Investing in CHP – an interview with Chris Marsland
Chris has worked in the CHP industry since 1998. He is currently Solutions Director at GF Genovate, along with being chair of the Technical Committee at the Association of Manufacturers of Power Generating Systems.
Previous to this he has been Technical Director of Ener-G, Chair of the Commercial Forum at the Association of Decentralised Energy and Chair of New Energy Services & Heat Committee at Energy UK.
Chris studied Electrical Engineering and Electronics at the University of Liverpool. He obtained a first class with honours. Chris is a Chartered Engineer and Fellow of the Institute of Engineering Technology.
These are personal views which do not represent the views of any organisation.
Following on from our interview with Dr Stephen Dance and in connection with our interview with Andrew Gardner on CHP/CCL, we talk to Chris about the benefits and reasons why businesses should invest in CHP and where the market is going.
Q) It has been twenty years since you entered the CHP market. What do you enjoy most about the industry?
As cliched as it may sound, every day is different, not only that but the mix of disciplines that you need to be, at the very least, familiar with provides constant mental challenges. I have been lucky in my twenty years as I moved into the sector around the time of one of its biggest upheavals – NETA. Since then it has been one high-speed rush of new technology, new solutions, new business models etc.
Q) What have been the biggest challenges for the market and for yourself in that time?
I don’t mean this in a negative way, but one of the biggest changes/challenges has been the increased penetration of renewables. Don’t get me wrong, I’m completely behind renewable energy and it is 100% the right thing we should all be doing, but the industry is still reacting and adjusting to the changes. Business models have had to change, innovation, both technical and commercial, has brought a whole new set of opportunities and challenges and it’s been great to see how the industry has adjusted and embraced these challenges and turned them, for the most part, into opportunities.
Q) Where do you see the CHP market going in the next 5-10 years? Small-scale onsite generation or larger projects covering mainly industry?
There are so many changes going on in the industry at the moment I’m not sure I can give a clear answer to that. Larger projects are currently on the rise, driven by the spark spread, but whether the outcome of OFGEM’s TCR will start to make these less attractive is a concern. Likewise, the local energy revolution is bringing smaller end users into the market.
I think we will see the rise of the Energy as a Service model; a variation on the solutions model being marketed by Centrica, E.ON, SSE etc. for all consumers. This will mean that CHP will no longer be an end in itself and that CHP may become a more intermittent source of generation as the provider and its automated management and dispatch system will be chasing the lowest cost/maximum revenue generation, consumption opportunity or lowest carbon emissions.
Q) The majority of CHP units still run reciprocating engines. Do you think a new type of engine will come into the market, such as the Sterling Engine, or will reciprocating be around for decades to come?
I don’t believe we are even near seeing the demise of the reciprocating engine. There are plenty of exciting developments out there, including the Sterling Engine you mention, but also linear generators, more competitive fuel cells and a growing range of turbines. I’m not sure if it will be the engine technology directly that drives the change, more the type of fuel available. There are already discussions underway about the makeup of the natural gas being delivered to customers and there is the suggested use of Hydrogen in the gas grid as a way of decarbonising heat – both of these could make a massive difference in the prime mover of CHP.
Whether powered by a reciprocating engine or something else, I’m reassured by the continued need for synchronous generation to provide inertia to help support the grid as it evolves to facilitate the number of renewables our future energy mix has to have.
Q) What do you think will be the next technological advancement in co-generation?
I think this will come in the form of automated digital trading of energy from CHP even down to the level of sub 1MWe behind the meter units. You can see it happening in the I&C space and to a lesser degree with tech-savvy first actors in the domestic space but, when the marketing and the simplicity is improved, then I think we will see a big rush.
Like my comments earlier about the Energy as a Service model I think, in reality, it is unlikely that a small domestic consumer will engage directly but rather their energy supplier will have day to day, maybe minute to minute, control over the power flows at the dwelling to optimise cost for the consumer – it will be transparent to the domestic customer.
Q) What could the industry do to improve the uptake of CHP?
There are two main areas where industry could take steps to help more people adopt CHP. Firstly to move away from the “technical sell”, all too often the approach is based on how many kWs, how many cylinders, what latest technical innovation this one has – as an engineer I can be just as guilty as the next man. The sell needs to be on what the impact will be on the customer’s energy bill. We have seen the rise of this alternative selling approach over the last five years but it is only in the last year or so when the technology is really becoming disconnected from the outcome. Now we are finally seeing companies offering energy solutions to businesses with no mention of what technology is behind it – it could be solar PV, it could be battery, it could be DSR, it might even be CHP – the point is that it doesn’t matter to the customer provided the contractual promises are fulfilled.
Secondly, there needs to be a push towards open control systems. There are many arguments as to the advantages of such systems, mostly for the supplier, and making the customer “sticky” but from a customer’s perspective, it simply limits their freedom to choose. Maintenance suppliers like their own proprietary systems (at least until they have to replace someone else’s control system on some new O&M Project). However, this change is not just in the hands of the CHP suppliers, the prime mover suppliers have their own proprietary systems which can also lead to the customer being tied into a single source of supply for their long-term maintenance agreements.
If any O&M company is as good as they say they are then there should be no fear of letting others try to be better…
Q) With the Carbon Reduction Commitment (CRC) being abolished and the increase in Climate Change Levy (CCL) rates, do you think this will hinder or improve investment in the CHP market?
Natural Gas fired CHP has always been something of a Cinderella technology, what I mean by that is it has never really had direct subsidies or support. The industry has managed to make it attractive to customers through tight cost control, innovating solutions and robust technology. One of the small helping hands it did get was beneficial treatment under the CCL. From some of the modelling I’ve seen, there will be an effect but it doesn’t completely cancel out the financial benefits to the business of CHP and, obviously, there are the other benefits such as reduced Carbon emissions, security of supply and predictability of utility costs.
Q) A question we always like to ask, Brexit. Do you think it will have an impact on the CHP market?
Undoubtedly, whilst there are many UK based CHP suppliers and manufacturers a large number of components are sourced from Europe – with no UK based alternative. The key thing, at the time of this interview at least, is the lack of certainty in the whole process. UK businesses are good at coping with change provided it gets some forewarning of what those changes are.
People have been focussing on the physical effects of Brexit such as will equipment from Europe cost more and will supply chains hold up? One piece that I haven’t seen widely explored yet is the impact of changes to the Carbon markets and regulations along with the wider issue of becoming a rule taker rather than a rule maker in almost every area of interaction with Europe.
Q) Finally, what advice would you give to business on investing in CHP?
CHP can provide benefits to business in many ways. It can provide cheaper energy to the business, it can provide security of supply, it reduces the carbon footprint of a business, it can also provide additional income streams such a Capacity Market payments or through DSR. For the adventurous, there are further income streams to be had from frequency response.
In short, do your research carefully, all suppliers I’m aware of provide no-fee initial surveys and quotations. Shortlist a few potential providers for detailed discussions. These discussions can be used to flesh out their project experience, their understanding of available funding support mechanisms, the technical performance of their equipment and whether they can access additional income opportunities. Finally, and in many ways, the most important piece of the jigsaw, is making sure they have local maintenance coverage and that you take out a maintenance contract from day one. However good a CHP may look, or however enticing a financial model may be, CHP only works for a business if it runs!
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