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The CHP Support Programme UK

Over the past few years the British Government have introduced a number of support mechanisms to support the growth of CHP. Some of these are targeted at specific types of CHP technologies or CHP market sectors.

Climate Change Levy (CCL) Exemption

The Climate Change Levy (CCL) came into force on 1 April 2001 and included an exemption for Good Quality CHP.
The levy is chargeable on the industrial and commercial supply of taxable commodities for lighting, heating and power by consumers in Industry, Commerce; Agriculture; Public administration; and Other services.
More information on the CCL is given in the following document:
A general guide to Climate Change Levy

Additional information is also available via the British Government's CHPQA programme - see: Guidance Note 41:
Use of CHPQA to Obtain CCL Exemption

Exporting CHP schemes are awarded Levy Exempt Certificates (LECs) through a system administered by OFGEM. Full details of this scheme are available on their Website.

Enhanced Capital Allowances

Enhanced Capital Allowances (ECAs) were introduced as part of the CCL package in April 2001. They are 100% first-year capital allowances on investments in certain energy-saving equipment. Businesses are able to write-off the whole cost of their investment against their taxable profits during the period in which they make the investment. Good Quality CHP is one of the technologies eligible for support under the ECA scheme.
Further information is available on the Website

Preferential Treatment of Business Rates for CHP Plant

CHP plants are not fully exempt from paying business rates. However, the British Government has introduced preferential treatment under the business rates regime for Good Quality CHP plant.

ECAs for Biofuel Plant utilising CHP

Subject to State Aid clearance, Enhanced Capital Allowances (ECAs) will be granted for future biofuel plant construction providing certain processes are used. Good Quality CHP has been recognised as such a qualifying process. Further details can be found on the following HMRC note.

Renewable CHP

CHP schemes that utilise a renewable energy fuel are rewarded with a premium on each MWh of electricity produced under the Renewables Obligation (RO) mechanism. There is currently no benefit provided to the production of low-carbon or renewable heat.
More information on the RO can be found on the DTI's Website

More information on the addition of CHP to the list of qualifying energy from waste technologies is available in the following document: Renewables obligation order 2006

MicroCHP

MicroCHP schemes benefit from a reduced rate for their installation, from the standard level of VAT payable from the normal level of 17.5% to 5%.

Further details are outlined in the HMRC Regulatory Impact Analysis document.
Reduced rate of VAT on air source heat pumps and micro CHP units March 2005

MicroCHP schemes also benefit from an ‘uplift’ factor applied to their energy savings under the Government’s Energy Efficiency Commitment (EEC) programme. More details on EEC can be found at Defra’s and Ofgem’s websites.
http://www.defra.gov.uk/Environment/energy/eec/
http://www.ofgem.gov.uk/ofgem/work/index.jsp?section=/areasofwork/energyefficiency

District Energy (Community Heating)

Community Heating with CHP has been identified as an 'innovative action' under the Energy Efficiency Programme (EEC) and, similar to the treatment of MicroCHP, also benefit from an 'uplift' in energy savings to encourage suppliers to invest in such projects. See the OFGEM document Energy Efficiency Commitment 2005-2008
Innovative Action - Decisions document November 2005

Phase II of the EU Emission Trading scheme is currently in operation. See the link below.
http://www.defra.gov.uk/environment/climatechange/trading/eu/operators/phase-2.htm