The level of support for micro-CHP under the UK’s feed-in tariff programme was recently decided by the Government. The industry now has a little over two years to make a success of the current incentive. There are a number of companies who could benefit from this certainty, but no obvious choice for who will now look to drive the market.

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BEIS clarifies the level of support for micro-CHP

Earlier this month the UK Department for Business, Energy and Industrial Strategy (BEIS) announced that the feed-in tariff (FiT) support for micro-CHP appliances rated ≤2kWe will remain largely the same as what it looked like before the review of the scheme was launched last Spring.

In its consultation response, the Government stated that the generation tariff will increase from 13.61p/kWh to 13.95p/kWh in the new financial year (which would give an additional £15 worth of payments to a micro-CHP user whose 1kWe system runs for half the year).

A little more significantly though, industry learned that there will also be a new, lower, deployment cap. A total of 20MW of new installed capacity can be supported over the next two years (and this is split into four six-monthly sub caps each of 5MW). Residential micro-CHP products are usually rated between 1-2kWe, meaning 10,000 to 20,000 new units can be supported before the scheme is scheduled to end in 2019; the original limit was 30,000 when the incentive was first introduced.

Consultation outcome matches Delta-ee’s ‘best-case’ scenario

In all honesty, this outcome was better than most expected (BEIS had proposed a total cap of just 4MW) and the best-case scenario according to Delta-ee. The amount of support (equivalent to a max spend of ~£9.8mil by BEIS) is sufficient to secure interest in the UK market, and would be enough to see a small number of players to drive sales up and costs down.

But will any company actually step up to seize the opportunity? Or will most of the money be left on the table?

Who will step up and make the most of the feed-in tariff?

Only three products are currently certified to qualify for the FiT: the Baxi ‘Ecogen’ (1kW Stirling engine), the SOLIDpower ‘BlueGEN’ (1.5kW fuel cell), and the Flow’s ‘Flow Boiler’ (1kW organic Rankine cycle). Arguably, Flow is the best placed to capitalise – given it has the lowest-cost product and a direct route to customers via the Flow Energy business. No sooner had the news broke, however, when the company issued an update for its investors saying that it will focus on exports to Europe instead of cultivating the market at home.

Baxi (alongside British Gas) was the first company to make a go of the UK micro-CHP opportunity, launching around the turn of the decade. However, shortly afterwards the product was withdrawn from sale in the UK, and we don’t think this announcement is likely to lead to an about turn (especially given the size of the prize is now smaller).

And, after a recent hiatus from the market after a change in ownership, the SOLIDpower ‘BlueGEN’ has only just re-emerged after enduring a lengthy recertification process. The unit now also qualifies for an installation subsidy of over €10,000 in the German market…

Other companies are waiting in the blocks: Sustainable Power, Viessmann, Ceres Power and Samad Power to name a few, but their products are currently still navigating, or yet to begin, the ‘painfully slow’ process of being certified under the Microgeneration Certification Scheme – the badge that’s needed to access the FiT. This hurdle will also stop any established foreign player from swooping in and taking the lion share of the spoils.

So, while on one hand industry should be satisfied with its efforts to engage with BEIS during the consultation process, on the other it is arguably right back where it was at the beginning of it – only another year down the line and one closer to the end of the FiT. A strong mix of capability, strategy and appetite will be needed to make a success of the market over the next two years. Up to now these three elements have not aligned for any one player, and it remains unclear if this will change, even with the recent developments.

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