Important tax and financial changes impacting CHP operators

1st March 2012

In relation with the EMR (Electric Market Reform) it is proposed to introduce the CPS (Carbon Price Support). The current status is that although the government recognise the role of CHP, the Treasury (HMT) does not recognise that CHP generate heat in addition of electricity. As a result HMT is aiming to apply the carbon Floor Price on all fuel input to CHP. This could have a significant impact on all CHP operation and on commitment to fund new CHP plants and district extensions for your institutions.

For example, the University of Warwick currently generates around half of its heat and power with CHP and is committed to halve its carbon emissions by 2020 to support the government carbon reduction target. As such the University of Warwick is implementing a holistic multimillion investment action plan to reduce utilities consumption, change behaviour and reinforce its heat and power self-generation installations. Would the new tax regime be implemented the consequences for the University of Warwick are likely to be:

• Not achieve carbon reduction targets that public sector are required to support through the Higher Education grant letter from the Treasury.
• Increase its operating costs significantly.
• Cancel a £10m investment to build a new energy centre and reinforce the district heating network in place.
• Cancel CHP maintenance contracts with impacts on local companies

As a result of these proposed changes, Iain Patton, the EAUC's CEO, has written a letter to Cheltenham's MP, Martin Horwood. The letter aims to raise this issue at a political level.

Information from Combined Heat and Power Association (CHPA) and Iain's letter are available for download below.