Financial Benefits
Do you know that CHP can reduce energy costs by up to 20%?
While each company will need to assess the likely benefits of CHP in relation to both company policy and overall financial status, it is important to recognise from the outset that there are three main development options, each with its own resource implications:
- By adopting the design and manage approach, the company maintains maximum control over the development, pays for and owns the plant, and usually benefits fully from the cost savings achieved by operating and managing the plant itself. The project appears on the company’s balance sheet, and its development may involve the company in some form of debt finance or hire purchase arrangement to meet the capital costs incurred.
- The turnkey option is also an ‘on-balance-sheet’ option, but the company limits its development input and gives responsibility for plant design, procurement, installation and testing to a contractor. While the company pays for the plant on completion (with or without debt financing) and owns it thereafter, it may adopt one of two main approaches to operation and maintenance. If it elects to take full responsibility for plant operation and maintenance, it will benefit fully from the cost savings achieved. If it decides to contract out these activities to an integrated energy services company (ESCO), the ESCO will become responsible for energy supply, but will also take a share of the overall cost savings.
- Where a company does not wish to adopt one of these options, it may enter into a contract with an ESCO from the start. The ESCO agrees to provide a CHP facility; designs, installs and owns the plant; and then operates and maintains the plant as part of a long-term agreement to supply the company with heat and power at agreed rates. The company limits its involvement to establishing and facilitating the initial contract, but accepts a reduced level of cost savings. This type of project does not appear on the company’s balance sheet.
Further details are available on the financial benefits associated with customised and packaged CHP.
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