Public sector combined heat and power (CHP): The scale and cost-carbon challenge – Net Zero Go
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Public sector combined heat and power (CHP): The scale and cost-carbon challenge

Produced by Energy Systems Catapult, this report quantifies the scale of the challenge of replacing combined heat and power (CHP) installations across the public sector, balancing the low cost of CHP against its high emissions as we decarbonise the grid.

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Part of: Public sector decarbonisation guidance (PSDG)

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Business modelling Operational models Energy generation and storage Heat Heat network Non-domestic energy efficiency

Net Zero Go says:

There are many public sector CHP installations, including in hospitals and universities, that will face replacement decisions within the next decade. As the grid decarbonises, there will be a fine balance to between their low-cost benefits but high-emission drawbacks. Early planning is critical because replacement projects can take 3-5 years and may be delayed by grid constraints.

For local authorities, the report highlights the need for long-term energy masterplanning, early engagement with distribution network operators, and coordination with heat network zones. It shows how proactive, phased transitions can reduce carbon lock-in, manage infrastructure risks and support Net Zero objectives across public sector estates.

Public sector combined heat and power (CHP): The scale and cost-carbon challenge

There are 309 gas-fired combined heat and power (CHP) installations across the public sector estate in Great Britain, representing 414 MW of behind-the-meter generation. Three quarters of them will need replacing within the next decade.

Produced by Energy Systems Catapult under the Public Sector Decarbonisation Guidance programme commissioned by the Department for Energy Security and Net Zero (DESNZ), this report quantifies the scale of the challenge and reveals a fundamental tension: every low-carbon alternative costs approximately 2.5 times more to operate than gas CHP, while gas CHP is now the highest-emitting option over the period to 2050. With grid constraints, long project lead times, and the recent closure of the Public Sector Decarbonisation Scheme, the window for managed action is narrowing.

Key takeaways from the report

This report highlights an urgent challenge for the public sector: many CHP systems are nearing the end of their life, but replacing them with low-carbon alternatives is often more expensive and dependent on electricity network upgrades. The findings have important implications for how local authorities plan energy infrastructure and decarbonisation projects.

  • Plan early for CHP replacement. Most public sector CHP assets will require replacement decisions within the next decade, and projects can take 3–5 years to deliver. Delaying action increases the risk of defaulting to another gas-fired CHP and missing Net Zero targets.
  • Cost and carbon objectives are increasingly in tension. Gas CHP remains one of the cheapest options to run, but it is now one of the highest-emitting technologies as the electricity grid continues to decarbonise. Public bodies will need to balance affordability with long-term carbon commitments.
  • Grid constraints could slow decarbonisation. Electrified alternatives such as heat pumps often require substantially more electricity capacity, meaning local authorities should engage early with distribution network operators and factor grid upgrades into plans.
  • Heat networks could benefit from CHP transition. Hospitals, universities, and other public buildings with CHP often represent large heat demands that could act as anchor loads for local heat network development, creating opportunities for place-based energy planning.
  • Take a whole-system approach. The report recommends combining heat decarbonisation, electricity infrastructure, resilience, solar PV, storage, and heat network opportunities within long-term energy masterplans rather than treating CHP replacement as a standalone plant upgrade.

ESC is making this report available under the following conditions. This is intended to make the Information contained in this report available on a similar basis as under the Open Government Licence, but it is not Crown Copyright: it is owned by ESC. Under such licence, ESC is able to make the Information available under the terms of this licence. You are encouraged to Use and re-Use the Information that is available under this ESC licence freely and flexibly, with only a few conditions. Using information under this ESC licence Use by You of the Information indicates your acceptance of the terms and conditions below. ESC grants You a licence to Use the Information subject to the conditions below.

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