Buro Happold expert urges review of CHP levy for 2050 carbon target

22/04/2009

Alasdair Young, Senior Engineer at Buro Happold, provides reaction to today’s budget.

“Combined Heat and Power (CHP) plants have been subsidised by an exemption from the Climate Change Levy - the tax on industry's energy use. This exemption has been due to expire but it was announced in today’s budget that the levy will remain in place from 2013.

“Whilst we welcome the retention of the levy and recognise its effectiveness in encouraging industrial CHP development, further financial incentives are required to encourage the use of CHP in the urban environment, as the current levy has historically shown to be unsuccessful in that respect.

“CHP plants were the Government’s proposed method to reduce carbon emissions and by keeping the levy in the budget it has shown its continued support of the scheme. Investment in new CHP projects has remained unchanged over the past four years as companies have not been sure of the government’s future tax plans so today’s announcement will hopefully end that trend.

“However, the current levy does not deal with the issue of incentivising urban use of CHP systems. This is a major hurdle to decarbonising our buildings, if it hopes to achieve the 80 per cent carbon reduction by 2050 target set out last year. To put this in perspective the Government’s previous policy was to reach 10 GW of CHP capacity by 2010 - we are currently only at 6GW.

“In an industrial environment CHP plants power oil refineries, chemical factories and such and have only one customer making it relatively straightforward and low risk. The old levy encouraged this use of CHP so the retention of the levy exemption would continue to do so.

“CHP systems in urban environments however are higher risk and more complex so require stronger incentives. But it is imperative we encourage their use in this environment as dealing with emissions from existing buildings is a key issue  - by 2050 60 percent of buildings that currently exist will still be in use. If we want to make a real impression on carbon emissions it is these buildings we need to adapt.”

As suggested in London First’s Cutting the Carbon’s Capital report prepared by Buro Happold last year the greatest potential lies in using the waste heat from power stations energy from waste plants and new dedicated district scale combined heat and power plant serving both new development and existing buildings. These existing buildings also act as anchor loads and are less energy inefficient than new buildings, resulting in higher carbon savings.

The other three priorities stated in the report include the need to establish a body within the London Development Agency (LDA), suggested to be called Energy for London (EfL), to deliver a strategic implementation plan for decentralised energy in London, the development of energy masterplans for each borough and a partnership approach between public and private sectors for project delivery.

Background on CHP

CHP is an energy conversion process where electricity and useful heat are produced simultaneously in one process. CHP systems use the heat produced during the electricity generation process for community heating or for industrial processes and can be as much as 90 per cent efficient. It is a form of a decentralised energy technology, and one capable of making very large carbon savings, supplying customers with heat and power from low carbon sources. By supplying energy closer to the point of use the losses which occur in transmitting electricity from large, remote centralised plant to customers are eliminated.