The production of reports on the benefits of large scale combined heat and power projects became an industry in itself in the early 1980s. Fifteen years on, there is still widespread enthusiasm for the technology which puts waste heat from power generation to use.
But the fortunes of the CHP industry have always been hampered by energy regulation, and by the economics.
In 1994 the rising trend of CHP popularity went into reverse. Despite a target of 5GW capacity by 2000 within the last Government’s strategy to reduce carbon emissions, capacity is now just 3.6GW.
John Prescott’s letter to 300 business leaders this week encouraging adoption of the technology is a small step in the right direction. Before the general election the Labour Party had committed to 10GW of CHP by 2010. Now there are signs that it may increase that target.
The Combined Heat and Power Association makes some bold claims. It estimates that quadrupling Britain’s installed capacity to 12-15GW would save £3bn a year in energy costs, cut carbon emissions by 15 million tonnes, stimulate £5bn of investment and create 10,000 jobs. But the industry needs more concerted governmental action to move it forward. It will be looking for positive measures in next week’s budget.
Financial incentives are crucial to achieve a substantial capacity. Gordon Brown would do well to look at capital allowances for CHP projects, reforming the Non-Fossil Fuel Obligation to cover such schemes, and increasing the value of their exemption from the fossil-fuel levy as a incentive to add to Prescott’s warm words.