Gas CHP – Fully Funded ApproachEverything you ever wanted to know about Gas CHP
Gas CHP Solutions or Combined Heat and Power (Gas CHP) is a very efficient method of generating heat and electricity from a single process and single gas fuel source. The process has lower carbon emissions when compared to the more traditional forms of generation and also provides lower energy costs than traditional grid reliance.
With every major business looking for new ways to reduce carbon emissions and improve the company’s bottom line, Gas CHP generation is extremely underutilised and undervalued in the UK when compared to Europe.
That is why we think that funding renewable energy projects is a long term commercially viable option, but we see 3 barriers why more companies don’t embrace the major benefits of CHP solutions.
The Three Barriers to CHP GasWhat makes a Gas CHP project viable
The first is really straight forward, where a site has a limited annual energy consumption profile or only operates for limited amount of time. The most viable sites with the best return on an investment, requires a site to have a constant requirement of both heat and power to optimise the load requirements and we require sites with a minimum annual usage of:
8 GWh + for both power and gas per annum.
> The second is the need for a thermal heat load, Gas CHP systems produce a lot of excess heat as part of the operating process and for the business case to stack up we need to find a need for that thermal heat source. This is an easy one in winter months as the heat can be used for heating the buildings but not so in the summer. So instead we look at how the heat can be used as part of the production process such as pre-heating at a moderate temperature range of between 100–180 °C or even converting the heat load through an absorption refrigerator for cooling purposes. It is possible to do both, and this process is called trigeneration or combined cooling, heat and power or (CCHP) for short. CCHP is the combined generation of electricity and heating and cooling from the same gas CHP engine.
> If your business process qualifies for the first two requirements often the biggest barrier to entry is then the initial capital cost. CHP systems are a major piece of engineering and as such series consideration needs to be taken as to the best way to fund a solution. Both the hardware and installation costs can be considerate. But the potential savings that can be achieved are easy to calculate and return on investment models are readily available. Some organisations prefer to look at an asset purchase or asset finance, but most now favoring the significant additional benefits of a corporate power purchase agreement or PPA for short. A PPA isn’t a new concept but one that is now becoming more mainstream and not just reserved for the big players anymore. Put simply a PPA is a long-term contract under which a business agrees to purchase electricity and or heat and cooling directly from a renewable energy generator.
Does my business qualify for a fully funded CHP system?
If your business can satisfy the first two requirements, then we would look to move to an initial evaluation phase. During the evaluation phase we look to gather your consumption data and operations process along with a fact find to help us qualify the long-term commercial viability of on-site generation.
This process helps determine the best approach to your needs and establish if CHP is the right solution for your business or if other technologies would be better suited to your requirements.
Following this initial consultation phase and working with our range of technology partners we would share this initial phase report with an CHP analyst who would start to evaluate the type and size of engine that would be appropriate for the sites profile and operational requirements.
Benefits for your business
A gas CHP solution is a great way to reduce energy costs, and improve resilience and carbon credentials.
On-site generation with a gas CHP unit can reduce energy costs by up to 40%.
Our solutions are fully funded through the use of a corporate PPA.
Gain budget stability through predictable electricity costs.
Fully Funded Solution Gas CHP
We provide a fully funded Gas CHP solution, where our technology partners evaluate, size and scope an appropriate sized solution to your requirements. Using the information gathered in the initial evaluation phase allows us to build an options appraisal.
We then present this proposal which would outline the appropriate solution and details on the corporate PPA.
This approach means that the funder will purchase, install and maintain the gas CHP system under a power purchase agreement which is a contractual agreement between you the energy buyer and the energy seller to purchase an agreed amount of power, heat or cooling generated by a renewable asset through the use of a PPA.
These types of agreements are usually between 10-20 years to cover the capital purchase of the equipment.
You the buyer can then purchase energy below grid cost with the reassurance that you have a fully maintained system.
This approach generally provides access to first class systems as the investor wants to minimise any potential maintenance requirements and optimise the usage for the best return on their original investment.
This helps frees up any working capital and ensures that you always have an optimised approach to onsite generation.
The Energy Price Gap
The continued widening price gap between wholesale gas and electricity is increasing the economic viability of gas CHP solutions.
When it comes to energy costs for years the main focus has been on energy procurement and how various flexible strategies can enhance the buying process for major energy intensive users.
Although the opportunities to make multiple purchasing decisions through a flexible arrangement still exist and are still a smarter way to purchase energy for industrial and commercial users.
The real energy price shock is in the non-commodity charges, with more risk and challenges ahead given the long-term effects of Covid-19 on the energy market infrastructure. Despite recent double-digit year on year increases, we are likely to see further significant impacts in this area to support the growing transition to a net zero nation.
Once an energy purchasing strategy is defined and in place organisations then start to look at how they can reduce energy consumption and or energy costs.
Most will start with a site energy audit to identify opportunities to reduce consumption or improve energy efficiency. With the increase in site energy surveys over the last few years driven by regulatory compliance such as ESOS or SECR more organisations than ever are aware of the opportunities that exist to reduce energy spend.
Most surveys will identify a list of measures and rank these in either the order of cost to implement or the return on investment or even the impact on carbon reduction. It doesn’t really matter in which order these are listed; it’s taken action that counts.
Onsite Energy Survey the Bad News
But the trouble with these types of surveys is they normally only take into account areas to either measure more data points for better housekeeping or how no cost, low cost, or investment level solutions can either replace or enhance how equipment, plant or buildings consume energy. This is of course great if you haven’t already tackled your top ten list of energy saving measures.
Rarely do these types of surveys explore the options for on-site generation such as solar PV, wind generation or indeed gas combined heat and power generation as such their remains a huge opportunity for businesses to harness the benefit from a CHP plant.
So there are huge opportunity’s for a fully funded gas CHP system still for a lot of company’s.
Who can benefit?
> Food and Drinks
> Data Centres
But Gas CHP isn’t renewable is it?
Although gas has a lower carbon footprint compared to electricity, a gas CHP system isn’t a renewable technology but it can be a low carbon one, and one that can help bridge the gap towards 100% net zero.
However a number of providers are now providing green gas but this is currently at a high premium when compared to normal gas. The alternative is to purchase carbon offsets where the carbon is offset normally by paying an organisation to plant new trees which offset the carbon used.
A number of established suppliers now provide a range of carbon offsetting services and this helps further with the viability of onsite gas powered generation. Thus turning a low carbon technology into a no carbon technology.
The biggest driver for change is still focused on the savings that can be achieved through the use of CHP though. With the ability to cut energy bill by up to 40% is a very attractive solution for those businesses looking to reduce energy costs.
A PPA approach also frees up funds that can then be re-purposed towards other energy efficiency solutions and can help to bridge the gap towards net zero.
Hydrogen Fuel Blend CHP
For those organisations that don’t want to do carbon off-setting and prefer a zero emissions approach then our systems can be configured to use a blended hydrogen fueled CHP system. Or can be future proofed when hydrogen become more readily available.
Gas contracts and take or pay clauses
Major consideration needs to be given to any existing or pending gas contract. As most major gas contracts will contain a take or pay clause by which a business commits to a certain annual volume of gas per annum. If a site under or over consumes then a supplier reserve the right to charge the difference. As gas CHP solutions use mains gas as the main fuel source then the annual consumption required has to be accurate.
As part of our solution Catalyst can also provide a commercial no take or pay contract option on a gas contract. This means that you only pay for the gas that’s actually consumed and no financial penalties for under or over consuming. This includes both fixed and flexible energy contract options so we are able to provide an option for any risk type.
This energy price certainty also increases the viability of a project as you don’t need to worry about the price fluctuation during the critical setup stages of a new installation.
Asset Purchase - Existing Gas CHP Systems
You may also have an existing gas CHP solution on site that you would like to release some cash back into the business to fund other projects.
With our assets purchase solution if you have a generation asset such as a large scale CHP (i.e. >500kW) or a large scale solar installation (i.e >500kW) that’s of a reasonable age (i.e. less than 5 years old for a CHP and less than 10 years old for solar), we can put an offer on the table to purchase the asset with a view to sell the power back at an agreed rate via a PPA agreement.
You will receive a cash injection back into the business by selling the asset, but will still benefit from the asset, by getting low cost energy from the asset via the PPA agreement.
Recent Gas CHP ProjectData Centre
> Proposed system – 1.5MW Tri-generation scheme
> Heat use – Cooling/chilled water and LTHW
> PPA contract term – 8year
> Annual savings(budget) – £300k – £350k per annum
Recent Gas CHP ProjectManufacturing Site
> Proposed system – 2MW
> Heat use – Steam and Low temperature hot water
> PPA contract term – 8years
> Annual savings (budget) – £400 – £450k per annum
Smaller Consumption SitesSites with an annual power consumption of >3GW per annum can potentially realise savings of 30% year-on-year. With our behind the meter generation and combined storage solution and no demand for heat necessary.
Avoiding non-commodity costs allows our customers to make large savings, while simultaneously improving supply resiliency and supporting the decentralisation of the national grid.
If your site has a high heating demand, a generator can be supplied with a heat exchanger, creating a CHP system whereby any heat benefit obtained is completely free. Further benefits may be available via Demand Side Response and power export opportunities.
Installed through our Dynamic Power Purchase Agreement, our behind the meter gas CHP products are completely cost-free.
A full design and installation service is included in the price of the PPA, together with a market-leading O&M service for the life of the contract. 24-hour call out nationwide plus remote diagnostics and monitoring software provide peace of mind, and we assume the operational risk for the asset: if the genset is not producing power, then the customer does not pay.
Combined Battery Energy Storage Systems
Sites with steep spikes in demand throughout the day can benefit from hybrid generation and storage solutions. Through our exclusive distribution contact with a leading international battery manufacturer, we can supply sites with Battery Energy Storage Systems sized from 250kW upwards.
Used in conjunction with gas generators or as standalone solutions our battery energy storage systems can reduce costs by shifting site power consumption away from expensive peak periods. Batteries can also provide supply resilience and revenue via export to grid balancing services.
As you can see Gas CHP systems have a place to play in the road map towards net zero carbon requirements, and can help reduce the significant cost of grid supply.
What is a Gas CHP engine?
A Gas CHP engine or combined heat and power (CHP) is the use of a heat engine or power station to generate electricity and useful heat at the same time.
Is Gas CHP renewable?
Gas CHP is often called a green energy technology but it isn’t necessarily generated from a renewable source of power.