Making CHP Accessibleby Paul Hamblyn, Managing Director, EuroSite Power

While most public sector energy managersunderstand the benefits that CHP systemscan provide, the capital costs cantraditionally prove prohibitive when itcomes to getting a decision from seniormanagement to adopt the technology.

Energy managers can be hard pushed topersuade cash-strapped senior managers tomake large capital investments now, evenwith the promise of long term savings in thefuture. However, with some smart financialand technical thinking by CHP providers,public sector organisations can harness thebenefits of CHP in a way that makes sensenot only to energy managers but to budgetcontrollers too.

An on-site utility works for many buildings that require a constant supply of hot water such as leisure centres orhospitals, particularly those with a relatively modest but stable base load. A CHP system or gas-engine chillerinstalled inside the building can be used to meet its base power, heating or cooling requirements, with thevariable additional demand being met by the building’s regular energy providers or existing plant. By havingthe base load supplied at a lower and more visible price, costs become easier to manage and operators caneffectively hedge the risk of future energy price rises.

CHP can also be used as a stand-by provider during a power outage with a wave form that is compatible with alltypes of everyday appliances, including advanced IT systems. An appropriate system should be able to actentirely independently of the building’s main utility, with low fault current contribution and no reactive powerdraw. The system should also be microgrid compatible and be able to be used alongside other equipment withDC outputs such as solar panels or wind turbines.

To get the full benefits, it is essential that the CHP system specified delivers a stable and predictable supply ofboth electricity and heat. By refocusing on heat, a properly applied system can provide greater certainty aboutthe savings generated.

Such matters are bread and butter to energy managers, but can be difficult to explain at senior managementlevel, where the focus is so often on upfront cost and returns projected in simple terms. And even where thecost can be spread over the life of the contract, for instance through lease financing, risks such as variable gasprices, maintenance, shut downs and inefficiency, can mean there is a danger the CHP system becomes aburden to the customer, who may not have the technical expertise to ensure the correct return on investment.

The solution for overcoming these potential negatives is for CHP providers to “put their money where theirmouth is.” Instead of charging customers for installation of the equipment, CHP providers can achieve greatermarket penetration and overall adoption of the technology in the public sector by providing solutions thatdeliver the savings promised from day one, in a way that is as easy to understand as possible.

Under a long term agreement, the CHP provider installs and maintains the CHP system without charge to thecustomer. Covering the capital costs, and taking responsibility for all testing, maintenance and repair, the CHPprovider buys the gas used by the system. It then sells the electricity and heating produced on-site to the

customer, at a price that provides the immediate energy bill savings promised by the CHP system. That meansthe CHP provider takes the price risk away from the customer with a typical energy bill saving of 10% which isfixed for the contract life – usually 15 years.

The logic of this methodology has proved extremely popular in the US for on-site utility providers like AmericanDG Energy, which was the first to launch the idea, and has already been adopted by some big names in the UK,including major hotel and leisure centre chains.

As well as a number of council-run leisure centre, pioneers of this system in the UK public sector include CliftonHospital near Blackpool, Lancashire. With up to 200 hospitals in the UK appropriate for this type of scheme,the benefits are there to be harnessed, providing unprecedented cost efficiencies and green benefits, and asolid, sustainable way to promote CHP adoption across the public sector.