SI 2001 no. 846 grants exemption to certain items of plant including Combined Heat and Power Plant provided the occupier of the hereditament has been granted an appropriate certificate by the Secretary of State. The first of the certificates are starting to come though, and it is necessary to deal with these on pinks by the end of rate.
Combined heat and power plants most often use an engine of some description (usually gas oil, occasionally a gas engine or a steam / gas turbine) to drive a generator, producing electrical energy. The Waste heat is used via heat exchangers to provide space or water heating.
The efficiency of the system is typically around 70% and can approach 80% in total broken down as follows:
% Of Total Energy input
This compares with the efficiency of the conventional delivery of electricity, via the grid from thermal generation at a power station to net useable energy at the point of delivery at around 28%
In terms of CO2 production the use of CHP saves about 1Kg/Kw of emission compared with conventional electricity generation and space/water heating.
To encourage development of such schemes fuel for CHP schemes is exempt from the climate change levy, there are advantageous capital allowances on the purchase of new plant and also the new exemption from rating.
Most CHP units are fired by natural gas, and in the early 1990 when many of these schemes where introduced the cost of gas relative to the cost of electricity was very low, this made the schemes very attractive. However through the 1990’s the balance shifted as gas prices rose and electricity cost fell. This may have contributed to the timing of the current rating provisions as the financial climate has militated against new schemes
Impact of the schemes
The results of (very meagre) investigations so far suggest that the effect on a hereditament can be quite small; one scheme suggests that the total amount of electricity produced is about 25% of the hospital, but that the contribution towards space and water heating is “a very small proportion”. The value effect of the course of action suggested below is very small on this particular scheme, and this may be the case for most schemes.
Implications for rating
If the schemes are producing a small proportion of the required energy for space and water heating, the clear implication of this is that there is still a need for conventional heat sources, and that the exempt CHP plant is an addition to the conventional plant. Non-the-less it will no doubt be possible to reduce the size of the conventional source to allow for the capacity of the (exempt) CHP Plant. No matter how small a reduction in the assessments is warrant in all cases where there is an exempt scheme (i.e. one with the proper certification)
See Rating Manual Volume 4 Section 3 Plant and Machinery
Action on Current work
On qualifying schemes, see relevant practice notes above, the items that are required to be taken out of the assessment are set out in SI 2000 No 540 Class 1 Table 1. (b), (c),(d) and (k).
Basically these are generating sets and for diesel / gas engine sets reference to the 2005 Cost Guide – Electrics – Generation Sets – 207D – series should be considered.
Information required to operate the scales is :-
(i) the output of the alternator kVa
(ii) the voltage ( likely to be 11 kV or 415 V )
(iii) whether the “set “ is in its own acoustic box or located in a basement or separate power house / building. (the power house / building will be rated separately the acoustic box is included in the costings)
The cost of the new “ set “ should be as per the Cost Guide whereas the cost of an old set should be reduced in value in accordance with the P & M allowance scales (see Cost guide Guidance Notes).
Adjustments for contract size adjustment and fees should be ignored.
On all qualifying schemes, it is suggested that the cost of a diesel or gas turbine set of equivalent (In terms of Electrical Power) output is taken from the valuation at the appropriate stage – see below
This figure appears to be Item 1 in the list of 7 items on the first page of the certificate and is measured in kW or mW (1mW or Megawatt = 1000 kW) and is described as the POWER CAPACITY of the scheme.
To distinguish from power in other forms some certificates use the suffix e i.e. MWe to denote electrical energy as opposed to the heat energy of the scheme.
It is important not to confuse the electrical energy with the heat energy that is produced and is shown on the certificate in MWh or KWh in item 3 (this confusingly is a measure of energy not power)
The costs of the generator sets are set out in appendix 1 (Acknowledgements to Dave Raley)
The cost should be written down appropriately for age and obsolescence and treated as a deduction in the valuation (the certificates do not show the age of the equipment so a phone call to the site is required). I have used the A and O for the buildings on the generators though strictly the P and M figure may be appropriate, and work through the remainder of the valuation so that the fees CSA etc are altered.
Please note that the location Factor should not be applied to the generator sets so the ARC of the unit should either be subtracted after application of the location factor, or grossed up to cancel out its effect
E.G. Hospital with a 1000 kVa generating set in a CHP unit
Voltage 415 V
Engine normal working speed 1500 rpm
50 hz (normal electrical current)
see Cost guide 207D94
Cost new as at 2003 AVD
decap 3.33 %
RV deduction £1,995
See relevant Cost Guide entries for Gas Turbines et cetera.