Combined Heat & Power

John Ward explains what is it and why you should be aware

The planet is heavily reliant on fossil fuels to provide our energy. The problem with fossil fuels is that they are bad for the environment and the levels are rapidly depleting. As such there needs to be an alternative which is able to provide the energy we require so we are not reliant on an ever-depleting supply.

There are alternative options, such as renewable and nuclear energy, however they are not currently producing the levels required to replace fossil fuels. Whilst there are great strides being made in the area of renewable energies, we need to find a way to utilise the remaining fossil fuels in the most efficient manner.

One way to do this is to run a Combined Heat & Power system. CHP plants are able to use the energy burnt in a more efficient method and save up to 40% of the energy lost whilst creating the electricity to be re-used.

The technology itself is not new, it has been used by Scandinavian countries for decades but it has only recently made it to the UK. Planners are keen for developers to utilise the technology as it is more efficient than traditional standalone boilers.

There a lot of factors which impact on this efficiency, such as design, usage, commercial utility costs and maintenance.

What is CHP?

A conventional power plant creates electricity by burning a fossil fuel such as oil, coal or natural gas in a huge furnace, which then provides the energy via hot water and steam to drive a turbine which in turn creates the electricity. It is a very inefficient system and there is a lot of energy wasted between burning the fuels and creating the electricity.

The main loss of energy is heat energy from the hot water being boiled to create the steam to drive the turbines. This is where the CHP engines differ from normal operating power plants.

Instead of losing all the heat energy, it can be used for heating and hot water in homes and apartments. The hot water is piped through a series of loops, one loop going into the building, then another loop going around the building and finally a third loop going around the home itself.

The heat from the water is then transferred over to the water in each loop through what is known as a Heat Interface Unit (HIU).

The basic flow of it works is as follows;

  • Fuel (coal, natural gas, oil, or biomass) is added at one end.
  • The engine (roughly the same size as a four-cylinder car engine) burns the fuel by ordinary combustion.
  • An electricity generator is connected to and driven by the engine's driveshaft.
  • Approximately 15kW of electricity is produced, which can be used for conventional power or as an emergency supply.
  • Exhaust gases from the engine flow through one or more heat exchangers, which remove most of their waste heat.
  • A catalytic converter (similar to the one in a car) removes some of the pollution from the gases.
  • The (relatively clean) exhaust emerges through a tailpipe or chimney.
  • Cold water flowing into the heat exchanger picks up heat from the exhaust gas and exits at a much higher temperature. A unit like this will produce about 40kW of thermal energy (heat).

The efficiency of the CHP plant is dependent on the following;

  1. The number of units it supplies
  2. How well it has been designed
  3. The location of the plant in proximity to the units it is supplying

The details of how each of the above effects the efficiency of the CHP plant is as follows;

1) The larger number of units the CHP supplies, the greater amount of energy it will be producing. This will in turn produce a larger amount of electricity which can be utilised by the development to power the communal lights or it can be sold back into the national grid with the monies going towards reducing the service charge.

2) The design of the CHP by the developer or their energy consultant will determine how well the unit itself runs. If the CHP is too large or too small for the development it is serving then it will have one of the following consequences;

  • a. It will not work to full capacity and as such it will not produce enough electricity as a side product to make it efficient or sustainable.
  • b. If it is too small it will over work and will be unable to provide enough heat energy to supply the hot water and heating to all units.

3) The location of the plant is also an important factor. The further away the plant is the more heat energy will be lost in transit through the pipe work to the units.
The closer the plant is to the units it is supplying the more heat energy will be utilised making it a more efficient system. This is one of the reasons why CHP plant systems are built on the development alongside the apartments to ensure efficiency.

Pro’s & Con’s of CHP

There are also environmental benefits to CHP. Every tonne of fossil fuel we avoid burning reduces the amount of carbon dioxide entering the atmosphere reducing the effects of global warming. Burning fewer fossil fuels also reduces air pollution and other related problems such as water pollution and acid rain.

CHP plants are also able to run off other fuel types such as methane gas produced in landfill sites or the energy created from burning refuse in municipal incinerators. This provides a range of sustainable options to fuel a CHP plant.

There are also disadvantages to CHP which impact on the residents themselves. This is mainly to do with the running costs and service charge.

As with any mechanical system the CHP plant and boilers require maintenance as do the HIU’s located within each apartment. These costs are usually wrapped up within the service charge of the development. It would also be sensible to build up a reserve fund for any major repairs or replacements in the future.

Another drawback to the system is the overheating within the communal corridors. This is a consequence of the hot water being continually pumped around the building. Developers have tried to offset this by insulating the pipe work to reduce the heat loss.

The insulation can only reduce the heat loss by a certain amount which means other methods are required to reduce the overheating of the corridors. One method is to install air extraction units in the corridors. These units extract the hot air and vent it to the outside.

This helps reduce the overheating, but this mechanical equipment will also need to be maintained and also requires electricity to run as a result there are further running costs which would be added to the overall service charge. Taking into account this added cost along with the overall running costs of the CHP plant, the cost per unit would be much higher than maintaining and running an individual boiler.

So how is the heat energy billed?

The billing for the heat energy itself is undertaken by the heat energy agent who undertakes the billing and recovery of monies on behalf of the landlord.

The unit price of the heat energy itself is calculated by utilising the factors of gas unit price, heat loss and boiler/CHP efficiency. This calculation is usually undertaken by the landlord or the billing agent instructed by the landlord.

However any leaseholder who lives on a development with CHP needs to be aware that unlike having an individual gas boiler where you can choose your own supplier, you are unable to do this if you have CHP system. The gas provider and energy billing agent are both chosen by the landlord. If the leaseholders are part of a Residential Management Company or have taken over the Right to Manage, providing them the rights and obligations of the landlord then they will be the ones making those choices.

However if they are not, they are unable to make this decision and if they are not happy with the levy being charged then they will have to seek a determination from the First Tier Tribunal.

There are also other ways to ensure the charges being levied are fair and reasonable. Due to this being a new kind of utility charge there was initially no legalisation which regulated how the charges were levied or controlled.

The Government introduced The Heat Network (Metering and Billing) Regulations 2014 to regulate the industry and provide end users with a level of protection.

The three main points of the regulations are as follows;

  • The end user must be able to read their own meter
  • Their bills must be based upon actual usage
  • They cannot be charged for the administration of the invoicing itself

These have been put in place to ensure the end user is not over charged or charged based upon an exaggerated estimation of their usage. It also allows the end user to raise disputes against the landlord or billing agent if any of the above is not undertaken.


The costs for running a CHP including the billing and any auxiliary equipment such as the heat extractors need to be accumulated to provide the leaseholder a total cost per unit which would then need to be compared to the cost of a leaseholder having their own individual boiler to be maintain.

Whilst the CHP system maybe more energy efficient and better for the environment when designed and run properly, this does not always equate to being financially equitable for the leaseholder.

Any leaseholder who is buying a property with a CHP needs to ensure they investigate and understand the system and charges in detail to ensure they are not levied with any unexpected invoices which they have not factored into the living costs of their new apartment.

John Ward is the Managing Director of Insight Property Consultancy who provide a range of services to the property sector.