” is an emotive and misleading way to describe the truth that conversion from “low grade” energy (eg coal) to something useful, like electricity, consumes energy en route. An internal combustion (ICE) vehicle may “waste” 75 % of the fuel in the tank but no-one imagines this waste heat is easily captured by the driver for useful purposes[1]. (Switching to electric vehicles offers three times the notional efficiency at point of use, but will of course incur upstream heat loss if from thermal generation.)

Combined heat power (CHP) schemes aim to make use of the heat content lost in fossil fuel generation to improve the overall efficiency, either through use of high temperature heat in industrial processes or lower temperature heat for buildings in winter. This is a laudable aim but it has an increasingly limited economic or carbon reduction potential for several reasons.

First, a much more compelling case for CHP was made, but without much success, in the 1970s, when the best fossil generation had thermal efficiencies in the 35-40 % range, and domestic gas boilers were about 60 % efficient. CHP offered theoretical overall efficiencies of 80 % (before distribution). The 1990s development of combined cycle gas turbine (CCGT) generation, with best in class efficiencies of around 65 % in baseload operation, and domestic condensing boilers with 90 % efficiencies, eliminated most of the theoretical cost and energy savings from CHP.

Second, efficiency claims for CHP systems were, even then, frequently overstated. Heat is lower-quality energy than electricity, and only at high temperatures does it become close to comparable utility. The number of such high temperature applications is limited, largely to industrial process heat, and was not helped by UK de-industrialisation. The more modest efficiency gains with low-temperature waste heat use, with potentially wider application to residential heating, carry heavy retro-fitting costs, and don't necessarily lead to substantial improvement in overall energy use, due to lower thermodynamic efficiencies, particularly if heat network and distribution losses are taken into account.

Third, and most crucially, a zero carbon economy requires rapid elimination of virtually all fossil fuel use, starting with its use in power generation. Renewables such as wind and solar, at whatever technical efficiency, do not in any case generate “waste heat”. There may be a plausible future role for heat networks fed by smaller scale modular nuclear reactors, but otherwise the potential for fossil-based CHP schemes seems to be confined to a very few niche applications.

“The UK could save the equivalent of £23 per household just by upgrading our electricity network's efficiency to match that of Germany's.”

International comparisons are often dangerous guides to reality. Losses in developed economies are a function of geography and economic structure as much as efficient network management. A casual inspection of energy statistics indicates that in Germany industrial consumption is nearly double that of domestic, while in the UK the reverse is true and domestic use exceeds industrial, reflecting the demise of much of UK heavy industry under the Thatcher governments of the 1980s and 1990s. Since heavy industry is almost invariably connected at much higher voltages, and much larger percentage losses occur in medium and low voltage distribution networks, Germany’s lower figure tells us little.

A good case can be made for additional capacity investment to reduce UK network losses, and even more so to support the stronger networks needed to cope with the big increase in electricity’s role in a low carbon economy. Some of the network companies regularly make that case, but of course investment has to be paid for, and loss reduction does not therefore automatically lead to lower consumer bills.

Centralising or decentralising factors in a low carbon economy.

The future balance between decentralisation and centralisation requires a much more nuanced analysis. It will of course be geography specific, but we can note a number of factors, in the UK at least, tending towards centralisation and a strong transmission grid:

·         A high proportion of currently projected low carbon sources of power are either intrinsically large scale, like conventional nuclear, may depend on a substantial network infrastructure, like carbon capture, or are remote from consumer load, with long transmission lines, and require central coordination to exploit weather diversity, like offshore wind.

·         Inflexibilities or variabilities in output – for nuclear or renewables – mean that larger interconnected, and inevitably to some degree centralised, systems enjoy major advantages in reducing the cost of reliable supply. Small systems, perhaps with a single source of renewable energy, need interconnection. And the UK system benefits from international interconnection.

·         The importance and relevance of energy storage for power systems can accentuate the above.

On the other hand, there are forces for decentralisation.

·         There is demonstrably an essential need for much more consumer involvement in the operation of power systems. Low carbon generation gives rise to much more complex needs, including the management of overall demand with more sophisticated tariffs having a major role. 

·         There is a plausible role for heat networks, as one alternative to heat pumps, of which CHP associated with modular nuclear is one possibility. These may be the more suitable option in some urban environments. They require substantial investment in retro-fitting and communal maintenance and strong local governance structures such as local heat authorities.

·         Changing patterns of electricity generation and use may create new and localised problems in the management of lower voltage networks, so that more control, management and governance systems are required at lower voltage levels, but without reducing the importance of the high voltage transmission grid.

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Some of these issues can be explored in much more detail elsewhere.

The future of low carbon networks. Heat networks. Enabling Efficient Networks For Low Carbon Futures | The ETI

The future of consumer and network tariffs in a low carbon economy. How must energy pricing evolve in a low-carbon… | Oxford Martin School

 

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[1] though the internal heater may recover a small fraction of that in winter

ELECTRICITY TARIFF REFORM. SHIFTING THE BURDEN FROM ELECTRICITY TO GAS IS A START

 

Plans to shift green surcharges from household electricity bills to gas bills are an overdue and welcome reform. With the necessity to shift consumption away from gas to low carbon power, taxing electricity but not gas has been perverse. In particular it conflicts with policies to shift residential heating to electricity-based systems, especially heat pumps. It was one of several key recommendation of the 2019 report, on network tariffs for a low carbon future, that I prepared for Energy Systems Catapult. So it’s satisfying to see the proposed change.

However this shift is probably not enough on its own to provide a clear incentive for consumers to switch from gas to electric systems, including heat pumps, even if the present surge in gas prices is sustained. A more fundamental recasting of the structure of electricity tariffs will be essential, notably a significant change towards recovering far less of the fixed costs of network infrastructure through the kWh charge. This is a profound change, and may require additional measures to prevent the regressive effects of a larger burden on lower income households. But it can be done in ways that are consistent with equality or levelling up agendas.

The flaw in current tariffs

The incremental costs of supplying energy are the right basis for any price and tariff comparisons that consumers make when choosing a heating system. Costs should ideally include all environmental costs and these may be expressed for example as a carbon price. Energy costs are however only a part of the story for the tariffs faced by consumers. For residential consumers, up to 50% of total costs reside in the fixed costs of the networks, concentrated in the local distribution networks. The marginal cost of accommodating extra throughput is, at least in uncongested networks, very low. But the fixed cost still needs to be recovered. How best to do it poses some difficult questions in terms of reconciling considerations of equity and income distribution, on the one hand, and the efficient allocation of economic resources on the other.

Current UK practice for smaller retail consumers is simply to average most fixed costs over all units of energy sold. This seems fair, and prima facie results in those who consume most (and might broadly also be those with higher incomes) paying the most towards the fixed costs. However it distorts the economic message, that the actual marginal or incremental cost is much lower. This leads to at least two major problems.

1.       It exaggerates the incentive for individual consumers to instal their own forms of power generation, even if these incur high resource or environmental costs, simply in order to avoid network charges. There is no saving in overall fixed cost and, while individual consumers with own generation may benefit, a larger share of fixed public network costs is then picked up by others. Total societal costs increase. Incidentally, this also tends to benefit the wealthier households who are more likely to instal their own generation.

 2.       Policies for a low carbon economy rest on persuading consumers to use large amounts of extra electricity for heating (eg with heat pumps). The high unit kWh rates that result from the current practice of spreading the fixed costs over all kWh then become a very serious obstacle, particularly when the consumer choice is between electricity and gas. This is reinforced by the matter of high per household capital costs for retrofitting heat pumps.

 

For household consumer, a higher fixed charge in the tariff, and a lower unit energy charge, transforms the choice between using the low carbon solution (electric heat pumps) and traditional fossil fuels (gas or oil).  I examined this in my 2019 report, but it is worth recalculating in the light of recent price trends. Assuming 10,000 kWh per annum consumption, a coefficient of performance (COP) of 3 for heat pumps, and 90% efficiency for modern condensing boilers (both slightly optimistic), the message is clear.

 

Economics of Heat Pump vs Gas [Energy Cost Only]	elec tariff p/kwh	Elec useful heat p/kWh	Gas tariff p/kWh	Gas useful heat p/kWh	Heat pump saving £ pa
Current tariffs[1]	14.50	4.83	3.86	4.29	-54
Current tariffs and + 1p/kwh CO2 tax on gas[2]	14.50	4.83	4.86	5.40	57
Reform tariffs + CO2 tax.[3]	7.50	2.50	4.86	5.40	290
Reform tariffs + CO2 tax + permanent high gas price[4]	7.50	2.50	8.00	8.89	638

 

With current tariffs, heat pumps struggle to be competitive with gas even on running costs. A 1p per kWh carbon tax on gas, or its equivalent, helps to shift the balance (to a small advantage for heat pumps). Tariff reform has a much larger impact (2.5 times), and this is of course hugely reinforced if we assume permanently higher gas prices. This takes us at least part of the way to compensating households for the higher capital costs of heat pumps.

Disadvantages to poorer consumers

We noted above that some wealthier consumers benefit from current tariffs through the arguably excessive implicit subsidies to own generation. Other beneficiaries include second home owners with very low annual consumptions. However the regressive impact of a necessary tariff reform cannot be ignored. But there are many different options available.

One is to change the basis for applying standing charges to consumers. One proposal put forward has been to collect contribution to fixed costs through tariffs based on property values, akin to traditional approaches in water based on rateable value, or property tax band.

Another is to limit the application of the lower tariff rate to consumption for heating, but not for other purposes. Modern technology makes separate metering, as well as the detection of any metering fraud, a very plausible option.

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The conclusion must be that tariff reform will be an essential component of any national strategy for the decarbonisation of the heat sector.

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[1] Average kWh rate for UK, and recent variable rate British Gas tariff for gas.

[2] Set at 1.0 p/kWh as first approximation to likely impact of transferring environmental cost burden to gas. I used a higher number in the original report

[3] Assumed future average wholesale power cost of 7.5p/kWh

[4] Assumed winter gas price of 170 to 210 p/therm, deduced from recent reports

HEAT NETWORKS AND NEW INDUSTRIAL STRATEGIES

The Institute for Public Policy Research (IPPR) is intending shortly to bring out a report on heat networks and the decarbonisation of the heat sector. A recent workshop addressed some of the specifics of this subject and in particular the potential linkages with industrial strategy, a concept that is back in mainstream policy discussions after years in the wilderness. We should support strongly efforts to create a coherent policy for the heat sector but we should not underestimate the scale of the obstacles to achieving the objectives. These include getting a clear direction of travel on the evolution of the power sector, not least on the future of carbon capture, and also the sheer scale of what will be involved in retro-fitting a high proportion of the UK housing stock with connections to a heat network. A national body, with the scope to develop a coherent strategy, encourage best practice, and assist and advise local authority initiatives, should be part of the answer.

This blog has touched on the heat sector before[1], as it is clearly fundamental to achievement of UK (and other geographies’) low carbon objectives. Heat networks are also an important component of the future options, choices and scenarios considered by a number of bodies that are concerned with energy policy and decarbonisation, including the Energy Technologies Institute (ETI) and Committee on Climate Change (CCC).  So this is a subject that matters a lot and has several dimensions.

Industrial strategy.

A first reaction to the introduction of industrial strategy as an additional objective in the decarbonisation agenda should perhaps be caution. Industrial strategy is most often associated with overcoming barriers to the development of new technologies, eg by funding research and development or helping develop supply chains, and is sometimes loosely associated, pejoratively or not, with “picking winners”.

Heat networks, on the other hand, are very large investments in pipes to transport hot water, and then retrofitting buildings to make use of the heat provided.   This includes digging trenches, laying pipes, and a lot of construction activity, most likely as a retrofit. The network per se can be to a significant degree technology neutral, and indeed one claimed benefit for heat networks is that there is some flexibility over how they are fuelled. But the networks themselves do not represent any very radical technological shift. Linkages to supply chains and technology choice, the stuff of industrial strategy, are, on this reading of the problems, less obvious issues.

They might instead be more accurately be described as major infrastructure spend, which can have substantial macro-economic benefits, as a stimulus when this is appropriate, and as an instrument in rebalancing the economy, particularly if associated with efforts to prioritise relatively depressed areas. But in the broader context of influencing future patterns of UK manufacturing, the links with industrial strategy are prima facie less clear.

However decisions on future heat networks are also inseparable from other big choices and other big developments within a decarbonisation programme, since these introduce a number of constraints and preferences.  For example, one plausible direction of travel is to associate heat networks with generation based on fossil fuel with carbon capture (CCS). In this context the cancellation of support for a CCS programme in November 2015 is very unfortunate. But had it gone ahead, or were it to be reinstated, it would predispose early schemes to proximity with new CO2 gathering networks and facilities. And of course CCS would have had its own “industrial strategy” questions as to whether the UK would be a leader or a follower and an importer or exporter of the technology.

Energy Sector Choices for Decarbonisation

Embarking on a major investment in a new heat network requires, therefore, a clear view of what are the options for sourcing the primary energy input to the scheme. This in turn needs to be consistent with an overall approach to decarbonisation. Industrial strategy enters the equation as soon as we start thinking about management of primary energy sources, most obviously for carbon capture, possibly for “modular nuclear” (an ETI favourite), for hydrogen (if we go down that route), and possibly for heat storage technologies. Those are all areas where industrial strategy might determine whether we lead or follow, and end up as exporters or importers.

Institutional Factors

Operation of heat networks is correctly seen by IPPR as a function that belongs to a substantial degree with local authorities, and this in turn raises some important questions about the ability of local authorities to finance very substantial capital investments, and also about the subsequent regulation of the sector and the protection of consumers who may have had limited choice over their participation. These are discussed in more depth on the Decarbonising Heat page, but future issues include:

·         possible wide divergence between costs and prices in different towns and cities, reflecting geographical advantages (eg density), access to different low carbon technologies, divergences between earlier and later schemes, and so on.

·         a high proportion of fixed costs, where there is no obviously “correct” or unique methodology for charging; inter alia this allows significant price discrimination eg in favour of social housing.

These and other questions indicate the desirability of confronting these potential issues at an early stage in order to establish some principles for the future funding in construction and operation of large scale urban heat network schemes.
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Taken together these issues make a strong case for an expanding role for the existing Heat Networks Development Unit, possibly as a new National Heat Authority, a body with a much greater ability to interact with the other major players in UK decarbonisation, including the energy companies, National Grid, and the Committee on Climate Change.

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[1] See the separate page – DECARBONISING HEAT , a 2016 posting Policies for Decarbonising Heat., and an earlier blog Difficult Questions for Combined Heat and Power.

POLICIES FOR DECARBONISING HEAT

A round table discussion last week on decarbonisation of the heat sector was a reminder of just how large and complex a question the future of UK domestic heating is set to become. A paradox of the sector is combination of major technology choices at one end of the chain, with all the potential concerns of parish pump politics (not intended as a disparaging term) at the other. Sourcing the heat in the first place has multiple competing options and poses huge strategic decisions across the power and gas industries; these include modular nuclear, heat and other storage technologies and linkages to carbon capture. But there are also distribution issues including the demand heat pumps can place on local power networks. And downstream distribution of heat in district heating schemes is dominated mainly by the relatively low tech problems of digging up streets, laying pipes, retrofitting homes, persuading or compelling householders, and a myriad of particular local issues and considerations which historically at least are associated firmly with local authorities and their skills and expertise. Our round table focused on the latter and on district heating in particular.

The Big Picture

Most scenarios for a low carbon future, and, post Paris, especially a zero carbon future, expect domestic heat needs to be met predominantly from innovations such as heat pumps installed for individual households, or through communal systems involving the sourcing of heat from combined heat power production, involving various thermal generation technologies. These include modular nuclear and fossil plant with carbon capture, combustion of waste products, and some geothermal and other sources. A fuller discussion of the heat sector from this perspective is given on the [DECARBONISING HEAT] page (button at the top of this page).

The future of heat delivery, in terms of these “big picture” options,  is very obviously bound up with the future of the power sector, but it also has a local scale at which the major transformation has to be implemented, potentially affecting every household in the country. Key points that emerged both from what was discussed at the round table, and what was not discussed, were several.

Immense scale of what is involved, compared to UK experience to date.

DECC evidence suggests there are at present some 1750 district heating networks in the UK, with two thirds of these classified as small (less than 100 households), with an average of 35 households per scheme. There are only some 75 “large” networks with more than 500 households, and the total number of households connected to a network is around 220,000, or less than 1% of all households. So the UK does have some experience in developing and maintaining these networks, but the scale is tiny compared to our expectations for the future.  Even defining “large” as 500 households is revealing in this context. In Denmark the CTR scheme for central Copenhagen serves 275,000 households.

To put this in perspective there are some 27 million households in the UK, so the full decarbonisation of the heat sector by 2050 is likely to require installation or retrofitting  of low carbon solutions (heat network or individual property solution) to around 20,000 households a week over about 25 years, assuming a starting at some point in the 2020s.  In other words this implies an entirely different scale of operation from anything of which the UK has any past experience.

A future district heating industry will develop a very different culture.

The dominant culture in the management of heat networks reflects (mainly) a history of post World War II local authority reconstruction schemes, together with some opportunistic exploitation of specific sources of waste heat from power station or other industrial schemes. The positive benefits of utilising “waste” heat combine with some of the social objectives associated with local authority schemes, including keeping the costs to householders as low as possible. One of the benefits of “waste” heat is that it has frequently been provided at very low or no cost to the scheme.

The low carbon objectives which will underpin the future of district heating will create some very different economic conditions. The supply of waste heat per se is really very limited, although the future will most likely include purpose built installations built specifically with the dual purpose of providing city-wide heating and power to the national system. But schemes will have to fund significantly higher heat costs, as well as infrastructure, and the cost of heat is likely to be significantly higher than it is for today’s householders who enjoy a gas supply.

The economics of large schemes depend on scale. Getting to a reasonable average cost will depend on achieving near universal penetration in high density urban populations. This will accentuate the problems of collective choice for heating and may introduce elements of compulsion.  

Taken together with the sheer scale of the district heat undertaking, the challenges for traditional management structures and assumptions in the heat sector will be immense.

Cost of capital again a critical issue.

Once again, and as in the power sector, the capital requirement will be very large. I have emphasised on many occasions the fact that infrastructure projects “ought” to be considered as low risk, low cost of capital investments. But this requires careful attention to the structuring of the funding arrangements and may require substantial public sector guarantees and significant local government borrowings, another major cultural shift. This is increasingly accepted but it is a necessary condition for the transformation of the sector at a reasonable and affordable cost.

Roll out in conjunction with energy efficiency

One of the most fundamental obstacles to introducing large scale district heating is the physical disruption to the householder. The same issues promote inertia in introducing household level measures for energy efficiency. Given that energy efficiency is a necessary part of overall heat strategy anyway, in order to bring heat loads down to manageable levels, then coordinating and integrating the rollout of low carbon district heat with energy efficiency measures makes a lot of sense.

Regulation

Finally we can foresee some new and challenging questions for energy regulation, and a considerable political overlay.

First, this is another sector dominated by fixed infrastructure, ie network, costs. There is considerable scope for alternative approaches to how those are recovered from consumers, eg a fixed charge per household or an averaging over all kWh of energy consumption. This will include the question of whether heat metering is feasible and desirable.

Second there will almost certainly be a huge variation in actual costs between different schemes and geographies. This may provoke political demands to “even” out the costs to householders, avoiding the “postcode lottery”.

Third, initial concentration on high density urban housing will ensure that social policy issues come rapidly to the fore. Will this lead to new approaches to fuel poverty questions?

DIFFICULT QUESTIONS FOR COMBINED HEAT AND POWER

HOW BIG A ROLE FOR CHP IN A LOW CARBON FUTURE?

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?

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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.