electricity & gas tariffs
Access to appropriate electricity and fuel tariffs is a key issue when establishing the economic viability of a CHP installation.
Another important consideration is the selection of an appropriate supplier at a time when most energy users have access to an increasingly competitive market and a choice of supplier.
Electricity
The cost of electricity purchase is sub-divided into two basic payments, one to the power producer/supplier, and one to the local electricity company that owns and operates the local area supply system to which the consumer is connected. A component of charge is also payable to the National Grid Company, which owns and operates the main national grid system.
The range of tariffs and prices available for the supply of electricity is now extremely wide. Any consumer can opt to purchase electricity from any licensed supplier on a fixed tariff basis. The most conventional form of tariff is a time-based one. This will include electricity, use of system and transmission charges, and will be fixed for a period of one year.
Natural Gas
Although ownership and operation of the UK’s gas distribution network remain exclusively with Transco, there are numerous gas suppliers with which consumers can establish a contract. It is normal practice for a gas supply quotation to include the transportation cost that the supplier will pay to Transco for use of the system. This element of the cost will vary according to the anticipated level and profile of gas consumption. Most supply tariffs are quoted in terms of cost per unit of gas, with no variation in charge for time of day, week or year.
In general terms, gas can be purchased on either a ‘firm’ or an ‘interruptible’ basis.
- Firm gas supplies are available up to the capacity limitations of the site gas connection at the time, and only a multiple failure of the system or an accident to local pipework will disrupt the supply.
- Interruptible gas supplies are subject to temporary stoppage, at Transco’s discretion, for up to a fixed number of days each year. These interruptions usually occur at times of peak system demand during cold weather, and are an important technique for limiting short-term demand peaks.
The choice of a firm supply involves paying a higher tariff rate for the virtual certainty of having gas available at all times. This is the most appropriate choice for any gas-burning equipment that is used to meet process or heating demands, and for equipment that cannot operate on an alternative fuel. The use of spark-ignition gas engine CHP plants requires a firm gas supply, unless the operator is prepared to risk having the plant off-line during gas interruptions.
Interruptible gas is supplied at a lower tariff rate and is generally only available for loads that meet minimum size criteria. The price advantage is offset by the need to have alternative fuel burning capability available. Gas turbine CHP plants, for example, may have the capability to operate on gasoil when gas is not available. Overall, the saving in gas price is offset by the cost of the oil-burning capability and by the higher fuel costs of using oil if gas is interrupted.
Climate Change Levy
Since 1 April 2001, the Climate Change Levy has been applied to all purchases of gas and electricity by commercial and industrial fuel users in both private and public sectors . The rates from 1 April 2008, which were increased broadly in line with inflation from the previous year, are £0.00159/kWh for gas, £0.00456/kWh for electricity, £0.01018/kg for any petroleum gas, other gaseous hydrocarbon, supplied in a liquid state and £0.01242 per kg for any other taxable commodity.
However, the Government recognises the environmental benefits that the additional energy efficiency of CHP plant can offer. As a result, qualifying fuel inputs and electricity outputs from Good Quality CHP are exempt from the Levy. Full details of the definition of Good Quality CHP and the energy exemptions are provided at www.chpqa.com.
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