The contribution that combined heat and power (CHP) will make to meeting targets for the United Kingdom's greenhouse gas emission targets depends heavily on how the market responds to mechanisms such as the third phase of the EU Emissions Trading Scheme and the Carbon Reduction Commitment Energy Efficiency Scheme.
The level of saving is also dependent on what is used to fuel the CHP plant. The degree to which CHP is fuelled by renewable energy sources is likely to be driven by the relative attractiveness of the Renewables Obligation (for electricity output) and the Renewable Heat Incentive (for heat output). The proposals for the Renewable Heat Incentive are currently out for consultation. Published at the same time as those proposals was a paper prepared by AEA for the Government on the interaction between different incentives to support renewable energy and their effect on CHP. This presents a number of scenarios which consider the contribution of CHP to carbon emissions reduction.
The CO2 savings per annum associated with all types of CHP in 2020 in this paper are estimated to be in the range of 20 to 29MtCO2 depending on future fuel prices, cost of capital, the operation of the third phase of the EU Emissions Trading Scheme and the attractiveness of the investment in renewable energy.