Micro CHP is generally considered a solution for existing homes, primarily because it is possible to install micro CHP in homes where it is difficult or impossible to apply other energy efficiency measures, for example, loft insulation (in flat roofs, combed ceilings or dormer windows) or cavity wall insulation (in solid or already insulated walls) or double glazing and draught-proofing where these are already in place. However, micro CHP, like any other energy efficiency measure, should be ranked according to its cost effectiveness. In simple payback terms, it is more cost-effective than double glazing, less than loft insulation and about the same as cavity wall insulation.

For the case of micro-CHP it can be argued that the vast majority of households will only invest when their existing boiler breaks down or reaches the end of its useful life. This leads on to the assumption that only the additional or marginal costs of this investment – when compared to the purchase of a new condensing boiler – should be considered which would be between £500 and £1500. This would reduce payback times considerably to around 4-5 years.

• Sell-back agreements

At present, the situation regarding sell-back agreements is confusing and liable to change as more distributed generation is connected to the grid. In any event such an agreement is likely to consist of the following components:

1. Connection – One-off charge
2. Use of System
   • Fixed charge (p/month) - Reflects costs for local connection assets and costs to serve
   • Variable charge (p/kWh) - Reflects contribution the user makes to required capacity throughout network

However, it is possible that for micro generation, typically around 1.1kW with a maximum of 3.7kW, then there will be no connection cost.

• Carbon savings

CHP uses 10-35% less primary energy than the equivalent heat and power produced by a heat-only boiler and power station. This reduction in primary energy requirements reduces both fuel costs and emissions. Each GW of installed CHP capacity will save between 0.5-1 million tonnes of carbon per annum.

• Energy savings

Gas consumption is virtually the same for a conventional gas boiler and a micro CHP unit. Savings are made through electricity generated.

Annalists predict that the average home with Micro-CHP could save £150 per year on energy costs; this saving includes the sale of electricity back to the energy supplier. As the Micro-CHP market grows and gets more competitive over the coming years this figure should rise.