Have you considered renewable combined heat and power (CHP) for your decarbonisation project? Whether fuelled by biogas, bioliquids, bio-LPG, rDME or hydrogen, this tried, tested and trusted  energy technology is delivering a secure, low-carbon heat and power supply to thousands of sites across the UK.

The government sees an important role for renewable CHP in our future energy mix, so the good news is that there is funding available to help you make the switch.

Here’s our quick guide to grants and tax breaks for CHP, accurate as of March 2024. If you’d like advice or support in applying for funding, get in touch with Fleetsolve on 0151 353 2870 or contact@fleetsolve.com.


1.   Public Sector Decarbonisation Scheme

This scheme was created to help public sector organisations reduce the emissions from their buildings; projects are geared towards decarbonising heating systems and enhancing energy efficiency. Phase 4 of the scheme was announced in February 2024, and will cover funding for the years between 2025 and 2028 inclusive. Details of Phase 4 eligibility are not yet available at the time of writing (March 2024), but the previous phase supported low-carbon CHP as a heat decarbonisation technology . We are expecting full guidance in summer 2024.


2.   Industrial Energy Transformation Fund (IETF)

This fund is for businesses with high energy consumption, to help them transition to lower-carbon technologies. Phase 3 launched in January 2024 and the first “competition window” is open until 19 April 2024.

For a CHP proposal to be considered for IETF funding, there are two important conditions.

  1. The project must involve an “eligible fuel switch”. That is, the new system must run on a different fuel that achieves lower greenhouse gas emissions than the system it replaces.
  2. The new (or upgraded) CHP system must be helping to decarbonise an industrial process that the IETF considers eligible for support. At least 70% of both the heat and power generated by the CHP must be used for this specific industrial process.

Read more details in our guide to the IETF.


3.    Climate Change Levy exemptions

The Climate Change Levy (CCL) is a tax automatically added to businesses’ energy bills to encourage them to cut their energy consumption and associated emissions. It is charged per unit of natural gas and grid electricity, so the more energy you use the higher the CCL you pay. But if your CHP system is efficient and green enough, you will be eligible for favourable treatment. This favourable treatment applies to both the fuel being used in the system and the electricity it produces.

The gold standard is the CHP quality assurance programme (CHPQA). If your combined heat and power system meets the CHPQA standard efficiency percentage of 20%, you can be completely exempted from the Climate Change Levy.

If your CHP system doesn’t meet that standard, you can still apply for a reduced rate. This will be calculated based on how efficient the CHP unit is and how close it comes to the standard.


4.    Full expensing

Full expensing allows businesses to claim 100% capital allowances on qualifying capital investments. In other words, for every pound a company invests it gets a tax break of up to 25p. Although the tax break was originally brought in as temporary support for businesses, it has since become permanent. In his 2024 Spring Budget speech, the Chancellor announced that he is considering extending it to leased assets.


5.    Swimming Pool Support Fund

This fund was created to make public swimming pools more energy-efficient. It pays for capital investments designed to reduce the facility’s energy consumption, which includes upgrading the heating and hot water systems. CHP involves generating electricity on site and then capturing the resulting heat for an organisation’s heating needs (achieving cost savings of up to 50%), so it’s an ideal technology for heat-hungry facilities like swimming pools. Applications for Phase 2 of the Swimming Pool Support Fund closed in October 2023, and it is not yet clear when or if there will be future funding rounds for the scheme, but we will keep you posted.


6.    Grants for SMEs

The government has recently piloted a Business Energy Advice Service in the West Midlands to help SMEs cut their energy usage. The scheme offers businesses a free audit, which helps them identify measures to reduce their consumption. Then they can apply for up to £100,000 of match funding towards implementing these measures. The announcement of the spring 2024 Budget said that government is examining the results of the pilot and considering rolling the scheme out nationwide.


7.    Low Carbon Skills Fund

A new round of the Low Carbon Skills Fund (LCSF) has just been confirmed, with full details yet to be confirmed at the time of writing (March 2023).  Delivered by Salix, this scheme awards funding to help the public sector to identify low carbon heat upgrade projects, and develop heat decarbonisation plans for their estates. Further details will be announced by on the Salix website.


Get in touch – we can help you!

Fleetsolve has over 20 years’ experience successfully delivering award-winning renewable CHP solutions to industrial, commercial and residential sites, and we’d be delighted to offer advice on whether it’s right for you.

If you’re considering CHP or would like advice on your eligibility for funding, get in touch for a no obligation chat.

We offer the full turn-key solution and  can help you with initial scoping and feasibility, through to application support, project delivery and ongoing operation and maintenance.

Call us on 0151 353 2870 or email contact@fleetsolve.com.