17 May 2012
Cut carbon tax liability with CHP, says expert
Manufacturers can avoid punitive green taxes if they have combined heat and power (CHP) systems. That's the message from energy advisory firm Ener-G, which adds that firms can reap a double reward if they use the generated power on site rather than selling it back to the National Grid.
The company says that most of the UK's smaller CHP customers will continue to be exempt from the Climate Change Levy and will also be exempt from the new Carbon Price Support levy, to be introduced in April 2013.
It was announced in the Budget that good quality natural gas-fired CHP systems with a capacity below 2MW will be exempt from Carbon Price Support. In addition, businesses that consume the energy they generate, rather than selling it to the National Grid, will continue to be exempt from Climate Change Levy, providing a double indemnity from green taxation.
Alan Barlow (pictured), MD of Ener-G Combined Power, said: "Most factories... and other organisations generating and consuming their own low carbon energy supply through CHP will be exempt from both taxes.
"According to our financial modelling, the new Carbon Price Support levy, set at £9.55 per tonne of CO2 for 2014/2015, will increase the cost of conventional fossil fuelled electricity generation by at least 0.5 pence per kWh, which is an 6.5% increase on current prices. Since most CHP customers won't pay this or Climate Change Levy, the price advantage of on-site CHP generation will be even bigger.
"We estimate that a typical customer operating a 1.5MW CHP system 17 hours per day will increase their gross financial savings by 8.3%."
Larger factories with systems above 2MW will be partially exempt from the Carbon Price Support levy, charged only on the electricity they produce, not the heat generation part. They could also be exempt from Climate Change Levy if they consume the energy they produce, says Ener-G.
A typical large CHP customer with a 2.145 MW unit operating 24 hours per day could make an additional 4.3% cost savings following the introduction of the Carbon Price Support mechanism.
Barlow added: "As a carbon-cutting technology with a formidable track record, CHP is a cost effective tool for improving cost and environmental performance, while improving long-term energy security. We are pleased that the government is recognising the carbon saving potential of on-site CHP generation and providing green taxation exemptions."
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