Memorandum submitted by the Combined Heat
and Power Association
INTRODUCTION
Overview of the Combined Heat and Power Association
1. The CHPA is a long-established not-for-profit
trade association, that acts as a focus for the combined heat
and power (CHP) and community heating industry in the UK, providing
support across our membership and working to establish and maintain
the strong and stable market conditions necessary to grow the
application of these technologies. The CHPA has well over 60 members
and represents a significant proportion of the total CHP capacity
within the UK. Our membership comprises of CHP developers (small
and community scale, large scale industrial and utility companies),
end users, suppliers, public sector bodies and professional services
providers.
Background to this Response
2. The Association welcome the Environmental
Audit Committee's (EAC) inquiry. The Association believes that
Local and National Government are unique stakeholders in the challenge
to transform the UK into a low carbon economy. As noted in the
(EAC) press notice announcing this inquiry, the operations of
Government have a sizeable environmental impact and Government
are accountable for meeting a range of sustainability targets
under its Framework for Sustainable Development on the Government
Estate.
3. The CHPA is concerned that recent reports
from both the Sustainable Development Commission[1]
(SDC) and the review by the NAO[2]
Office have provided a stark illustration of the extent to which
some Departments are failing to meet their Framework for Sustainable
Development targets. Government appears to be facing a huge challenge
if it is to achieve its statutory duty that is laid out in target
E4, which requires departments to source at least 15 per cent
of electricity from good quality CHP by 2010. This itself is a
lesser target than those set under a new framework for Sustainable
Operations on the Government Estate (SOGE), which includes a target
for the Government Estate to be carbon neutral by 2012.
RESPONSE TO
QUESTIONS RAISED
How should the Government treat the purchase by
Departments of electricity from "green tariff" contracts?
4. The Association has no objection to green
tariffs per se, provided that they are offering a genuinely
additional impact in respect of carbon abatement objectives.
5. However the utilisation of green tariffs
is a convenient or expedient approach that fails to either:
— secure for Government the long-term
benefits of investing directly in alternative, low-carbon energy
sources; or
— exploit the commercial position of
the public estate as a secure, long-term customer that is able
to provide the necessary contractual security to support a more
ambitious programme of capital investment, such as CHP or community
heating.
6. Furthermore, through the requirement
to adopt a "whole life costing" approach in respect
of capital investments, the Government is in a position to manage
to the capital constraints that might typically apply to comparable
commercial organisations. However, procurement managers will need
to be given clear guidance on the use of this approach.
7. Notwithstanding the requirement to adopt
a whole life costing approach, the Government also has available
to it the facility to enter into a commercial energy services
contract that can secure the benefits of capital investment in
lower-carbon technologies whilst sustaining only revenue charges.
8. Under these conditions, the Government
is in a strong position to move beyond the limited response and
relatively unambitious response of procuring a green tariff.
What should be done to accelerate progress from
Departments in using combined heat and power, and sourcing electricity
from onsite renewables?
9. Presently the target for the Government
to utilise CHP, as specified under the Framework for Sustainable
Development target E4, is framed in terms of electricity supply.
The SDC's report "Sustainable Development in Government 2007"
notes, somewhat disappointingly, that overall the Government has
reported that 5.8% of electricity is sourced from CHP power. This
provision allows for government to source the electricity necessary
to meet its targets from remotely generated CHP, but requires
no physical or local relationship between the generating plant
and the Government consumer.
10. As noted above, this situation fails to leverage
the powerful position of the Government estate as a host for CHP
or as a cornerstone for the development of community heating schemes,
as is the case where departmental buildings are in close proximity
to one another or to other complementary energy loads:
— Commercial CHP opportunities arise
where there is a stable, long-term heat or cooling load. This
load provides the basis for a long-term heat or cooling contract
that in turn provides the necessary commercial conditions to support
investment in a CHP plant. In the case of a district heating system
it provides a stable "anchor" load, as part of a portfolio
of contracts that will provide the revenues for that system.
— In contrast to a conventional energy
supply arrangement for thermal services, adopting CHP or community
heating/cooling for the physical provision of energy services
will ensure that the Government estate is making a direct contribution
to reducing carbon emissions and minimising energy consumption
on its own estate as well as creating the opportunity for adjacent
buildings do so by connection to the system.
— The requirement to adopt a whole-life
costing approach should, under normal circumstances, bring Government
departments to consider CHP options, as they will in most cases
offer cost benefits in additional to environmental benefits over
the longer term.
— In any case, capital barriers can
be addressed through partnership with commercial energy services
providers, which have the capability to absorb capital costs and
present the Government customer with an annual revenue charge.
— In many cases, the Government Estate
is well placed to enter into such energy contracts, recognising
that much of the Estate is subject either to an extended lease
periods or to a PFI contract with a similar tenor (duration).
11. Irrespective of the supply option, Government
departments will require the provision of electricity and thermal
services (heating or cooling). Furthermore, the level of this
demand for a given building or complex is unlikely to change dramatically
once the fabric of the building has been established. Hence entering
into a long-term contract for heat supply from CHP represents
a relatively low-risk proposition for the Government estate.
Why has progress in reducing carbon emissions
from the Government Estate been so poor?
12. At the simplest level, the relatively
weak provisions of the existing targets have provided Government
departments with a relatively simple alternative compliance option.
Although it may be dangerous to generalise a number of further
factors may contribute to the pattern of limited progress, including
inertia, ignorance of alternative options, perceptions of increased
risk, constraints on public borrowing and a lack of incentive
for individuals to change procurement patterns.
13. The evidence of positive progress in
some aspects of the Government estate suggests that there should
be no fundamental barriers to a more widespread adoption of CHP
and CH in the Government estate.
What should be done to accelerate progress?
14. Targets for CHP should be expressed
in terms of heat or cooling supply from CHP and should be considerably
more aggressive than the existing 15% percentage level in place
for CHP electricity.
15. Programmes should be instigated to share
best practice and to provide effective decision support to those
responsible for decisions affecting energy supply and environmental
compliance.
Should targets for energy use be framed in terms
of absolute reductions in consumption, as opposed to improvements
in energy efficiency?
16. Expressing targets as a fraction of
energy supply to be derived from CHP sources would deliver an
implicit minimum energy saving.
17. More generally, recognising efforts
to reduce the overall scale of Government and the efforts to improve
the physical energy performance of both new and existing buildings,
a target expressed in terms of absolute reduction is probably
more appropriate.
18. Given the poor progress to date, the
Government needs to drive knowledge of the opportunities for CHP
on MOD sites. Where these sites are sold off to other parties
the MOD should seek to highlight the benefits of developing DH
networks on new developments
19. With the imminent implementation of
the CRC, all national Government buildings should be included
within the scheme and the benefits of CHP promoted in any supporting
guidance.
22 April 2008
1 Sustainable Development in Government 2007. Back
2
Energy consumption and carbon emissions in government departments
November, National Audit Office 2007. Back
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