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3 ways CHPs make financial sense for the manufacturing industry

With costs rising across the board, learn how CHPs could make good financial sense for manufacturers.

Manufacturers are seeing costs increase across the board – from raw materials, to labour, fuel, shipping, energy, and more. Unsurprisingly, this widespread volatility is impacting on the competitiveness of the sector.

So much so, that recent research by Make UK and BDO found that the growth of output and orders in the UK’s manufacturing sector has continued to slow, and there are signs that rising prices are now starting to put off international customers from British goods. It’s critical that you find ways to get these rising costs under control, to keep your business in track.

When it comes to energy, manufacturers that need multiple heat sources have the greatest demand and are likely to be feeling the impact of rising energy costs the most. If you’re the energy manager at one of these companies, Combined Heat and Power (CHP) could make a lot of financial sense for your organisation right now. It could help you in three ways:

1.     CHPs can help you to save money

CHPs are almost twice as efficient as traditional generation, as it captures the heat that’s created when electricity is generated – providing you with on-site heat and power simultaneously. This helps to cut your energy consumption and means that some sites can achieve cost savings of as much as 40%. What’s more, as energy prices increase, your CHP could potentially pay for itself in as little as 1-2 years.

2.     You don’t need to make an upfront investment

Faced with so many financial strains, making an investment in onsite energy generation technology may feel like the last of your priorities right now. The good news is that there are a range of funding options available to you which don’t require any capital investment. These include:  

  • Discount Energy Purchase (DEP) - We fund, supply, install, operate and maintain the CHP – and you pay a fixed unit rate (with indexation) for the electricity generated across the lifetime of the asset. And you can use the heat that’s generated by the CHP free of charge.
  • Energy Services Agreement (ESA) - An ESA is a ‘pay for performance’ solution. With this option, you can implement a CHP without any capital outlay – and receive guaranteed performance levels in return for a fixed rate of payment, spread across the lifetime of the contract.
  • Optional Ownership Agreement (OOA) - This option delivers immediate energy savings with the option of moving OPEX spend to CAPEX. The CHP is delivered through our DEP financing structure, but you have the flexibility to invest more into the project. The more money you invest, the lower your DEP (p/kWh) fixed rate. Post year one you can reassess your investment, and increase if you want, further reducing OPEX spend.

3.     It can help you to get budget stability

With everything going up in price, it’s never been more important to be able to accurately forecast your future costs. If you invest in a funded CHP through one of the options outlined, you’ll know exactly how much you’re going to need to spend on energy over the next 10+ years. You’ll benefit from predictable electricity costs, and accurate forecasting of operating expenses. This will be valuable insight that can make a real difference in your business planning processes. What’s more, our expert Operations and Maintenance team will be there to support you every step of the way, making sure that your CHP is performing at optimal levels and that you’re getting maximum value for money.

Not convinced? See it to believe it

As one of the UK’s leading CHP suppliers and operators, we’ve been helping manufacturers to unlock the power of CHP for 35+ years.

Take automotive manufacturer Magna PT as an example. They produce 3,000 transmission systems per day, requiring up to 60 GWh of electricity per year. Their operations also require significant amounts of heat for cementation processes, as well as cooling to help lower the temperature of their machinery.

We implemented a 4 MW CHP solution at their manufacturing plant, which covers more than 50% of their energy requirements. It’s helped them to reduce their energy costs, and has saved then more than 14,000 tons of CO2. Their HSE Manager Franco Modeo said the reason they chose to partner with us was because “We really valued the combination of high-quality managerial and engineering expertise that Centrica Business Solutions provided. We are also extremely satisfied with their open and professional approach: the relationships have always been transparent and are geared towards complete openness.”

While costs may be your primary focus at the moment, we know that you’ll also have important net zero goals to achieve, too. As well as guiding you through how you can make CHP work from a financial perspective, we can also help you to understand how it can support your decarbonisation goals, too. For example, looking at how it can be partnered with other technologies like solar PV or heat pumps to form a tribrid energy generation system. Since our CHPs are hydrogen-ready across a large range of engines, our solutions will mean you’ll be ready to go with the network changes too.

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