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Understanding CHP capital and maintenance costs

Everything you need to know about capital and maintenance costs for CHP.

Obtain the true value of CHP over its lifetime, by including an analysis of capital and maintenance costs, together with financial and environmental benefits.

What are the costs of a CHP system?

The upfront capital costs consist of:

  • System equipment costs, including the CHP unit and the ancillary plant.
  • Site works costs, including CHP delivery, installation, commissioning, and site heating system modifications.

Are there economies of scale?

The installed cost per kW of CHP electrical output decreases as the size of the system increases, but the size of the system must take account of the heat and electrical demand of the site. Ensure that site demand data is accurate for correct CHP sizing, helping you to make the right system selection later on. Efficiently running CHP, sized correctly, will operate at maximum output and help you to achieve maximum savings. 

Which CHP type is best for you? 

There are two CHP unit types:

  • Packaged – a gas-engine-driven alternator comes complete with integral heat recovery systems within a self-contained enclosure.
  • Bespoke – gas-engine/alternator and heat recovery equipment are supplied ‘loose’ for on-site system design,installation and integration.

Each site is different. There may be space or noise restrictions, the unit will need to be selected to suit the specific location. The advantage of packaged units is the ‘plug and play’ concept of delivering and connecting the equipment. Bespoke units must be built on site and though they may take longer to design and install, they can fit your requirements exactly. 

What life cycle maintenance costs do you need to consider? 

Maintenance costs also have an economy of scale with the costs per kWe generated generally being lower as CHP capacity increases.

The lifetime of CHP is 15+ years. To ensure high operational efficiency, you will need to carry out periodic inspections and routine services. Carrying out lifecycle maintenance activities will help you to maximise ROI. This means: 

  • Regular, scheduled downtime when the CHP is not generating.
  • Short periods to check the engine and change the oil.
  • Longer periods when ‘top-end’ and complete engine overhauls are required.

Condition and performance monitoring of CHP is essential, preferably done remotely. This gives you the opportunity to diagnose and respond to any issues before they become a major problem. This includes warning of conditions that could cause engine failure and associated unscheduled downtime.

How can you achieve best cost maintenance?

Plan for maintenance from the very outset of your CHP project. A regular and preventative approach to system performance can save a lot of expense further down the load. It will also help you to generate greater ROI. 

Connect with reputable CHP suppliers who offer fully comprehensive maintenance services, covering all levels of repairs and routine servicing. A remote monitoring service is also likely to be built into the cost. They will take ownership of CHP maintenance, so you can focus on your own business objectives. 

A CHP system operating at the high efficiency will provide the main benefit of an annual operating cost saving.

CHP annual operating cost saving = (total conventional op. costs – total CHP op. costs)


  • Total conventional operational costs = grid electricity costs + boiler fuel costs
  • Total CHP operational costs = CHP fuel costs + maintenance costs.

CHP with good heat utilisation can qualify as ‘Good Quality CHP’, which brings the following financial benefits:

  • Eligibility for Enhanced Capital Allowances (ECAs) – the full capital cost of the CHP investment can be written off against taxable profits in the investment year.
  • Exemption from Climate Change Levy (CCL) – an environmental tax on fuel supplies and electricity use.

How do the costs and benefits weigh up? 

Assess if CHP meets your financial expectations by comparing the CHP system  capital cost with the benefit of it’s net annual operational cost savings. This will provide an indication of a project’s payback, typically between 2-5 years.

Consider environmental factors and compliance. CO2 savings, improved corporate social responsibility, reliability, and security of energy supplies all need to be factored into the final decision-making.

What finance options are available?

Fixed-cost capital purchase is often seen as the main option for energy savings projects. There are a number of finance options that can help avoid capital and operational costs, allowing customers to spend capital elsewhere in the business. These include: 

  • Discount Energy Purchase: no capital and maintenance costs or risk to the customer, who pays for CHP generated power at a discounted rate, with the heat supplied free.
  • Energy Services Agreements: energy saving measures, including CHP, are used to guarantee annual energy savings, enabling the capital costs to be repaid on a pay-as-you-save basis.
  • Public Private Partnerships : authorised public sector bodies self-fund the project from energy savings.


CHP maintenance packages are designed to provide peace of mind. Operating CHP without maintenance cover could leave the plant non-operational for weeks. This will minimise the efficiency and benefits of CHP and will certainly negate ROI. Maintenance needs to be planned to control and minimise costs over the CHP lifetime. 

Key takeaways

  • The objectives of using energy saving CHP need to be identified and agreed.
  • CHP system equipment and installation costs, lifecycle maintenance costs, and expected annual operating cost savings need to be established.
  • Weigh up the costs and benefits to ensure this provides the ROI you require.
  • Consider the best finance options for the business.

Power you CHP maintenance from the beginning of your project.