Pros and cons of selling surplus electricity from cogeneration to the grid
Thinking about exporting your surplus energy? Here’s everything you need to consider.
Combined heat and power (CHP), or cogeneration, is a low-carbon source of electricity and heat. Any electricity that’s not required for use on-site can be exported to the grid. We answer your questions about selling surplus energy back to the grid. We also examine the benefits and what needs to be considered before making the decision to export.
What are the benefits of CHP?
Centralised electricity generation is inefficient. Waste heat is released to the atmosphere and energy is lost by distributing power over long distances. CHP generates electricity locally, and the waste heat is captured to provide heating. This is much more efficient than conventional centralised generation and dedicated heating systems, so CHP can cut site energy costs, one of the benefits of a distributed energy system.
CHP works best when meeting a constant demand, and owing to fluctuations in electricity consumption through the day, systems are usually sized to meet the base level heating needs of the site. When electricity demand is low, rather than letting this surplus energy go to waste, it can be exported to the rid to open up an additional revenue stream.
How do you sell electricity back to the National Grid?
The prerequisites are:
- A suitable connection to the National Grid.
- An export meter.
- Permission from the local Distribution Network Operator.
- An agreement with the utility company that buys the surplus.
CHP systems that have been sized to meet a large base-level heat demand can produce more electricity than the site requires. If this excess supply is substantial and predictable, an agreement can be reached with a utility company that will purchase the excess.
Are there other benefits?
As well as any revenue received from selling electricity, the low-carbon nature of CHP means that it can attract government support as part of national efforts to reduce carbon emissions. Good quality CHP systems may qualify for benefits, including Climate Change Levy (CCL) exemptions, and Enhanced Capital Allowances (ECA).
Of course, these schemes involve additional paperwork and will add to the accounting workload. Renewable CHP also requires a reliable fuel source that is either produced or stored on site. While these factors will add to costs, the benefits for many CHP operators significantly outweigh the overheads.
Are there any risks?
The impact of changes to energy prices needs some analysis when considering the sale of surplus power to a utility company. Prices paid for exports are lower than grid supply prices. If the input fuel price rises dramatically, it is possible that exporting electricity could incur a loss.
The impact of the withdrawal of government incentives at some future point should also be considered. For marginal cases, loss of these benefits could undermine the economic argument for installing CHP, but high efficiency cogeneration systems should be viable.
It is possible that the surplus electricity available is insufficient to justify the expense and effort required to arrange for exporting. It is also possible that site power demand may increase in the future, therefore consuming any surplus electricity and making the export connection obsolete. Costs may be incurred for supporting infrastructure, such as additional equipment and for the maintenance of export hardware. These factors should be carefully considered in relation to the site demand profile and any planned growth before committing.
Installing the equipment required for exporting electricity can cause disruption, but with detailed planning, the impact can be minimised. Any short term disruption should be weighed against the longer-term benefits.
- CHP is an efficient, low-carbon technology that can reduce energy costs.
- Surplus electricity can be exported, creating an additional revenue stream.
- Installation will involve some disruption, but the benefits can be significant.
- The impact of future growth should be considered.
- Risks must be evaluated when determining economic viability.
- CHP can qualify for government low-carbon incentives.