Micro CHP: Powering a Heated Discussion about our Energy Future

Leading companies in the micro combined heat and power (micro CHP) sector in the UK have today set out a bold strategic vision for the role of micro CHP as a key component of an emerging smarter energy environment in a report produced by Ecuity Consulting LLP. The report sets out how this emerging family of technologies could revolutionise home heating and suggestions for a support framework to allow consumers who let their heating system also power their house be rewarded for the full value they bring to the energy system.

The electricity generated by micro CHP, in tandem with the smart grid and energy storage innovations, could also help the grid to cope with capacity constraints and short-term spikes in demand. Alongside power generation benefits, micro CHP is also the most cost-effective gas fuelled individual home heating solution that generates on-going benefits of up to 4.3 pence per kWh of heat delivered in comparison to incumbent technologies.

Solid support is necessary to bring this novel solution to mass market. A visionary policy framework in Japan has led to rapid market gains and a 25% unit price reduction between 2010 and 2012. Similar cost reductions should be expected in the UK if an equally visionary policy were followed.

Modelling carried out for the purposes of this report shows that all commercially available micro CHP products in the UK would generate a net benefit for the UK economy beyond the initial 50,000 units as a result of scale and learning. Therefore support for micro CHP now makes economic sense.

This group of companies aims to use this joint report as a framework for constructive collaboration with a wide range of policy and industry stakeholders in the UK based on the objectives below that are also backed by key micro CHP industry bodies

1. Provide an initial boost
Backing for flagship distributed generation projects, such as virtual power plant applications, would drive rapid cost reductions and serve as a means of demonstrating the capacity of micro CHP to support security of supply and alleviate the need for local network reinforcement due to load growth. Such projects could be financed by the Green Investment Bank and supported by the Low Carbon Networks Fund,

2. Reflect the benefits of micro CHP to the wider energy system
Aggregated and controllable micro CHP applications fulfil the main objectives of the capacity market, designed under the Electricity Market Reform, and therefore should be eligible for this mechanism. The industry would also encourage a review of the current export tariff design to seek ways to reflect the real value of exported electricity by micro CHP as a result of its capability to generate power at the point of use and typically at times of peak demand.

3. Enhance consumer incentive
An increase in the feed-in tariff for micro CHP to at least 17p/kWh, as the industry has jointly argued since 2010 (FIT RPI adjusted), would generate improved consumer incentive, bringing it closer to other supported low carbon heating technologies. This would start to enable the considerable potential of micro CHP to contribute to low-carbon economy objectives to begin to be realized and start to drive scale and rapid cost reductions.

Ian Manders, Deputy Director & Head of Development of the Combined Heat and Power Association commented:

“Micro CHP should be able to reach the parts other low-carbon and renewable energy products cannot reach. As a direct replacement for the domestic gas boiler it is a convenient technology to install. However, this means it is competing with the gas boiler in a market dominated by price. If the UK want this technology and all the benefits it brings, it must provide enough support to lower costs enough in the short term until economies of scale kick in”.

Chris Yates, Deputy Director of the Heating and Hotwater Industry Council commented:

“Micro CHP can play a significant role in utilising the UK’s well developed gas network to offset the peak load requirements of the electricity grid. Heat and power demands of a dwelling follow very similar patterns enabling the micro CHP unit to deliver significant benefits in terms of offsetting peak load on the electricity networks.”

Emma Piercy, Head of Policy of the Micropower Council commented:

“The role of micro CHP alongside other domestic generation technologies in reducing customers’ bills, whilst also addressing policy objectives of security of supply and carbon reduction, will rise substantially if an effective policy framework is put in place. The ability of micro CHP and other technologies to participate in demand side response as part of the proposed capacity market under EMR is essential.“

The report is available online at:
http://www.ecuity.com/wp-content/uploads/2013/03/The-role-of-micro-CHP-in-a-smart-energy-world.pdf

A dedicated webpage to provide consistently updated information on micro CHP technologies and micro CHP market developments can be accessed at:
http://www.ecuity.com/microchp

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