Guidance

Combined Heat and Power (CHP) Finance

A simple guide for developers on financing of Combined Heat and Power (CHP) development.

Document

Part 5: A guide to CHP Finance

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Detail

There are several approaches to costing and financing a CHP development. However the benefits of investing in CHP can only be realised by the appropriate operation of the plant. Combining this understanding of operations and capital investment makes financing CHP unique and has led to CHP financing solutions only seen in the CHP sector.

The CHP Finance guide reviews methods for establishing the capital, fuel and maintenance costs. The impact of financing CHP on a company’s balance sheet is reviewed. We review the common methods of financing the investment of CHP and show how to compare the projected performance of CHP against conventional methods of heat and electrical generation.

The economic benefit of installing a CHP unit on any particular site arises out of the relationship between annual operating cost savings and capital outlay. The annual cost savings must be sufficient to meet the requirements for return on the capital invested by the owners of the plant.