Combined heat and power

This section explains combined heat and power (CHP).

Combined heat and power (CHP), also known as co-generation, refers to the simultaneous generation of usable heat and electricity.  Heat from a CHP plant can also be used to generate cooling by using an absorption chiller unit. CHP that produces heat, electricity and cooling is termed ‘tri-generation.

Why use CHP?

CHP makes sense on sites with a heat demand of over 4,500 hours a year. This equates to an average heat demand of about 17 hours a day for five days a week, throughout the year. In general, the greater the demand, the higher the monetary and carbon savings.

The best time to consider installing CHP is at the design stage for a new installation or building, as it can be fully integrated into the design specification. However, it can also be successfully retrofitted into existing sites, and tends to be more convenient if existing energy plant (such as boilers or electrical supply) needs upgrading.

  • CHP can cut costs by typically 20% compared to the use of grid electricity and on-site boilers
  • It can reduce greenhouse gas emissions cost-effectively because the technology can be applied to existing energy installations
  • There is a short payback on investment of around three to five years
  • CHP technologies are mature and proven - There are 1,438 CHP schemes in operation in the UK. Of these, 328 are in the industrial sectors and 1,110 are in commercial, public administration, residential, transport and agriculture sectors

The following explains the benefits and potential issues to consider before installing combined heat and power:

Benefits and potential impacts of CHP

The biggest benefit of using CHP is the high efficiency of fuel conversion. This efficiency will depend on the system being well located, sized and designed, it is thought that they can achieve overall efficiencies in excess of 70% at the point of use. This compares to a typical figure of 40% for electricity provided via the grid from conventional power stations.  

High fuel conversion efficiency results in:

  • reduced CO2 emissions
  • efficient use of fuel
  • reduced fossil fuel consumption (resulting in lower emissions of nitrogen oxides (NOx) and sulphur dioxide (SO2) which are controlled and regulated emissions).

Other benefits include:

  • Reduced energy costs – building owners using CHP will have reduced demand charge and reduced peak electric energy costs.
  • Lower costs over the lifespan of CHP – even though the initial cost of CHP for buildings is higher than conventional systems, the life-cycle cost of CHP is often lower because of the energy cost savings over its expected life of 15 years.
  • Energy security - the owners of CHP installations have more control over their electricity and heat supply
  • Return on investment – through the energy costs savings, CHP in the right location offers attractive returns on the upfront capital investment
  • Affordable community energy – CHP serving large and suitable areas can provide communities with affordable energy.

Potential issues regarding CHP

  • Correct sizing of the CHP unit, based on an accurate understanding of likely heat and electricity loads, is essential and so requires an in-depth feasibility study
  • Planning permission will be required for the majority of large scale CHP applications.
  • Very high upfront costs.
  • Infrastructure requiring long-term investment with long payback periods.
  • For industrial district heating or CHP, customers are locked into a single long-term supply contract for electricity and heat giving rise to a monopoly.
  • Other impacts are similar to those highlighted in the biomass and district heating factsheets.

Impacts on the environment of using CHP

  • CHP is a low carbon technology but still releases CO2 emissions.
  • The exhaust gases from a CHP plant can cause nuisance within the local environment if the installation is not correctly designed and operated. Adequate pollutant dispersion can be achieved by ensuring that flues are sufficiently high.
  • Some CHP technologies are noisy – internal combustion engines in particular.
  • Operation of CHP does not generate large quantities of liquid effluent. However, some effluents (for example, oils, cleaning fluids or washing effluent) can cause environmental damage if not controlled.
  • Large scale CHP can have landscape and visual impacts given that plants are large structures, particularly the flue

Cost and funding

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 from £750 per kWe for large scales schemes and up to £11,000 per kWe for small systems. Capital costs can be paid back in three to four years for small systems.

Below is more detailed information of costs for different scales and CHP technologies, as well as funding information for CHP:

Costs and funding for 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  three to four years  £40 to £60
Building level  internal combustion engine/micro-turbine £750 per kWe/£1000 per kWel four to five years £80 to £250
Large scale CHP/District heating network £750 per kWe/£700 to £1,000 per meter more than five 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, if you have Good Quality CHP registered with the CHPQA, which 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.

Feed-in tariffs are only available for micro-CHP systems (with a capacity of 2kW or less). The Renewable Heat Incentive has only been proposed for the useful heat of CHP fuelled by renewables (e.g. energy from waste).

Project timescales

The following timescales for CHP types are given from inception to commissioning:

  • Micro and mini CHP - a few weeks
  • Building level CHP - less than six months
  • Industrial (district heating and CHP) - three to five years.

How and where combined heat and power works

Systems are typically installed on-site, supplying customers with heat and power directly at the point of use. Because of this they avoid many of the losses that occur in distributing electricity from large centralised plants

There are various generation technologies and fuel sources for CHP. The main generation technologies include:

  • Internal combustion engine
  • Steam turbine
  • Gas turbine
  • Stirling engine
  • Micro-turbines

CHP can be applied at a range of scales – from micro (domestic boiler level) to large industrial and community scale. The ‘Scales of CHP technologies' page shows examples of the different scales at which CHP can be used. There is also information on the installations, applications and efficiencies of different CHP technologies.

Scales of CHP technologies

Three scales of CHP
Micro CHP

Internal combustion engine micro-CHP unit with hot water storage tank to enable continuous operation.

Development scale
Packaged CHP at Dalston Square in East London. The unit is housed in an insulating Enclosure to minimise noise levels.

Large scale
The visual impacts of large scale CHP can be significantly reduced through good design offering an improvement to traditional power stations.

Technologies, installations and applications

The main generation technologies (internal combustion engine, steam turbine, gas turbine, stirling engine and micro-turbines) are used at different scales. These scales are applicable to different installation types.

Scale: Micro and mini CHP (from 1kWe)



Stirling engines
Internal combustion engine
Organic rankine cycle (not yet commercially available at this scale)
Fuel cell
Micro CHP is a relatively new technology which is still being tried and tested


 Natural gas


 Fuel conversion efficiency of up to 80 per cent


 Replacing gas boilers in individual homes and small buildings and generating some or all of the electricity needs.


 Micro-CHP systems are designed and supplied as complete units. They contain the engine, generator and heat recovery equipment, together with all the associated pipework, valves and controls. In some cases, thermal store is supplied along with the unit. Although systems are commercially available, CHP technology at this scale is still maturing.


Scale: Building level CHP (60kWe to 1.5MWe)


Internal combustion engines
Organic rankine cycle 


Natural gas
Biogas and liquid biofuels
Fuel oils


Mature and reliable technology with fuel conversion efficiency of up to 85 per cent.


Supplying some or all heat and electricity for commercial and public buildings as well as blocks of flats and small to medium developments, via a heat network.


 Micro-CHP systems are designed and supplied as complete units. They contain the engine, generator and heat recovery equipment, together with all the associated pipework, valves and controls. In some cases, thermal store is supplied along with the unit. Although systems are commercially available, CHP technology at this scale is still maturing.


Scale: Large scale CHP (1MWe to hundreds of MWe)


Internal combustion engines
Gas turbines


Natural gas
Biogas and liquid biofuels
Fuel oils
Coal, lignite or coke


Overall fuel conversion efficiencies range between 70 and 85 per cent


Central CHP system supplying some or all heat and power to multiple buildings (linked by a heat network) or to industry.

Can start with small number of buildings with high and relatively steady heat demand (known as anchor loads) and expand over time.


Specially built plant that generally consists of large and complex systems installed onsite.


Further explanation about heat demand, locations, management, maintenance and the future of CHP are available here:

Opportunities for Combined Heat and Power 

Irrespective of scale, opportunities for CHP are principally defined by heat demand and availability of space. In the case of micro and mini CHP, these issues are taken into account when the units are designed. For the purposes of packaged and large scale CHP, these are issues that need to be considered when identifying potential opportunities.

The ‘Opportunities for combined heat and power' page gives an explanation of installing CHP:

Heat demand

Heat demand primarily determines the scale of the scheme. There are three questions that need to be answered when determining the potential opportunities for CHP:

1. Is the heat density high enough for CHP?

The Energy Saving Trust suggests that at least 55 new dwellings per hectare are necessary for a financially viable scheme. Also, a recent study for the Department of Energy and Climate Change (DECC) suggests a minimum heat density of 3,000kW per square kilometre per annum. Densely populated areas such as town centres, high density residential developments or groups of large energy users in industrial estates are well suited for district heating CHP. To assist in identifying opportunities, DECC has developed a heat map for the UK. Many sub-regional and local areas have more detailed maps.

2. What are the levels of heat demand to be served by the scheme?

Heat demand is determined by the use and energy efficiency of buildings. Older buildings tend to have a higher heat demand, although this can be reduced by fitting insulation and other improvements. The scale of a CHP scheme can be determined by the total heat demand of the end users to be connected to the CHP heat network.

3. Are heat demand patterns appropriate for CHP?

Consistent heat demand is best for CHP. However, in most cases heat demand fluctuates throughout the course of the day and the year. The most viable opportunities will be in those situations in which a mix of uses (commercial, public and residential buildings) can be served by a CHP plant. Inclusion of buildings, such as hospitals, hotels and swimming pools will provide large and steady demand for heat over 24 hours.

Resources are available from both the Carbon Trust and DECC to help calculate your heat demands and profiles, and subsequently see if a CHP scheme would be viable, and what size scheme would be the most economically and technically viable.

Availability of space

Sufficient space is required for the plant and related infrastructure. The space available will have implications for the scale of the scheme and the chosen fuel source.  For example, biomass requires storage space, while natural gas can be supplied via the gas grid, if available, requiring no on-site fuel storage.

There may be other physical barriers to the development of CHP and district heating including:

  • railway lines
  • major highways
  • canals
  • rivers
  • large buildings

Although a way around these barriers can normally be found, it is likely to increase project costs and may even make a project unviable.

Management and maintenance

Micro, mini and packaged CHP units can be left to run without much need for user interaction. Routine maintenance is required at least every 1,000 hours of operation. This needs to be carried out by qualified technicians. Installers will be able to provide all the necessary information.

Industrial and district heating CHP require operational staff and annual routine maintenance of the plant.

Practical issues

There are practical issues to consider before installing different scales and applications of CHP. See 'CHP project checklist' with regards to these issues. There is also information on the planning permission needed for combined heat and power projects.

CHP project checklist

There are practical issues to consider before installing different scales and applications of CHP. See 'CHP project checklist' with regards to these issues. There is also information on the planning permission needed for combined heat and power projects.

Planning and regulatory requirements

Micro and Mini CHP

There are no planning requirements for micro and mini CHP as there are no external changes to buildings.

Packaged CHP
Many CHP packages are installed within existing buildings, and in these cases there is often no need for planning consent to be obtained. However, where the unit requires the installation of an external housing, the construction of a new building or a communal heating network then a planning application will have to be made, depending on the size and type of installation envisaged.

In situations where the installation will feed into an existing heat network, permission to connect needs to be obtained from the owner/operator of the scheme.

If a packaged CHP plant is connected to an industrial installation that is regulated under the new IPPC Directive (concerning integrated pollution prevention and control) procedures, then the CHP plant will probably need to be included in the scope of the IPPC authorisation from the regulator. Advice on the required information and procedure should be obtained from the appropriate regulator, usually the Environment Agency.

Large industrial and district heating CHP
Planning consent is required for large scale CHP. Applications for plants with capacities less than 50MWe need to be made to the local planning authority.

Applications for dedicated biomass plants with capacities greater than 50MWe are not determined by the local planning process. They need to obtain development consent from the Secretary of State. The application needs to be submitted to the Infrastructure Planning Commission (at a future date this will be replaced by the Major Infrastructure Planning Unit).

The Pollution Prevention and Control Regulations (part of the Environmental Permitting (EP) Regulations) apply to fuel-burning installations that have a fuel input rating of more than 20 MW.

All scales

Space requirements

Space requirements depend on fuel source.  Bulky fuels such as biomass would require more space for storage.
There must be sufficient access for maintenance purposes and to house any auxiliary equipment.
The location should allow space for storing additional fuel (e.g. additional boiler backup fuel), lubricants and other items necessary for effective plant operation.
Siting of building level or large scale CHP within a community needs to allow for the appropriate installation of a flue. This needs to be above the height of the tallest building in the development.
For large scale CHP the actual footprint of the plant depends on the generating capacity and technology selected (e.g. a 40MW plant would require approximately 4,000m2).


Although most CHP engines and gas turbines are supplied with acoustic enclosures, noise is produced by the plant and its auxiliary equipment. Since the plant may operate almost continuously, where possible its location should minimise the impact of the noise.

Electrical grid

For micro/mini and packaged CHP, the "Fit and Inform" electricity grid connection regulations apply. These require that the distribution network operator (DNO) is informed of the connection, but it is not necessary to request permission. There are standards that the system needs to meet before it is connected. Qualified installers will be aware of these requirements.
For large scale CHP, an application needs to be made to the DNO for grid connection. The site needs to be located close to the grid connection point to keep cabling costs down. Overhead line costs around £20,000 - £35,000 per kilometre and buried cabling can cost over ten times this.g. a 40MW plant would require approximately 4,000m2).

Heat demand

Heat demand in homes and commercial properties tends to be "spikey" with peak demand occurring at certain times of the day and the year.
For packaged or large scale CHP, heat demand can be "smoothed" by ensuring that a mix of building types are connected to the community heating network.  For example, ensuring that there are anchor loads connected to the network such as hospitals, hotels, and prisons.  These anchor loads have a large and steady demand for energy over 24 hours.

As a general rule of thumb for large scale CHP (particularly in a communal heating setting), heat densities of 3,000kW per square kilometre per annum are required to make CHP viable. For more  information about heat demand see Opportunities for combined heat and power above.

Future proofing

Future changes in heat demand and technological developments need to be accommodated.  For example, for existing housing, are there plans for fitting insulation and double glazing to improve home energy efficiency and reduce heat demand?

Practical ways in which systems can be future proofed include ensuring:

  • there is space for additional plant to cover future expansion of the network
  • that the plant is housed in a way that will allow plant replacement and possibly the installation of new technologies, such as fuel cells or biomass CHP
  • that the pipework is sized to enable future expansion of the network.

Energy efficiency

The energy efficiency requirements of the Building Regulations have become more stringent over time. As this continues, new buildings will have relatively low heat. This presents a challenge for the installation of CHP because new buildings may not present enough heat demand to make CHP systems viable.
This may be resolved by connecting to the network a mix of uses and adjacent existing buildings that have poorer insulation, and therefore greater energy demand. However, it is important to make sure that insulating existing buildings where feasible is not avoided just to make a better base for CHP.

Fuel supply

It is important to make sure that the CHP scheme has access to a steady, secure supply of the chosen fuel, particularly if this fuel is not currently supplied to the site.
For example, if switching from oil to natural gas, check that there's a natural gas network available. Or, if planning to use biomass, check that there is a sustainable and secure supplier who will deliver to the site for a reasonable price.

Micro and mini CHP

Space requirements

Micro/mini CHP units will normally fit in the space occupied by an existing boiler.

Heat demand

 To overcome changes in heat demand systems at this scale are installed along with thermal storage (e.g. hot water tanks).  To address heat demand, this scale is usually pre-sized on the basis of average heat consumption in homes.

Boiler replacement

If boilers are scheduled for replacement in the short term, this is an ideal time to consider conversion to micro/mini CHP. This would help to offset some of the capital cost of the CHP.

If the existing boiler has been recently installed (within the last 3 to 5 years), it may be less economically viable to install CHP for the following reasons:

  • Modern condensing boilers are more efficient than the micro-CHP units currently available (although they do not have the advantage of electricity production). Therefore, the user will not see significant energy bill savings when switching.
Payback periods for replacing existing boilers with new condensing boilers are between 8 to 10 years. By replacing a recently installed boiler, some of the investment made on the boiler is lost.rk.

Building level and large scale CHP including district heating


Space requirements

Packaged CHP will fit into the existing boiler room in the case of retrofitting. However, it is necessary to ensure that there is room for additional equipment and pipework. In the case of new build projects, site layout needs to incorporate approximately 40m2 for the boiler house (based on a 60kW system). Packaged CHP can also come in a shipping container.

Heat demand

To overcome changes in heat demand systems at this scale are "smoothed" (see heat demand at all scales).  To address heat demand, systems are usually pre-sized on the basis of average heat consumption in commercial and public buildings.

Existing energy contracts

If there are energy contracts with an energy supplier (particularly those that require commitment for the long-term) these may affect the financial viability of a CHP system. It would be difficult to recoup the capital investment (in terms of energy savings) made in installing CHP. It would be more beneficial to wait until the end of the contract term.


The CHP plant needs to be located in a position from which the recovered heat can be supplied to the end user. To maximise the benefits, you need to consider the potential for connecting buildings located outside the site boundary (particularly in the case of packaged CHP). Technically, heat can be transferred over very long distances, although consideration need to be given to the point highlighted under "proximity to end user" below.
Installing a CHP plant to serve a number of existing buildings is likely to be challenging due to the need for a distribution network. Some issues to consider include obtaining wayleaves as well as the cost and disruption for road and building users.
See the district heating technical issues section for more information:
link to be added when live

Proximity to end user

Proximity to the end user has two main implications – cost and heat loss:

  • Installation of pipework costs around £700 to £1,000 per meter. It is therefore necessary to minimise the length of pipework required by locating district heating CHP close to the end user.
  • Heat losses occur as the heated water moves along the pipework. Reducing distance from heat source to end user also helps reduce these losses which can be as high as 10 per cent, but much lower if well designed.

Case studies

Here are some examples of how some councils are already using CHP:

City of London's combined heat and power plant

Nottingham's warmth from waste system

Tower Hamlets turns up the heat



Links to further information

CHP Focus is a new DECC initiative to support the development of CHP in the UK.

On the website you will find comprehensive information on all aspects of CHP, whether you are new to CHP or looking for specific information. There is also free helpline support provided on 0845 365 5153, where experts can provide guidance to those who require it.

Introducing combined heat and power (2010) - on the Carbon Trust website

Combined Heat and Power Association website

Department of Energy and Climate Change CHP Focus website

Micro-combined heat and power - on the Energy Saving Trust website

Community energy: urban planning for a low carbon future (2009) - on the TCPA website




25 November 2015

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