Costs and funding for combined heat and power

Cost of CHP

Costs and payback vary significantly, with major influences including the site requirements, technology, fuel and level of demand for the heat produced. Ballpark figures are provided in the table below.

Scale Technology Installed Costs Simple Payback Lifetime cost of carbon
saved per tonne of CO2
Micro and mini Stirling engine system up to approximately
£11,000 per kWe
3 to 4 years £40 to £60
Building level internal combustion engine/
micro-turbine
£750 per kWe/
£1000 per kWe
4 to 5 years £80 to £250
Large scale CHP/
District heating network
£750 per kWe/
£700 to £1,000 per meter
more than 5 years £190 to £250


Please note that simple payback for micro and mini CHP is calculated using the price differential when compared with the installation of a domestic boiler.

Funding schemes

There is no direct funding or grants available for CHP. There are, however, a number of Government funded incentives to help recoup the capital and running costs, these include:

  • exemption from the Climate Change Levy for all Good Quality CHP fuel inputs and electricity outputs
  • eligibility for Enhanced Capital Allowances (ECAs) for Good Quality CHP plant and machinery
  • business rates exemptions for certain Good Quality CHP schemes
  • enhanced eligibility for Renewables Obligation Certificates (ROCs) for renewable CHP schemes
  • eligibility for ROCs for the biomass element of fuel used in biomass or energy from waste CHP plants
  • reduced VAT on the installation of micro-CHP
  • eligibility for the Renewable Heat Incentive as of June 2011, where a qualifying renewable fuel source is used
  • eligibility for the Feed in Tariff for electricity generated by the first 30,000 gas-fired micro-CHP units installed.

1 May 2012

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