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Thought CHP payback periods of 1-2 years were fiction? Think again.

Aaron Parker, Head of CHP Sales, explores how increasing energy prices can improve Combined Heat and Power business cases.

With ongoing price volatility in the energy market, businesses are looking for ways to reduce their energy costs, get maximum value for money from their energy infrastructure and gain better cost predictability for the future.

Combined Heat and Power (CHP) is one potential solution. It’s a highly efficient solution that captures the heat created through the electricity generation process, producing on-site heat and power simultaneously. And, as energy prices increase, the payback period for your CHP installation would reduce significantly. So much so, that your CHP could potentially payback in less than 1 year – good news in today’s volatile environment.

How do different energy rates affect CHP payback periods?

Graph showing CHP payback periods

These payback periods have been calculated based on the assumption that there is 80% heat use, 100% electricity use, and that the CHP is operational for 8,000 hours per year.

With electricity rates at 12p/kWh and gas rates at 2.5pkWh, the maximum payback period you could expect would be just over 1 year and 9 months. For a smaller scale units, the payback period could be even lower, at around 1 year and 8 months.

If energy prices increase, these payback periods drop. With electricity rates at 40p/kWh and gas rates at 10p/kWh, the maximum payback period that you could expect for your CHP installation would be just over 7 months. For small-scale units, it could drop to as little as 6 months and 2 weeks.

Not only is the payback period for CHP very desirable, but it can also help you to unlock a range of other benefits. It can help you to:

  • Reduce grid reliance - CHPs can lower your exposure to volatile grid energy prices and reduce reliance on grid energy by generating your own electricity onsite.
  • Gain budget stability – With all our CHP solutions, you can be assured of maximum return on investment and will be able to accurately forecast your energy spend through predictable electricity costs and accurate forecasting of operating expenses.
  • Improve energy efficiency - CHP plants reach efficiency ratings in excess of 80%. CHP engines are almost twice as efficient as traditional generation, helping to cut energy consumption and further improve efficiency.
  • Cut costs – It’s possible for sites to achieve cost savings of up to 40%.

Think the capital costs of CHP are too high? Think again.

Investment in any quality energy infrastructure doesn't come cheap. But when you consider that the lifespan of a CHP system is 10-15 years, it can deliver impressive financial returns.

For those organisations with capital constraints or competing funding priorities, a range of flexible and transparent financing options are available, which remove the need for capital investment. These can finance the capital cost of the unit itself, and the ongoing maintenance costs.

A range of different options are available:

  • Discount Energy Contract (DEP) – A DEP is a fully funded, flexible form of financing – making it a route to the benefits of CHP operation, without the need to invest capital. We fund, supply, install, operate and maintain the equipment ourselves – and you pay a fixed unit rate (with indexation) for the electricity generated across the lifetime of the asset. At the same time, the heat generated by the CHP is provided without charge.
  • Energy Services Agreement (ESA) - An ESA is a ‘pay for performance’ solution. With this option, you can implement an energy efficiency project 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) - Our OOA option delivers immediate energy savings with the option of moving OPEX spend to CAPEX. Energy solutions are 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 prefer, further reducing OPEX spend.

It’s a win-win for businesses, providing the upfront investment to accelerate delivery of onsite cogeneration projects and unlock immediate benefits.

Interested in learning more about our CHP solutions? Click the link below to find out more, or contact our team.

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