A new report produced by Ecuity Consulting sets out how the emerging micro combined heat and power (micro CHP) technologies – Stirling engine, Organic Rankine cycle, and fuel cell – could revolutionise home heating in the UK. It also suggests a support framework to allow consumers who let their heating system also power their house be rewarded for the full value they bring to the energy system.

‘Micro CHP should be able to reach the parts other low-carbon and renewable energy products cannot reach,’ says Ian Manders, Deputy Director and Head of Development of the Combined Heat and Power Association.

The electricity generated by micro CHP, in tandem with smart grid and energy storage innovations, can help the grid to cope with capacity constraints and short-term spikes in demand. Alongside power generation benefits, micro CHP is also the most cost-effective gas-fuelled individual home heating solution, which generates ongoing benefits of up to 4.3 pence per kWh of heat delivered in comparison to incumbent technologies.

‘As a direct replacement for the domestic gas boiler, [micro CHP] is a convenient technology to install,’ continues Manders. ‘However, this means it is competing with the gas boiler in a market dominated by price. If the UK wants this technology and all the benefits it brings, it must provide enough support to lower costs enough in the short term until economies of scale kick in.’

Solid support is necessary to bring this novel solution to the mass market. A visionary policy framework in Japan has led to rapid market gains and a 25 percent unit price reduction between 2010 and 2012. Similar cost reductions should be expected in the UK if an equally visionary policy were followed.

‘Micro CHP can play a significant role in utilising the UK’s well developed gas network to offset the peak load requirements of the electricity grid,’ explains Chris Yates, Deputy Director of the Heating and Hotwater Industry Council. ‘Heat and power demands of a dwelling follow very similar patterns, enabling the micro CHP unit to deliver significant benefits in terms of offsetting peak load on the electricity networks.’

Modelling carried out for the purposes of this report shows that all commercially available micro CHP products in the UK would generate a net benefit for the national economy beyond the initial 50 000 units as a result of scale and learning. Therefore support for micro CHP now makes economic sense.

The companies that contributed to the report – Calor Gas, Ceramic Fuel Cells Ltd, Flow Energy (Energetix), Baxi, IE-CHP Ltd (Intelligent Energy), and E.ON – aim to use this joint report as a framework for constructive collaboration with a wide range of policy and industry stakeholders in the UK.

Their objectives – which are also backed by key micro CHP industry bodies – are as follows:

• Provide an initial boost: Backing for flagship distributed generation projects, such as virtual power plant applications, would drive rapid cost reductions. It would also demonstrate the capacity of micro CHP to support security of supply and alleviate the need for local network reinforcement due to load growth. Such projects could be financed by the Green Investment Bank and supported by the Low Carbon Networks Fund.
• Reflect the benefits of micro CHP to the wider energy system: Aggregated and controllable micro CHP applications fulfil the main objectives of the capacity market, designed under the Electricity Market Reform, and therefore should be eligible for this mechanism. The industry would also encourage a review of the current export tariff design, to seek ways to reflect the real value of exported electricity by micro CHP as a result of its capability to generate power at the point of use, and typically at times of peak demand.
• Enhance consumer incentive: An increase in the feed-in tariff for micro CHP to at least 17p/kWh, as the industry has jointly argued since 2010 (adjusted for inflation), would generate improved consumer incentive, bringing it closer to other supported low-carbon heating technologies. This would start to realise the considerable potential of micro CHP to contribute to low-carbon economy objectives, and start to drive scale and rapid cost reductions.

‘The role of micro CHP alongside other domestic generation technologies in reducing customers’ bills, while also addressing policy objectives of security of supply and carbon reduction, will rise substantially if an effective policy framework is put in place,’ says Emma Piercy, Head of Policy at the Micropower Council. ‘The ability of micro CHP and other technologies to participate in demand-side response as part of the proposed capacity market under Electricity Market Reform is essential.’