Whole Life Costing — the case for CHP

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Continuing increases in energy prices, together with ongoing legislation regarding carbon emissions, has put energy management on the boardroom agenda. These hikes in fuel costs and the need for clean, efficient and economic energy has put Combined Heat & Power (CHP) into the limelight with many managers and directors now considering it as a viable alternative to purchasing electricity from energy companies. Marcus Dodsworth, Technical Service Division Manager of shentongroup, explains

Whole Life Costing — the case for CHPCHP or co-generation is the simultaneous production of electricity and heat from a single fuel source. A CHP system recovers the heat normally lost in electricity generation for use on site in space heating, domestic hot water, swimming pools or processes heating. Compared with separate generation of electricity and heat, CHP systems can operate at more than 95 per cent efficiency.

The main benefit of a CHP system is that the overall annual energy costs can be reduced — on-site generation reduces the amount of electricity that has to be purchased from the grid. Although there will be a shift in gas/electricity balance of a building’s total fossil fuel consumption, any rise in gas costs will be more than offset by the savings in electricity costs.

Many buildings often have sufficient demand for space heating and hot water to utilise a small CHP plant. And CHP providers, such as shentongroup, can synchronise multiple units together to create a very efficient on-site power station that can substantially reduce electricity bills.

Whole Life Costing

Whole Life Costing is an economic evaluation technique that encompasses the total cost of an asset over its operational life including initial capital costs, maintenance costs, operating costs and disposal costs. These projected costs achieve defined levels of performance that are required during the lifetime of a capital asset including reliability, safety and availability. Whole Life Costing is an effective tool for considering:

  • Business justification
  • Procurement strategy
  • Concept approval
  • Investment decision
  • Readiness for service
  • Benefits/cost evaluation

With regard to CHP, Whole Life Costing encourages companies to look beyond the upfront capital costs to take a long-term view of other important factors such as energy emissions. It also helps managers determine the full benefits of investing in CHP. When carrying out such an exercise it is important to take into account the capital expenditure as well as all operating and fuel costs.

It is important to size the CHP system correctly to take into consideration the expected energy demands. Specialist companies have the experience and technical know how to undertake such studies and specify the exact CHP system needed. Oversized CHP units fail to achieve the anticipated savings and have to dump or transfer heat energy or run at lower capacity — and undersized units miss out on potential savings. If you have a heat load present on your building for at least 4000 hours per year, then CHP could generate a substantial amount of free electricity while meeting this heat demand.

Remote monitoring of CHP systems allows maintenance to be carried out before any problems arise. There are maintenance programmes specifically designed for CHP systems. For example shentongroup’s Infinium24 is a scientifically designed and monitored 'perpetual renewal protocol' that constantly renovates and re-engineers components before their projected replacement date.

The ethos behind such programmes is to provide CHP users with a fixed, ongoing cost of ownership paid for by the savings made during the maintenance programme. The ability of knowing these costs upfront enables maintenance to be calculated within the Whole Life Costing of the CHP system.

Other advantages that need to be taken into consideration when calculating Whole Life Costings are:

  • 95 per cent efficient means less money spent on energy
  • Located on site means no transmission losses — what you generate is yours to use
  • The gas used can be exempt from the Climate Change Levy (CCL)
  • Reduction in the use of your existing boilers
  • Power-cut back-up facility

Although capital costs of CHP equipment are higher than a conventional boiler plant, the equipment usually has lower Whole Life Costs when the annual expenditure on operation, maintenance, heating, ventilation and air conditioning as well as fuel costs become part of the equation. When reviewing the Whole Life Costings of CHP the following points need to be considered:

  • A comparison of the conventional provision of heat and power by boiler and electricity purchased from the local electricity network
  • Size of distribution for each building
  • The size of the CHP plant that is appropriate for each building size and type based on heat demand and by optimising the combined cost of heat and power supply
  • An assessment of the capital and service costs associated with operation of the CHP plant and assess the cost-effectiveness based on gas and electricity prices and projected increases in these costs
  • Calculation of the potential income from exporting excess electricity to the grid
  • Calculation of the primary energy saving from the CHP capacity in accordance with EU guidelines

It is important to remember that CHP is not a single technology, but an integrated energy system that can be modified depending upon the needs of the energy end user. CHP can use a variety of fuels to provide reliable electricity, mechanical power or thermal energy for industrial plants, universities, hospitals or commercial buildings, wherever power and heat are needed.

Whole Life Costing enables a company to assess the cost of CHP throughout its entire life cycle, and using that insight allows CHP providers to optimise the design so as to minimise the total lifetime cost, i.e. through design, construction, operation, maintenance, renewal and eventual replacement or decommissioning.

Analysis of whole life costs is also a key driver in enhancing organisational sustainability both directly through reduced energy costs usage and waste, and by establishing an explicit framework for lifetime review against which sustainability can be assessed.

07 November 2012

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