Draft guidelines on CHP exemptions from Climate Change Levy published

Following last year's announcement that "good quality" Combined Heat and Power (CHP) schemes will be exempt from the Climate Change Levy, the Government has published proposals for a CHP Quality Assurance (CHPQA) programme.

The programme, to be voluntary and free, will provide a method for assessing and monitoring the quality of CHP schemes based on the energy efficiency and environmental performance of a CHP plant compared to good alternative energy supply options. The programme seeks to improve the overall quality of CHP schemes in the UK.

CHP schemes achieve efficiencies of 60-80% or more, compared with 30-50% from more conventional forms of electricity generation and heat-only boilers. As a result CHP plays a role in cutting energy costs and reducing carbon emissions. The CHPQA programme will, it is hoped, encourage the wider use of CHP in the UK and form the basis for exemption from the Climate Change Levy, estimated to be worth around £60m per annum to CHP users.

The Government estimates that over 90% of existing CHP schemes could qualify for Climate Change Levy exemption for their whole electrical output. Other CHP schemes will be eligible for a proportional exemption.

The CHPQA scheme may also be used to determine eligibility for other benefits (such as Enhanced Capital Allowances upon which the Government is consulting separately) where quality is a pre-condition.

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